Scientific Glass Inc.: Inventory Management Case Analysis
This case analysis examines the inventory management challenges facing Scientific Glass Inc. (SG) in 2010. The paper identifies key problems, including rapidly rising inventory levels, policy violations, inaccurate tracking systems, and the unintended consequences of a 99% customer fill rate compensation policy. It explores how warehouse proliferation directly contributed to excess inventory and tied up capital needed for growth. The paper evaluates available strategic alternatives — maintaining the status quo, eliminating trunk stock, and consolidating warehouses — and ultimately recommends outsourcing warehousing and logistics to Global Logistics as the most cost-effective solution that allows SG to refocus on its core business.
- Introduction: SG's Inventory Problems in 2010: Root causes of rising inventory and tracking failures
- Warehouses and Inventory Levels: Understanding the Relationship: How warehouse growth drives excess inventory and costs
- Evaluating the Strategic Alternatives: Assessing status quo, trunk stock, and consolidation options
- Recommendations for Management: Outsourcing logistics to reduce costs and refocus operations
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What makes this paper effective
- The paper follows the case study format cleanly, addressing each question in sequence, which makes the argument easy to follow and directly responsive to the analytical prompts.
- It grounds its analysis in specific data points — such as the 77.6% increase in inventory versus only 32.8% growth in sales — to support claims about operational inefficiency.
- The recommendation section weighs tradeoffs honestly, acknowledging risks (e.g., potential loss of customer service quality) before arriving at a reasoned conclusion.
Key academic technique demonstrated
This paper demonstrates structured problem-solution analysis in a business case context. The student systematically identifies root causes, evaluates multiple alternatives with their respective costs and benefits, and arrives at a prioritized recommendation. This technique — moving from diagnosis to evaluation to prescription — is central to business case methodology and mirrors frameworks used in operations management courses.
Structure breakdown
The paper is organized around four analytical questions drawn from the Harvard Business Publishing case. Section one diagnoses the operational and systemic problems. Section two examines the causal relationship between warehouse count and inventory levels. Section three evaluates three strategic alternatives using cost-benefit reasoning. Section four delivers a management recommendation to outsource logistics, supported by financial and operational rationale. The conclusion ties cost reduction to the company's broader growth objectives.
Introduction: SG's Inventory Problems in 2010
One of the primary problems facing Scientific Glass (SG) in 2010 was that inventory balances within the warehouses were increasing considerably, tying up capital the company needed to fund its growing operations (Wheelwright & Schmidt, 2011). The compensation program aimed at achieving a 99% customer fill rate caused most warehouse managers to hold higher levels of inventory than required. This policy needed to be reconsidered to prevent warehouse managers from stockpiling beyond actual demand. The company also had an inventory control policy not to exceed 60 days' supply — a policy that was regularly violated.
The trunk stock kept by salespeople further distorted inventory levels for their assigned warehouses, generating higher restocking requests. Because the stock held by salespeople did not count toward their target warehouse totals, warehouse managers were compelled to increase their own inventory levels to compensate.
The centralized inventory system at the Waltham warehouse was not capable of capturing inaccuracies caused by stolen, damaged, or lost goods. The system was also prone to human errors such as inaccurate processing of returns, erroneous order fulfillment, and improper tracking of warehouse transfers. These shortcomings created a persistent mismatch between actual inventory and computer records. The company's initiative to expand its warehouse network compounded these issues: inventory levels increased by 77.6% from 2008, while sales grew by only 32.8% over the same period.
Warehouses and Inventory Levels: Understanding the Relationship
The problems faced by Scientific Glass are closely tied to the relationship between warehouse count and inventory levels. As the number of warehouses increased, inventory demand rose in parallel, because each warehouse manager sought to maintain the 99% fill rate target set by the company. There is, therefore, a clear linear correlation between the number of warehouses and total inventory held across the network. The company expanded the Waltham warehouse and opened six additional locations, each required to maintain comparable inventory levels. This meant that a substantial portion of company funds was absorbed by inventory stocking, constraining the resources available for operational growth.
Warehouse managers also exhibited a tendency to hold inventory well above required levels in order to sustain the 99% service level target (Wheelwright & Schmidt, 2011). This behavior drove up inventory costs across all locations. Had the company operated a single warehouse with the same service level policy, total inventory levels — and associated manufacturing costs — would have been significantly lower.
A trickle-down effect also emerged from the warehouse expansion. Because manufacturing was only triggered when a warehouse's inventory fell to a set minimum, the production facility was frequently forced to manufacture more product than needed. This increased operational costs and tied up funds that could otherwise support broader expansion.
References
Wheelwright, S. C., & Schmidt, W. (2011). Scientific Glass Inc.: Inventory Management. Boston, MA: Harvard Business Publishing.
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