Flamingo Educational Services, a company located in the Tema metropolis, is a nationwide market leader in the publishing and distribution of textbooks for first and second cycle schools. Somehow, Flamingo does not use forecasts for production planning. Instead, the operations manager decides which books to produce and the batch size, based on orders and the amounts in inventory. The books that have the fewest amounts in inventory get the highest priority. Demand is uneven, and the company has experienced being overstocked on some items and out of others. Being under-stocked has occasionally created tensions with managers of the retail bookstores the company works with. Flamingo is on the verge of losing a lucrative contract with the Ghana Education Service over a complaint that the books produced over the last four months have defective binding as well as slight but noticeable variations in print quality and sizes of the finished books. Some staff members, however, have simply brushed aside the complaint, saying that ‘every mistake is a new style.’ Whereas the listed defects were traced to the firm’s failure to put in place stringent inspection regimes along the production chain, the defect having to do with variations in print quality has also been found to partly originate from the use of inks of varying quality made by different manufacturers. Furthermore, the use of ink from different suppliers happens very often because of hurried purchases to help complete production runs whenever unforeseen stockouts occur, which in turn is often caused by ink theft by workers due to poor inventory management practices. A suggestion by one worker that management should develop a special arrangement with selected ink and paper suppliers to guarantee the consistent supply of these two critical inputs, even in emergency situations, was rejected with the explanation that they would rather spend their energy on internal affairs than to concern themselves with the business of would-be suppliers, and that they would buy from anyone who has the right supplies at the time they need them. In order to diversify revenue sources given the difficulties being experienced in book production, the management of Flamingo Educational Services recently started its own basic school called Flamingo International School. Obviously oblivious of the differences in operations strategies between the production of goods (i.e. books) and the provision of services (i.e. teaching), the CEO has been bragging that his company will easily take over the basic education market in Tema because of its track record in producing and selling educational materials to basic schools. Questions on the Flamingo Educational Services Case Having been hired as an operations consultant to the Flamingo Educational group of companies, address the following issues: e) What inventory management practices would you recommend to help reduce the frequent incidence of ink theft as mentioned in the case study? f) Flamingo purchases 8,000 litres of ink each year for its production processes. The unit cost per litre is GH¢10, and the cost of carrying one litre of ink in inventory is GH¢3 per annum. Ordering cost is GH¢30 per orde Assuming that the firm operates on a 252-day working year, compute: (i). Optimal order quantity (ii). Total minimum inventory cost (iii). Expected number of orders placed each year (iv). Expected time between orders
Flamingo Educational Services, a company located in the Tema metropolis, is a nationwide market leader in the publishing and distribution of textbooks for first and second cycle schools.
Somehow, Flamingo does not use
Flamingo is on the verge of losing a lucrative contract with the Ghana Education Service over a complaint that the books produced over the last four months have defective binding as well as slight but noticeable variations in print quality and sizes of the finished books. Some staff members, however, have simply brushed aside the complaint, saying that ‘every mistake is a new style.’ Whereas the listed defects were traced to the firm’s failure to put in place stringent inspection regimes along the production chain, the defect having to do with variations in print quality has also been found to partly originate from the use of inks of varying quality made by different manufacturers. Furthermore, the use of ink from different suppliers happens very often because of hurried purchases to help complete production runs whenever unforeseen stockouts occur, which in turn is often caused by ink theft by workers due to poor inventory management practices.
A suggestion by one worker that management should develop a special arrangement with selected ink and paper suppliers to guarantee the consistent supply of these two critical inputs, even in emergency situations, was rejected with the explanation that they would rather spend their energy on internal affairs than to concern themselves with the business of would-be suppliers, and that they would buy from anyone who has the right supplies at the time they need them.
In order to diversify revenue sources given the difficulties being experienced in book
Questions on the Flamingo Educational Services Case
Having been hired as an operations consultant to the Flamingo Educational group of companies, address the following issues:
- e) What inventory management practices would you recommend to help reduce the frequent incidence of ink theft as mentioned in the case study?
- f) Flamingo purchases 8,000 litres of ink each year for its production processes. The unit cost per litre is GH¢10, and the cost of carrying one litre of ink in inventory is GH¢3 per annum. Ordering cost is GH¢30 per orde Assuming that the firm operates on a
252-day working year, compute:
(i). Optimal order quantity
(ii). Total minimum inventory cost
(iii). Expected number of orders placed each year
(iv). Expected time between orders
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