Module 5 Discussion inventory management at cryola.docx -...

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Summary Key Concepts related to the chapter Students should be able to structure the information given in the case in terms of the inventory types and how they are affected by Crayola’s inventory strategies. Based on the information provided, the students should first identify the inventory size requirements for Crayola. This is also related to answering the first discussion question. Small inventory should be justified by the cost of capital, storage and handling costs, and taxes, insurance, and shrinkage possibilities. On the other hand, a larger inventory will be needed to justify higher customer service, lower ordering and setup costs, better labor and equipment utilization, lower transportation cost, and lower payments to suppliers from quantity discounts. The next point to consider is how inventories are classified in the case. Managers used the terms raw materials, WIP, and finished goods. These are inventory categories for accounting purposes. Students should be able to identify additional types of inventories based on the information provided in the case. This task is related to the third question for discussion. Another point is relating Crayola’s inventory strategy and its impact on the four operational inventories - cycle, safety, pipeline, and anticipation. One way to think of it is to explain how each supply chain decision reduces one of the four inventory types. An example is having close proximity to suppliers so that it may reduce the amount of pipeline inventory.

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