EXECUTIVE SUMMARY

The recommendations that result form this study are to do the following to increase
the efficiency of Harvey Industry:

• Introduce Inventory Counting System

• Use Perpetual Inventory System
• Reduce the inventory cost of large items
• Use Safety System
• Use Reorder Point

After looking at these aspects of the report and issues, I get a clear concept about the
Inventory system issues that exists in Harvey Industry.

In the report I have included the aim of doing this report, background of Harvey
Industry and have looked into the issues that prevail currently. The recommendation
was intended to cover the steps that will help solve the problems.
 Table of Contents
EXECUTIVE SUMMARY........................................................................................1
Table of Contents...........................................................................................................2
Introduction....................................................................................................................3
Aim.............................................................................................................................3
Background ...............................................................................................................3
Problem / Issues.............................................................................................................4
Recommendations..........................................................................................................4
Conclusion .....................................................................................................................5
ANALYSIS AND QUANTITATIVE
STUDY
ON HARVEY INDUSTRY
BASED ON A CASE
FOR THE COURSE MGT 314

Introduction

Aim
As a consultant for Harvey Industries, I would look into the whole operation of the
company and try and locate any issues and problems that they might be experiencing
and also recommend solutions for Harvey Industries to correct the problems and have
a smoother operation.

Background
Harvey Industry is a Wisconsin company that specializes in the high-pressure system
assembly and also the repair parts of the system. Their product line expands from
small portable high-pressure washers to large industrial vehicles for removing snow.
General Motors, Ford and Chryslers are some of the companies that order to Harvey.
Harvey does concentrate on sales of industrial products but their primary business is
that of the coin operated self-service car wash system. With this system not only car
wash is available but some items like towels, tire cleaners are also available to be
bought from the bill changer machine that is with these systems. Recently Harvey
Industry is incurring loss which is also a concern for the new President who wants to
turn things around.

The current inventory system is that the managers reorder inventory when they find it
to be low and this creates a lead time of 2 day. The inventory needed for building high
pressure equipments are known from before. The repair parts and supplies for car
wash make up of the major amount of inventory and there is constant demand for the
repair parts. The stockroom is well organized in terms of the suppliers. Each supplier
has a separate shelf where their items are kept. And the suppliers supply these items
as well as keep them in proper shelf that makes the inventory system organized. Some
of the basic parts like nuts, bolts, screws are also available on the floor of the shop.
When these less valuable, in terms of dollar, is not available on the shop floor, it is
brought from the inventory store but no proper paperwork is kept. Only sales slips are
kept recording the number of parts sold. The current situation of the company has
meant the inventory system to come under spotlight and the company wants to fix the
problem.
Problem / Issues

After going through the whole case, I was able to identify three issues that according
me are the problems what Harvey Industry can improve on so that they can come out
of the current downturn that the company is going through.

Firstly, the company sometimes faces with empty stocks for some basic items, like
nuts, bolts, screws, which cause downtime in production. The possible reason for this
problem is that the current inventory system is such that these basic parts are taken
out of the inventory without any book-keeping which ultimately results in no records
which would indicate low stock when these items are on the verge of being empty.
Thus when the stock actually runs off, the operation process is hampered as
production and sales of repair items sometimes cannot precede without these basic
items. Solving this problem will result in stock of these basic items no running out
that stop production thus the operation of Harvey will be smoother.

Secondly, there seems to be too much inventory expense occurring at fewer items.
$220,684 out of $314,673 was used to but only 179 items out to total 973 items
bought. These high cost on these items indicate that these are essential large items but
the cost is make up of very large proportion of the total inventory cost. Cost of
production will decrease if these items can be bought cheaper. And this will definitely
help Harvey Industries to get out of the current loss they are in.

Finally, the company suffers from lead time which can be a negative side of any
business. When stocks are ordered after they are near to finish, it takes around 2 days
for the stocks to reach the inventory. Lead time means that production is delayed. If
stock is ordered after it finishes, that for the next two day there will not be inventory
for production to continue. In Harvey Industries, the general way of stock reorder is
that when an manager realizes that the stock are running low, then only the item is
reordered. This means that if a manager notices this late, this will cause greater lead
time and hamper in production of day to day basis.

Recommendations

For the first problem I would recommend that the company revises its inventory
system and introduce inventory counting system in the form of Perpetual Inventory
System which would keep record of inventory removal continuously and when the
inventory record will show that the inventory will on the lower end, then instantly the
order can be placed and this will result in inventory reaching before the old ones are
all used. I recommend this because after analyzing the first problem it is evident the
because of poor inventory record system, Harvey Industry some time have to face
downtime as inventory runs out and no good paper work of inventory system.
For the second issue I would suggest that the expensive inventory bought which
comprises of the majority of the total inventory cost should be tried and minimized.
Because Harvey Industry has been in this business for quite long, so they can ask the
suppliers to reduce the cost as they purchase inventory on regular basis. And if the
cost of these high end items are reduced, then overall inventory cost will go down.
And definitely inventory cost going down will contribute to the expenses reducing
thus profit increasing which is something that Harvey Industry will want to achive as
they have not seen profitability for some time now.

Finally for the lead time that exists currently can be and should be solved by the use
of safety stocks and reorder point. Safety stock will ensure that excess demand can be
fulfilled and reorder point will do the very important job of making sure that when
quantity on hand falls below a certain level, the item will be required to be reordered.
This will ensure that the lead time is minimized and because of these lead time,
production is not hampered.

Conclusion
I can conclude by saying that I have tried my level best to find out the problems that
Harvey Industry is facing and have suggested three solutions to all three problems.
And I firmly believe that Harvey Industry should implement these recommendations
for the company to run better.