Taylor Incorporated Inventory Management Challenge

Conduct an interview with someone who has a career or job position that is different from your own. Identify the duties associated with his or her position, as well as any skills and abilities necessary for the position. Use the information gathered in the interview, as well as information from the Week 3 readings.

BACKGROUND

Taylor Incorporated is a manufacturing and sales organization specializing in speed and distance measurement devices--not all of which are manufactured by Taylor Incorporated. One particular distance measurement device produced by Parker Altibelli Industries has just been put in the Taylor Incorporated inventory. The Taylor Incorporated management team is extremely enthusiastic about the sales of the new device to law enforcement agencies, insurance companies, and commercial and private trucking companies. The device projects a laser beam between an electronic reflecting object and the laser gun itself and provides an instantaneous distance reading that is accurate to one thousandth of an inch. Accident investigators are raving about the device because of the amount of time saved in gathering distances at the scene of an accident and because of the enhanced accuracy. An example of the type of measurement often taken is from the point of impact to the final stopping point of the vehicle.

SPECIFIC SALES AND COST DATA

Sales are estimated to be 4,500 units annually at $3,000 each. The cost of each unit for Taylor Incorporated is $1,200. Inventory carrying cost is 5% of the cost value of the device. Order placement cost is $60.

THE CHALLENGE

You have just been appointed the new inventory manager for Taylor Incorporated. The president of Taylor Incorporated has asked you to explain to him the basic principles of inventory management. You must also compute the economic order quantity in units for the new distance measurement device he is interested in purchasing.

The president has held the position for approximately two years, but he comes from a legal background and has very little knowledge of the supply chain and operations-management field. The initial comments of the president indicate that his concept of inventory includes only finished goods being held for sale.

Note: The formula for computing the number of units is provided.