Originally located in Block’s garage, the firm showed slow but steady growth for 7 years before it relocated to an old, abandoned meat-packing warehouse on Chicago South Side. With increased space for inventory storage, the company was able to begin offering an expanded line of auto parts.
Fifteen years later, Parts Emporium was the largest independent distributor Of auto parts in the north central region. Parts Emporium has engaged Sue Mackey as materials manager for the many. She recently graduated from a prominent business school. As she is being handed the task of managing the firm’s inventory, she is upset that aggregate information is not available and she decides to randomly select a small sample of approximately 100 items and compile inventory and customer service characteristics to get a feel for “total picture”.
From the result of this experiment, it seems that the inventory is in all the wrong places. Although an average of approximately 60 days of inventory is on hand, the firm’s customer service is inadequate. Parts Emporium tries to backorder the customer order to immediately filled from stock, but some 10 percent of demand is being lost to competing distributorship. Because cookouts are costly, relative to inventory holding costs, Mackey believes that a cycle-service level of at least should be achieved.