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Iscom305 wk 3 Parker Earth Moving Company Consulting-Session 2

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Running head: PARKER EARTH MOVING COMPANY CONSULTING: SESSION 2 1
Parker Earth Moving Company Consulting: Session 2
ISCOM305 - Systems Operations Management
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Parker Earth Moving Company Consulting: Session 2
Team A has been asked to evaluate the existing inventory management strategy at Parker
Earth Moving Company (PEMC). In order to determine how PEMC can optimize its operation
performance, Team A will evaluate the inventory reorder points, quantities per order, and
evaluate existing problems in the current operational strategy. In addition, Team A will also make
a recommendation to PEMC as to which subcontractor to employ, and explain emergency
planning in the event of a natural disaster.
Inventory Reorder Points
According to Russell & Taylor (2009), “the determinant of when to order in a continuous
inventory system is the reorder point, the inventory level at which a new order is placed” (p.
564). The equation for reorder point is R = dL. The demand rate per period is d, and the lead time
is L. Operating six days a week, PEMC would work 312 days a year. PEMC needs 30,000 units
per month, multiplied by lead time of 50, PEMC will have to reorder when the inventory level
falls to 4,808.
Current Operational Strategy
An effective operational strategy integrates several key components of the operating
process; storage capacity, adequate facility, and a proper workforce (Russell & Taylor, 2009).
Other key components exist in an effective operational strategy, but Parker Earth Moving
Company’s problems exist in the aforementioned components. First, the storage capacity is
unable to support the demand for the 30,000 units per month. Second, PEMC’s current facility is
unable to produce the number of units demanded each month without the aid of a subcontractor –
consequently increasing production costs by 62%. Third, the workforce needed to meet the
demand is inadequate requiring PEMC to outsource part of its manufacturing responsibilities.

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