EMMICO (How to improve Inventory turns): Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

EMMICO (How to improve Inventory turns): Case Solution

Identification and Improvement of Quality blocked inventory at the plant:

Quality blocked (quarantine) inventory is that type of inventory that could not be used for production or can be sold at both Vienna on-site and off-site warehouses. It can be seen that Quality blocked inventory contains a major portion of the overall excess inventory.

Warehouse:

It can be seen in Table 2 that only 1/3 of quality blocked inventory was marked as booked, which shows weakness in operating system as the investigating team noticed that inventory, which was stored at a location was booked and the investigation showed a lot of stocks outside the blocked location.

It is the responsibility of Quality personnel to mark all quality blocked goods in both the warehouses as well as the goods outside the blocked location because these values should be reported in SAP for proper inventory valuation. Moreover, 58% of the inventory was not considered as blocked and the return could not be accounted for as marked.

For this, the Quality manager should be held responsible and should assign the task of proper valuation of inventory because excess inventory would create further problems for the company. Moreover, the quality manager should be assigned the task of proper marking of goods as it would help the company to mark the inventory, which is outside the blocked location as this issue needs to be addressed as soon as possible so as to avoid loss in future.

Production stage:

Inventory was quality booked at various parts of production process, which was essential for proper valuation. Table 3 shows 66% of the blocked stock related to finished goods of the product. Moreover, the interview of the quality engineer revealed that this stock was mainly due to the sales return by unsatisfied customers, which was marked as blocked, and for that matter the quality manager resolved the issue later and unblocked it. The goods could be booked for SAP valuation, however this method was not in use, which showed less interest in inventory valuation whereas, the pallets were not booked into SAP because the staff did not know how to deal the issues which resulted in inventory outside the blocked location. There was approximate $235,648 in raw material in non-blocked locations, as no one was in charge of quality blocked goods in the non-blocked locations.

To reduce the sales return and decrease its excess inventory, Emmico should deliver the correct number of parts with correct item numbers with proper transportation along with the approval by quality manager. These goods should be recorded in SAP for proper inventory valuation and should provide training to employees to deal with pallets as employees lack expertise, which should be necessary for production line manager to deal with blocked inventory outside the location.

The proper division should be made for quality inspection, which would help the company to follow up on quality blocked inventory in non-blocked location as well as the quality manager should be responsible for the proper valuation.

Improvement of Material Inspection and Material flow:

Current Material inspection process: As shown in Table 2, 24% of quality blocked inventory was recorded as raw material, which is an important part of excess inventory, as it can be seen that suppliers were required to supply raw material at external warehouse, after which Vienna SAP system booked materials, stored and managed inventory, then further quality inspections were made by independent quality inspectors. The third party inspected the part and sent report to Vienna quality engineer, who released the part on SAP, after which the parts were transferred to the store on external warehouse for storage. Due to lack of control by external warehouse, errors were made by the staff in SAP and these errors were resolved by quality engineers at Vienna after which the parts were stored at external warehouse and then were transferred for production.....................

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