Purchasing and control strategies Economic order quantities of oligopolistic medium-scale enterprises
Description
Medium-scale enterprises have developed overtime and have performed a critical role in driving a country’s industrial transformation in most developed countries. A hardware establishment is a superb example of medium-scale endeavor. In the Philippines, particularly in Cebu City, the identified economic potentials of medium-scale enterprises slowly relegated due to challenges and constraints of a highly competitive oligopolistic market, product and demand variability including variances in purchasing strategies and internal control systems of most industries. One representation is Alliance Hardware, Inc. which desires to attain a 100% service level but the management has no idea as to the cost implications of the possible actions that they will take. This study intends to develop an appropriate inventory system so as to increase the company’s service level that will specifically cater to their needs as well as the needs of their customers. The research looks into establishing a standard reorder point and order quantity that will help the medium-scale hardware enterprises minimize inventory costs while minimizing or eliminating the presence of stock outs. Specifically, the study aims to optimize the service level using inventory management principles taking into account the company’s purchasing and internal control strategies in an oligopolistic environment. I analyzed all the data gathered and interpreted using industrial, operations and project management tools. Also, concepts such as reorder point, economic order quantity, safety stocks and service level were used. The computed standard reorder point and economic order quantity served as the basis for comparison in determining whether there is an improvement in the actual service level of Alliance Hardware, Inc. which serves as a good representation of a medium-scale venture. Finally, I then formulated solutions and alternatives that would help the company improve their inventory operations, thus, an increase in their level of customer service. Using the standard economic order quantity and reorder point that I have computed based on the data gathered would imply yearly savings of Php 838,355.10 for the company which is an enormous cutback on expenses especially for medium-scale enterprises in general.
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References
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