Blanchard Case Analysis
Correct the EOQ and ROP quantities for each of the five items mentioned in the case. How do the corrected figures compare with the quantities calculated in 1969 and with production volumes scheduled for the June 1972 bottling run?
The corrected numbers are much smaller than the scheduled amounts. If Blanchard did produce what they had originally planned, they would have a lot of unused inventory.
What are the disadvantages of the formal EOQ/ROP system and the actual system used for scheduling bottling runs at Blanchard? Which system do you prefer? What improvements can be made?
A disadvantage for the formal EOQ/ROP system is that the cost of a stock out may not be fully realized until an item is actually stocked out and they are unable to fill orders. Some safety stock should be held to prevent this from happening. To go along with this, there is also unused storage space, which lowers the actual cost of holding inventory.
There are also several disadvantages for the actual system Blanchard uses. While they may have plenty of safety stock, their surplus of inventory is unnecessary. They base their forecast off of the bottler’s guesses, rather than historical data. This can cause major problems (such as high holding costs), and will reduce the efficiency of the business.
I prefer the EOQ/ROP system because it is based off an actual calculations, rather than intuition. It seems like it should have a more accurate forecast, and that would be better for businesses. I like to have facts and numbers in front of me, so I can see where the numbers are coming from. I am also more of a conservative person, so I understand how sometimes “less is more”.
To improve Blanchard’s forecasting method, Hank can use historical data, experience employees, and multiple forecasting techniques to come up with the most accurate data. This way they will ensure that they have some safety stock on hand, but not too much.
What should Hank Hatch recommend to his
The corrected numbers are much smaller than the scheduled amounts. If Blanchard did produce what they had originally planned, they would have a lot of unused inventory.
What are the disadvantages of the formal EOQ/ROP system and the actual system used for scheduling bottling runs at Blanchard? Which system do you prefer? What improvements can be made?
A disadvantage for the formal EOQ/ROP system is that the cost of a stock out may not be fully realized until an item is actually stocked out and they are unable to fill orders. Some safety stock should be held to prevent this from happening. To go along with this, there is also unused storage space, which lowers the actual cost of holding inventory.
There are also several disadvantages for the actual system Blanchard uses. While they may have plenty of safety stock, their surplus of inventory is unnecessary. They base their forecast off of the bottler’s guesses, rather than historical data. This can cause major problems (such as high holding costs), and will reduce the efficiency of the business.
I prefer the EOQ/ROP system because it is based off an actual calculations, rather than intuition. It seems like it should have a more accurate forecast, and that would be better for businesses. I like to have facts and numbers in front of me, so I can see where the numbers are coming from. I am also more of a conservative person, so I understand how sometimes “less is more”.
To improve Blanchard’s forecasting method, Hank can use historical data, experience employees, and multiple forecasting techniques to come up with the most accurate data. This way they will ensure that they have some safety stock on hand, but not too much.
What should Hank Hatch recommend to his