Parts Emporium Case Solution

1. Enumerate three major problems that Parts Emporium is facing.

The three major problems that Parts Emporium is facing includes:

1. The utilization of the warehouse capacity increased from 65 to 90 percent indicating higher inventory holding costs along with stagnant sales growth.

2. Customer orders are often not met due to the inadequacy of firm's customer service and hence, Parts Emporium backorders such orders which are not fulfilled through stock. This results in a loss of about 12 percent of demand due to the presence of other competitive distributors.

3. Furthermore, no such aggregate information regarding the inventory is available, and the company does a physical count of the inventory at the end of a week. 

2. McCaskey decided to randomly select a small sample of approximately 100 items and compile inventory and customer service characteristics to get a feel for the “total picture.” Can you suggest a better strategy?

McCaskey could have utilized the following strategy to capture the total picture:

• Rather than randomly selecting a sample of approximately 100 items, she could have focused upon analyzing 50 fast moving items which could have been identified through purchase and sales patterns.

• The top 20 highest value items regarding inventory and turnaround times could have been analyzed.

• According to the 80-20 rule, the top 20 percent items generating the 80 percent sales could have been found.

• The items which resulted in a 12 percent loss can be analyzed, and then McCaskey could have compiled the inventory and service levels for these items.

3. Why limiting the study to two items only?

The study is limited to two items only as McCaskey wants to analyze the inventory trend and hence, for this purpose, she has selected a fast-moving and a slow-moving item. Through these items, she is trying to get an idea of the ordering cycle, patterns, demand of products, reordering systems and inventory checks in place.

4. Should McCaskey increase the ordering costs for Parts Emporium to include delivery charges?

No, they shouldn't as most of the customers directly pick up their orders from Parts Emporium. They should create a transparent billing system where the shipping costs of $21.40 are indicated for the customers who request for the orders to be delivered at their home.