OPERATION MANAGEMENT Consolidated Electric Company Case Study No
Consolidated Electric Company
Joe Henry, the sole owner and president of the Consolidated Electric Company, reflected on his inventory management problems. He was a major wholesale supplier of equipment and supplies to electric contractors, and his business hinged on the efficient management of inventories to meet his customers’ needs. While Henry had built very successful business, he was nearing retirement age and wanted to pass along a good inventory management system.
Henry’s two sons-in-law were employed in the company. Carl Byeryl, the older of the two, had a college degree in mathematics and was very interested in inventory formulas and computers. The other son-in-law, Edward Wright, had a degree in biology and was a manager of one of the company’s wholesale warehouses.
Joe Henry started the Consolidated Electric Company in the 1940’s and built it into a highly profitable business. In 2002, the company had achieved $10 million dollars in sales and earned $1 million dollars in pretax profits. Consolidated Electric was currently the twelfth largest electrical wholesaler in the country.
Consolidated Electric operates through four warehouses in Iowa (Des Moines, Cedar Rapids, Sioux City, and Davenport). From these sites, contractors in Iowa , Minnesota, Nebraska, Wisconsin, Illinois, and Missouri are supplied with a wide range of electrical equipment including, wire, electrical boxes, connectors, lighting fixtures and electrical controllers. The company stocks 20,000 separate lines items in this inventory purchased from 200 different manufactures. (A line item is defined as a particular item carried at a particular location.) These items range from less than 1 cent each to several hundred dollars for the largest electrical controllers.
Of the 20,000 line items, a great many are carried to provide a full line of service. For example, the top 2.000 items account for 50 percent of the sales and the bottom 10,000 items for only 20 percent. The remaining bottom
Joe Henry, the sole owner and president of the Consolidated Electric Company, reflected on his inventory management problems. He was a major wholesale supplier of equipment and supplies to electric contractors, and his business hinged on the efficient management of inventories to meet his customers’ needs. While Henry had built very successful business, he was nearing retirement age and wanted to pass along a good inventory management system.
Henry’s two sons-in-law were employed in the company. Carl Byeryl, the older of the two, had a college degree in mathematics and was very interested in inventory formulas and computers. The other son-in-law, Edward Wright, had a degree in biology and was a manager of one of the company’s wholesale warehouses.
Joe Henry started the Consolidated Electric Company in the 1940’s and built it into a highly profitable business. In 2002, the company had achieved $10 million dollars in sales and earned $1 million dollars in pretax profits. Consolidated Electric was currently the twelfth largest electrical wholesaler in the country.
Consolidated Electric operates through four warehouses in Iowa (Des Moines, Cedar Rapids, Sioux City, and Davenport). From these sites, contractors in Iowa , Minnesota, Nebraska, Wisconsin, Illinois, and Missouri are supplied with a wide range of electrical equipment including, wire, electrical boxes, connectors, lighting fixtures and electrical controllers. The company stocks 20,000 separate lines items in this inventory purchased from 200 different manufactures. (A line item is defined as a particular item carried at a particular location.) These items range from less than 1 cent each to several hundred dollars for the largest electrical controllers.
Of the 20,000 line items, a great many are carried to provide a full line of service. For example, the top 2.000 items account for 50 percent of the sales and the bottom 10,000 items for only 20 percent. The remaining bottom