Explain the importance of adopting inventory control methodologies in the current business environment

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Should RMD continue to purchase their Cryovaced rumps from McDonalds Meats or consider Kellys Meats offer?


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Question 1 – Inventory Management

Part A

Riverina Meat distributors (RMD) purchase products from a regional meat processor, Mcdonalds Meats (AM), for resale to restaurants and catering establishments in South East Australia in the from of Cryovaced meat. The Cryovaced meat is whole cuts of meat sealed in a plastic bag from which the air is removed. This allows for long storage of the meat at an optimum temperature (below 4 degrees C, but above freezing). It also helps in maintaining the texture of the meat. Whole rumps, using this method, are a popular product and are one of the mainstays of RMD. The cry faced whole rumps are packed 5 to a carton and the average net weight of each carton is 20 kg. There is some competition among meat processors offering cartons of cryovaced meat, and Am has ensured the quality of their product has been maintained. In addition, over the last 12 months, AM’s pricing policy to RMD has been consistent, with each carton based on a price of $6.00 per kg. Over the last few years, the average annual demand has been constant and RMD has purchased 600 cartons per month from Adrian Meats. The holding cost at RMD is 20% per unit (carton) per year and they have established that the administrative cost of each order is $200.00 per order.


Determine the total inventory cost for RMB, with their policy of purchasing 600 cartons per month and calculate what the savings would be if RMB used the Economic Order Quantity model.


Part B

A second supplier, Kellys Meats(KM), is associated with a major Queensland feed lot and has offered discounted prices dependent on the order size (for each order) as follows:

5% per kg discount for each order equal to or exceeding 800 carton orders

7.5% per kg discount for each order equal to or exceeding 1200 carton orders

10% per kg discount for each order equal to or exceeding 2000 carton orders

Should RMD continue to purchase their Cryovaced rumps from McDonalds Meats or consider Kellys Meats offer? Include the rationale for your recommendation.


Part C

Riverina Meats has a limited cool room capacity of 600 cartons of rump due to its need to also carry other cuts of meat to meet their customers demand. A local cold store has excess storge space and has proposed to RMD that they could hold excess inventory for $1 per carton per week. Discuss how RMD should evaluate this proposal.


Part D

Explain the importance of adopting inventory control methodologies in the current business environment. Use examples of inventory control methods to support your argument.


Question 2 – Project Management

Part A

Elaine, owner of Elaines Catering is renovating her Kitchen to increase the effciency to better serve her small catering operation. She also wants to increase the market value of her home. Harrisons Joinery has been chosen as the company to design and construct the Kitchen and will construct the fittings off-site at their factory and transport the finished cupboards and bench-tops for instillation when the removal of existing kitchen is completed. Items to be removed include existing cupboards and bench tops, a small section of a wall to expand the party, an air-conditioning unit,existing flooring and tiling around the work area. The removal of the A/C unit will require a brick layer to fill the resultant hole. The instillation will require the coordination of a number of suppliers and contractors. Elaine has requested your help as an external consultant to detemine what is involved in the project and how soon it can be completed. They have asked for a plan in the form of a Gantt Chart and Critical Path Network with relevant activity times, project duration and identification of the critical path. In the initial planning stages, you have decided that there are three major components (or sub-projects) in this expansion project -. After spending a few weeks in scoping the work, you have established a list of activities according to the three major components. Details of these are as follows:



A1 Plan and Design Kitchen

A2 Ordering of Materials

A3 Construction of Kitchen Cupboards and Bench Tops



B1 Removal of existing kitchen structure, oven and cook top dishwasher, sink

B2 Removal of A/C unit and laying bricks in the wall

B3 Lay in-floor power to centre work bench and to relocated power points

B4 Installation of wall oven tower and peripheral cupboards, benches and splashback

B5 Remove linoleum from floor and prepare for new flooring

B6 Lay new flooring



C1 Install centre work bench pantry, Oven and cooktop

C2 Connect power to all points

C3 Adapt plumbing to repositioned sink and dishwasher.

C4 Test all connections

C5 Paint kithchen

C6 Reinstall all other appliances


Discussions with contractors and the client have helped you to draw up a table of estimated durations for the activities and the relationships among them as indicated below.


Write a report on the project plan to Elaine’s Catering, offering sufficient information for senior management to review and understand the implications of embarking on such a project

ActivityPreceding ActivityDuration(In Days)
 A1 None 15
 A2 A1 5
 A3 A2 8
 B1 A3 2
 B2 1
 B3 B2 0.5
 B4 A3, B1 1
 B5 B4 1
 B6 B3 , B5 1
 C1 B6 2
 C2 C1 0.5
 C3 B4 0.5
 C4 C2 1
 C5 C1 1
 C6 C5 0.5


Part B

You realisen that the information that Elaine has requested is inadequate and suitable for only basic planning purpose. In a second section of the report, present your recommendations on what other information is relevant and what techniques and systems should be used to plan, monitor and control the project.

Students should use the Critical Path Method(CPM) as provide through POM, and then consider other oprions that provide the information necessary to complete the project.


Question 3 – Transportation problem

Part A

Esebo Bakeries supplies outlets in 4 shopping mails within the CBD. The pastries include 4 varities of pies, vegetable pasties and sausage rolls. The outlets are restocked daily but because of the good reputation on the product and the high demand, the outlets need to restock regularly to meet demand.

The outlet needs to notify the company when stock reaches the reorder point and restocking of the outlet can be done by any of the stores that have excess stock. The cost in fuel and time is listed below


1. Find the solution that minimizes moving costs, using POM for Windows.

2. You have noe been asked to act as a consultant to the company. You realise that the transportation methodology is directed only at costs, and in this case, the cost of moving product from each bakery to an outlet in a Mall. Explain what other factors you would consider to create a more realistic mathematical model.


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