Solution to Roger Gray
ANALYSIS

This is a very familiar problem to many purchasers and plant materials managers: incorrect and late information leading to poor supply performance. A common response is to blame the information system, and ask the IT group to fix it or design a new one. Others prefer to point to inaccurate records because those who use the system fail to record their transactions properly. Successful organizations find ways of dealing with these problems, as must Roger Gray.
The problems experienced by Roger Gray are typical of MRP- and MRPII-type systems. These systems provide the benefits of planning what to order and produce and when, which helps to keep costs down by minimizing inventories and avoiding unnecessary set-ups. The difficulty is that they require accurate data. Using data that is not accurate or is outdated leads to bad decisions.
The case also suggests that factors other than the materials management system were contributing to the problems. Therefore, focusing on IT issues alone will not adequately address the problems.
An important factor here is the high cost of a stockout. Failure to meet delivery requirements would result in customer downtime, which carries tremendous costs, particularly for Anderson’s automotive customers. Automotive OEMs charge their suppliers $300,000 to $400,000 per hour of downtime. Consequently, control over inventories is essential. Perhaps the fact that delivery reliability is important is one reason why Roger does not get criticized for carrying too much inventory. Finally, Anderson supposedly is operating in a JIT environment. It would appear, however, that the plant has failed to adopt JIT practices, while its customers (and likely its competitors) have. This problem is demonstrated by unreliable deliveries from suppliers, poor control of inventories and poor planning and