Case Study Να 19
(Mumbai Univ April 2006)
M/s Excellent Dashboard Private Limited (EDPL) is situated at Gurgaon near Delhi. The
company supplies dashboard assembly as a 4PL supplier to Maruti Udyog Limited (MUL)
since the past three years. There are a number of components in the dashboard such as
speedometer, fuel level gauge, etc. EDPL purchases these individual components from
various suppliers and assembles them at their factory. It then supplies the finished product
to MUL.
One of the major components, namely, the "starter switch", has always been a cause of
problem. EDPL does not observe any Systematic Inventory Control Methods in
purchasing of various items of inventory. They order the required items of inventory as and
when the demands for those inventories arise.
At EDPL, dashboards are not available off the shelf. Hence, many times delays occur in
arranging for supply of required quantity of assembled dashboard to MUL. This, in turn,
results in a substantial financial loss to EDPL since, as per the agreement signed between
EDPL and MUL, MUL can levy penalties towards delays in the supply of required
quantity of dashboard assembly.
The information gathered from EDPL shows that the annual demand of the item, namely,
starter switches, is 5,000 nos. The unit price of the item is Rs. 50/- each. The ordering cost
is R. 40/- per order. The inventory carrying cost is 20% of the unit cost of inventory.
Questions:
1)
Explain the role of Fourth Party Logistics in the above case
2)
Discuss various logistical ways in which EDPL can avoid penalties imposed by
MUL
3)
Calculate the EOQ for the item under reference from available information. Can
this EOQ be used to decide on the levels of stock to be kept at hand? What steps
should be taken to avoid faults in the starter switches?