Burmaker Manufacturing located in Petaling Jaya, Selangor, manufactures automotive parts for the Perodua Automobile Nasional. The company is currently implementing new AIS. Mr Alex Lim, the CEO has asked Denise Chong to work with Norlela Yusof, from the consulting firm that is implementing the new system, to determine the inputs and outputs needed for the new AIS. Of particular concern is the data the system will need to collect about inventories.
Alex Lim is hoping that better information about inventory levels will help the company to minimise inventory investments. Their customers, the automobile manufactures, are increasingly putting pressure on their suppliers to provide them with parts not only as needed, but exactly when needed. This is costly down the supply chain for Burmaker, as the company has needed to stockpile more of their parts inventories to be able to quickly meet customer orders. The costs of holding inventories are rising rapidly. A lot of cash is tied up in inventory that Burmaker could put to better use elsewhere. There are also warehousing, obsolescence, and insurance costs to consider. Alex feels that his company is being “squeezed” in the supply chain. He has to buy from his raw materials suppliers, hold raw materials inventories plus make-to-stock parts, or his customers will find another supplier!
Denise and Norlela meet to discuss the issues. They decide that they need to do two things. First, they need to determine whether it is feasible for the AIS to solve the inventory problem. Second, they need to decide what data element they need to capture about each inventory item to improve inventory management and control. Denise notes that, while some inventory descriptors are easy to determine, such as item number, description, and cost, others are more difficult. For instance, inventory on hand and inventory available for sale could be two different data items since some of the inventory on hand might be committed but not yet shipped.
1. Explain how AIS can help a manufacturing company improve inventory management and control.
2. What data elements would you include in the new AIS to describe each inventory item?
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