Case Study: Sapphire Energy
Sapphire Energy provides reliable electric service to customers residing near Ballarat, Melton, Wodonga, Geelong, Sunbury, Bendigo, Mildura, Shepparton, Traralgon, and Wangaratta, etc. To deliver the electricity the major material that is extensively used is 1/0 AWG aluminum triplex cable. This cable is most reliable to deliver the electricity from the distribution pole of electricity generation from powerhouse to meter loop on the house of a consumer of electricity. The eastern Power Storeroom company acquire this cable to produce the output to deliver it to in accordance with the contract signed with Sapphire Energy. To ensure the performance of the contract, Eastern Power needs 1,55,000 meters of cable this coming year. This cable is used in daily service work, practically the cable is installed for five working days of the company. The carrying cost of this cable is $1.35 per meter. According to the current agreement between the companies, the eastern power storeroom has to store one-twelfth stock of cables of the annual need or requirement of the company. This arrangement has made to ensure the efficiency of the company in the delivery of services as it will reduce the lead time. Sapphire Energy has a regular spot in the production schedule of Eastern Power. The supply will be made immediately whenever Sapphire Energy needs it because of agreement undertaken between Eastern Power and Sapphire Energy. Unless the lead time of delivery of power by Eastern Power without the agreement is twelve weeks. And there are more terms and conditions for the buyers contacted the company without any agreement. The terms are no quantity discount will be offered and the minimum order of 4500 meters has to be placed by the buyer. The capacity of Eastern Power Storeroom to store the cable is a maximum of 90,000 meters of 1/0 AWG aluminum service cable.
Moreover, a buyer has to pay the shipment cost of cable shipment at the rate of $50 per order, which includes the cost of purchase requisition, order an issue of the check after payment. The inventory carrying cost incurred on all items is 10% of the purchase price per unit per year.
As Victoria's Essential Services Commission and the Laburnum group are government regulated, investor-owned utility. Thus, shareholders critically evaluate the business and inventory management practices of the company to ensure high effectiveness and efficiency in the delivery of the service and maximum returns to the shareholders.
In this report, students are required to play the role of new inventory controller at Sapphire Energy. Being a controller, the student has to evaluate the effectiveness of the current ordering system and the measures to improve the current system.