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WILKINS, A ZURN COMPANY: AGGREGATE PRODUCTION PLANNING

GROUP-6

Anirban (188031)
Ankit(188034)
Ankur (188039)
Nishant (177128)
Pratyush(188183)
Rahul (188189)
Rohit (188149)
Shantnu (177128)
Tarun (177219)
Nature of Wilkins business

 Wilkins is in high quality water control products


 PVB is a seasonal business with max demand in Q3. Fire Valves is a business
with high demand uncertainty
 PVB made to stock (54% FG) and Fire Valves are made to order (85% RM)
 FG Inventory was spread across 52 locations in USA. Thus, it had
decentralized distribution
 Demand for the company’s product is growing
 Currently production capacity constrains in peak season and excess
capacity in other season due to seasonal demand
 Low labor cost
Major Challenges

 Seasonal demand of PVB causing production capacity constraints


in peak season and excess capacity otherwise
 Irregular demand of Fire Valves
 Excess inventory at plant
 No inter supplier transfer
Target to reduce the inventory by 30%

Assumptions for the year 2005


• δq1 = 1877, δq2 = 3361, δq3 = 3851, δq4 = 8154. (where q1 –quarter 1, q2-quarter
2, q3 – quarter 3, q4 – quarter 4)

• Customer Service Level of 99% and Lead Time of 2 weeks

• 6 Employees of PVB cell manage both Dept 101 which supplies Machine
Castings to the PVB cell and Dept 104 which produce PVB cell

CSL 99% z value 2.326347874


Q1 Q2 Q3 Q4
Std Dev. 1877 3368 3851 8154
Safety Stock 1712.703765 3073.194609 3513.916995 7440.269846
GIVEN DATA
Holding Cost 20%
Std. Cost($) 25.65
Holding Cost($/unit/quarter) 1.2825
Inventory Value($) 1523789
InventoryValue(units) 59407

Production Rate(unit/day/employee) 100


Labour Usage 82.40%
Production Rate(units/quarter) 5356
Hiring Cost per employee ($) 580
Level Strategy
0 Q1 Q2 Q3 Q4

Forcast(Units/week) 4,120 7,480 9,341 5,983

Forecast(Units/Quarter) 53,560 97,240 1,21,433 77,779

Safety Stock 1,713 3,073 3,514 7,440

Regular Production (/ Quarter) 74,511 74,511 74,511 74,511

Ending Inventory(units) 59,407 80,358 57,630 10,708 7,440

Number of Employee 6 14 14 14 14
New Employee 8 - - -
Cost of Hiring 4,588.81 - - -

Cost of Regular Production 19,11,215.43 19,11,215.43 19,11,215.43 19,11,215.43


Holding Cost 1,03,059.52 73,909.99 13,732.94 9,542.15

Total Cost 20,14,274.95 19,85,125.42 19,24,948.37 19,20,757.58

Total Annual Cost 78,45,106.32


Chase Strategy
0 Q1 Q2 Q3 Q4

Forcast(Units/week) 4,120 7,480 9,341 5,983

Forecast(Units/Quarter) 53,560 97,240 1,21,433 77,779

Safety Stock 1,877 3,368 3,851 8,154

Regular Production (/ Quarter) - 1,04,293 1,12,384 82,082

Ending Inventory(units) 59,407 5,847 12,900 3,851 8,154

Number of Employee 6 - 19 21 15

New Employee -6 19 2 -6

Cost of Hiring - 11,293.87 876.17 -

Cost of Regular Production - 26,75,116.00 28,82,649.60 21,05,403.30

Holding Cost 7,498.75 16,544.25 4,938.91 10,457.51

Total Cost 7,498.75 26,91,660.25 28,87,588.51 21,15,860.81

Total Annual Cost 77,02,608.31


Level Strategy

Results
Average Inventory 39,034
Average Inventory Reduction 34.29%
Chase Strategy

Average Inventory 7688


Average Inventory Reduction 87%
“Chase” and “Level” strategy

 In level strategy changes in demand are met by inventory, overtime subcontracting,


etc.
 In chase demand workforce level or production rate is changed in order to meet
demand.
 The planning on choosing the strategy depend on which cost is higher cost of hiring
and firing is high or cost of subcontracting.
 In level strategy we can manage with 2 shifts as the upper limit of 7 employees to be
employed at the PVB cell in a single shift
 In chase strategy we will have to plan for both hiring and firing also going with the 3
shifts.
Thank you!