A Case for Inventory Management IBS Enterprises (IBS) recently purchased Jim and Jewelry Company (JJC) a company that designs, manufactures and markets fine gold and diamond jewelry throughout South Africa. It had previously been a family- run business, but following the death of the founder and CEO, family members decided to sell the enterprise. IBS saw the potential for this business and purchased it, intending to improve supply chain performance. The domestic supply chain involves inbound shipments of raw materials from multiple small suppliers to a manufacturing location in Pretoria. Once the jewelry has been created, shipments are sent through a transportation intermediary to retail stores in Cape Town, Durban and Johannesburg. The challenges JJC faces are common to the fashion industry: rapidly changing styles and preferences require the company to react quickly and adapt designs to suit consumer demands. The peak demand periods occur throughout December and in mid-February, with a smaller one in the spring. The JJC brand and style is well established throughout South Africa, and IBS decides that it will keep the name to maintain brand loyalty. In addition to making supply chain improvements, IBS Enterprises is planning to export the products to the U.K. The jewelry market has experienced a steady increase over the past ten years, and has continued to grow over the past year despite predictions for an overall industry slow-down. South Africa’s participation in the Kimberley Process should help accelerate IBS move to the British market. The Kimberley Process is an international certification scheme designed to regulate and prevent the trade in conflict diamonds. Although a certificate is needed in the export of rough diamonds, IBS can provide a warranty on its polished diamond jewelry, stating the gems have been purchased from legitimate sources compliant with the United Nations resolutions. IBS is in the process of contacting multiple U.K. wholesalers to try and broker an export arrangement. Investigating Losses Despite IBS’s desire for expansion and growth, JJC has experienced an overall profit loss for the past five years. An initial investigation into the company’s finances revealed an overall business turnover of about USD 63 million, and the cost of inventory alone is USD 27 million. Over 80 percent of the company’s total inventory consists of finished product. Inventory is inconsistently categorized, which also leads to a longer lead time for the organization to fulfill orders. Most of the inventory is held in various retail outlets that JJC owns and in franchises where JJC owns the stock. Losses in sales were primarily due to the inability to deliver timely orders because the stock could not be located efficiently in its inventory. This resulted in frequent stock-outs during peak demand periods. In addition, designs were not well aligned to customer preferences, which meant that there were higher volumes of product left in inventory. There was very poor visibility of stock in relation to overall sales and no integrated and efficient method to track shipments, delivery and items in stock. In addition, IBS identified over USD 1 million in stock that JJC had accumulated over the past twelve months. Developing Strategies IBS executives have decided to investigate potential distributors and retailers in the U.K. while working on the supply chain improvements. A strategy is being developed to address the critical supply chain problems, while an exporting plan is being created to initiate the company’s international growth strategy. Question to be answered Which 2 basic activities should IBS undertake to address the critical inventory issues? Explain your answer.