How the Chips FallMs. Potato Chip Compary has been a well-respected regional manufacturer for many years. Aecenthe the company has decided to expand into new markets to anuere a competitive advantage. To do this, they will need to attract new investors and to accomplish that, they will need to show they are capable of producing a solid return on investments each year.In keeping with these objectives, a policy has been instigated which recduces the finished products’ irventory to a rock-bottom level each June 30 th, which is the end of the company’s fiscal year. Why? The lower the inventory, the less money is tied up. This situation, in turn, tends to put the comparry in a better cash ponition at year end, which means that more money can be passed on to the stockholders as earnings per share.As the recently hired production managec, lane realizes there is a downside to this policy, with imventory levels on lune 30 lower than at arry other point during the year but with demand for potato chips higher than usual, the net result is an inability to meet the total customer demand for various fypess of potato chipsi. in fact, once inventory levels are reduced, it will take more than a month to get the process back to normat and runing smoothly again. The effect, lane predicts, well be both lout cales at yeanend and a number of goerations problems associated with a low-imventory situation.For Jane, the dilemma is whether or not to confront senior management with these problems, should she question the wisdom of the policy?
Leave a Reply