Case Study - the Eagle Machine Company free essay sample

We have got Rs. 12 million worth of materials stashed away around here, and a percent cut would save at least Rs. 300,000 a year in carrying charges. At the same time. Get your payroll and operating expenses down 10 percent . That’s in line with our company wide cut back. I know this hurts, Manoharan, because we have got some mighty fine people here in purchasing, but we can’t be sentimental these days. Our over head has got to come down or we’re dead! â€Å"I’ m having an executive committee meeting in one week. Have your plans ready by that time! We’re betting on you, Manoharan. You have got to get us out of the hole. I know you can do it. Please interact and develop a harmonious proposal† Mr. Manoharan starts a review along with other depts. The purchases total only Rs. 43. 2 million per year. Eagle buy, a wide variety of materials, ranging from a few kgs of rare metals to sizable quantities of metal sheet. We will write a custom essay sample on Case Study the Eagle Machine Company or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page A big part of the Rupee volume is in non-ferrous castings, forgings, stampings, fasteners and sub-assemblies. The purchasing department consists of one Sr. Manager, three buyers, and four clerks. Salaries, fringes and expenses sum to Rs. 370,000 a year. The purchasing department is responsible only for buying and expediting; the manufacturing manager handles production, inventory control, receiving and traffic. Manoharan reports to the president, as do other department heads. Manoharan learns from inventory control that raw stock inventory is Rs. 12. 2 million. The marketing manager controls finished goods stocks. Manoharan wonders hoe he can deliver the cost reduction program. Questions: 1. What actions should Manoharan take to reduce inventories by 10 percent? 2. What dangers, if any, are there in reducing inventories? 3. In what ways could the cost of goods purchased be reduced?