Scientific Management of Inventory on a Hand-Held Calculator

Standard Brands is using programmable hand-held calculators in its warehouses to apply state-of-the-art mathematics to calculating safety stocks, re-order points, and order quantities of Planters Peanuts items. Each item controlled by the new system has its own card with data recorded magnetically like the data on the back of credit cards. About $10 million favorable cash flow has been generated up front, and a profit impact of $7.6 million during the first two years has been made possible by using the hand-held calculator. The impact will continue at $3.8 million per year, but this first two-year benefit would have been completely lost by the most common approach of working within a long-range MIS development program. An unusually favorable benefit-to-cost ratio reflects total equipment cost of about $9,000, and development and implementation effort measured in man weeks. Another major benefit of the work has been that the practice of Management Science became completely real and understandable to the management group; the programmed calculator has made appearances on airplanes, and over lunch tables. Top level management has been able to process some data personally, and use of the calculator in a simulation mode facilitates and encourages frequent “What if” investigations of alternative policies and practices.