Lowering the Water
The author of this report has been asked to give a brief set of responses to a test case relating to a company by the name of Smitheford Pharmaceuticals. The company is undergoing a review that has its goal of being the lowering of inventory costs. Concurrent to that will be a picture diagram that is a stack of rocks that is under water. The concept behind the picture is that more and different faults and issues will be exposed if the water level of the pond is lowered. Each rock will be explained and the obvious metaphor that is being created and explained via the picture will be laid out to the people in the meeting. While reducing inventory costs is a good goal to have, revealing the problems and shortcomings that are keeping costs high is imperative when it comes to fixing the problem.
Analysis
The metaphor that is clear from the picture is that the problems and reasons for inventory costs being higher than they could or should be is due to problems that are currently concealed completely and/or are not fully known to the people that are wanting to drive costs down. To fully address the reason inventory costs are higher and to fully address ways to get the costs down, the water in the proverbial pond needs to be drained so as to reveal the rocks (i.e. the problems) so that they can be identified, analyzed and then dealt with in an orderly and systematic fashion. Each of those rocks/problems will be discussed one-by-one and why each of them is important to identify, quantify and address...
First of all, the overall product quality should be exceedingly high. The overall rate of products with flaws or defects of some short should absolutely be in the single digits. If that is not the case, all of the reasons (and there is probably more than one) need to be identified and ironed out through things like better best practices, equipment reconfiguration, training for workers, better raw materials and so forth. There is also the problem of bad forecasting. Indeed, it has to be known with as much precision as is possible what the sales will be for the coming quarters and years. It is impossible to know things with certainty and there is always the chance that something very unexpected occurs. Good forecasting would be a blend of what happened last year and what will happen this year based on what happened before coupled with what is expected in the current year (Poler, Hernandez, Mula & Lario, 2008).
The next rock in terms of height is outages with the product. This would presumably be for situations where there is not enough of a product to meet the current market demand. This is in large part fed by forecasting and/or unexpected market turbulence that drives demand in one direction or another. In terms of the "middle rocks" that typify an work in process (WIP) situation, lack of employee involvement would be a problem because they are the front-line employees and thus they are…
