Read the Harvard Business School Case Study “Donner Company”. With reference to the situation described in the case study. Mr Plummer is concerned about recent events in his company and the likelihood that these may foreshadow future trends. He has asked you to come into his organisation as a consultant, advise him on the key operational issues he should be addressing and provide him with some guidance for the future. He has indicated that the delivery performance has been a potential issue given their strategy is based on build-to-order. In addition, they have been considering establishing stocks of some frequently used items but he is unsure about how to establish an inventory control policy for such items. Data has been provided below on “Base Stock Item” A. Data on its usage is given in Exhibit 4 of the case study. Plumber wants to know by how much his operating costs and inventory values will increase by holding stocks. Determine what this would be for Base Stock Item A. Plummer has previously done studies to determine that their cost of raising and processing a purchase order is approximately $50/order. Their accountant estimates Donner’s cost of holding inventory at 27%. Variations in monthly demand for Base Stock Item A can be up to 25% above or below average. Prepare a report no longer than 2,500 words addressing Mr Plummer’s needs. Your report should provide an appropriate mix of qualitative and quantitative assessment required to support any statements or recommendations.
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