Three Jays Corporation Case Study

Three Jays Corporation Case Study LOGS 6654 Distribution & Inventory Control Spring 2018 Dr. Sara Liao-Troth Three Jays Corporation Timeline 1954 – Fremont Jams and Jellies (FJ&J), founded by Alex Fremont, parent company to Three Jays (3Js) 1971 – FJ&J entered into a contract with major super market to product private label jams and jellies 1980 – Andrew Fremont joined FJ&J after graduating from business school, focused on increasing the overall efficiency of FJ&J manufacturing processes 1992 – Andrew Fremont named President of FJ&J 2000 – FJ&J only producing private-label jams and jellies 2005 – Jana Fremont joined FJ&J after graduating college and two years in the Peace Corps, founded Three Jays Corporation to focus on organic food products 2010 – Introduction of the Economic Order Quantity method to 3Js Executive Summary A subsidiary of Fremont Jams and Jellies (FJ&J), Three Jays Corporation (3Js) was founded in 2005. 3Js has established a business model of producing organic jams and jellies under the ownership of Jana Fremont, who saw the market potential. Production has been set up as a separate entity from FJ&J. Core Issues Jana Fremont is looking to make the most of the growing market for organic food products and 3Js has seen significant growth since its start. Wanting to take advantage of the demand, she will need to invest in a major marketing campaign that will yield an estimated return of 20%. However, in order to fund this investment, the easiest and quickest way is to reduce the finished-goods inventory, which she believes is too high. Fremont has tasked Brodie Arens, a new intern at 3Js that is working on his MBA, with familiarizing himself with the production process and various costs associated with it. After evaluating the current inventory situation, Brodie is to provide a recommendation that will help reduce the current levels of inventory. Analysis 3Js currently produces 141 SKUs comprised of six types of jams and jellies that are packaged in 2, 4, 8, and 12 ounce jars, all under its own label. All raw-material inventories, consisting of packing materials and ingredients that are used for most of the product recipes, are purchased by a buyer at FJ&J. In order to determine the optimal order quantity to be produced, the production team should be implementing the Economic Order Quantity (EOQ) and Reorder Point (ROP) calculated figures. Demand data from the first full year sales is used for the EOQ and ROP calculations. Brodie initially begins by updating the EOQ and ROP figures for each stock keeping unit (SKU) using 2012 demand data because the original calculations were done in 2011 with sales numbers from 2010. Comparison table of years 2011 vs 2012 found in Appendix 1 However, Brodie quickly determines that the formal production planning system was being ignored by the production team for several reasons. 3J’s production crew, Jake and Josh, felt that changing the lines would require more cost. By reducing the number of line changes as much as possible, they thought they were saving money. It was also thought that a longer run would ensure that there would be less production delays due to emergency situations while changing the lines. Jake and Josh also kept safety stock too high for fear of stock outs. This lead to high and costly inventory levels. It affected the inventory turnover rate. They erroneously established a technique known as Periodic Order Quantity (POQ) method. ………………………………..CONTINUED…………………………………