Clancy Mining Company mines iron ore for production into various metal products. During recent years, the company had large fluctuations in its inventories of metal ingots. Much of the volatility of the inventory levels is due to the variability of demand by the company's largest customers, automobile manufacturers. For large orders, the company has the technology to quickly shift production from one product to another. Explain how the company can improve its inventory control system and give the advantages of whatever you recommend.
What will be an ideal response?
The company can probably benefit from changing to a just-in-time system for inventory control. This would allow the company to be responsive to actual needs rather than finished goods inventory building. The advantages would be:
| 1. | Lower inventory requirements; |
| 2. | Reductions in carrying and handling costs of inventories; |
| 3. | Reduction in risks of obsolete inventories; |
| 4. | Reduction in total manufacturing costs; and |
| 5. | Reductions in paperwork. |
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