Академический Документы
Профессиональный Документы
Культура Документы
Aggregate Production Planning: Optimize resources to meet the demand, minimize cost and ensure sufficient
customer service level
SCM REDUCTION OF 30% INVENTORY FOR PRESSURE VACCUM BREAKERS (PVB) IN 2
2005
CALCULATIONS FOR INVENTORY
• Initial inventory = inventory value/production value =1523789/25.65 = 59407 units Safey stock = Z*S.D*(L)^1/2
CSL = 99%
• Holding cost = 20 % (25.65) = 5.13/unit/year/4quarter =1.2825/unit/quarter Z value = 2.33
• Production rate = 100 units/day/employee *5/days/week*13weeks/quarter =6500 SD (Q1) =1715 units
• Labour usage = 82.4%, SD (Q2) =3072 units
SD (Q3) =3520 units
• Production rate = 6500*.824 = 5356/unit/employee/quarter SD (Q4) =7452 units
Quarter weeks = 13
Production cost/unit = 25.65
Initial No. of employees = 6 FORCAST (units/week) 4120 7480 9341 5983
Holding cost = 20% FORCAST(units/quarter) 53560 97240 121433 77779
Hiring cost/emp = 580
Initial inventory (units) = 59407
Inventory value = 1523789
Lead time = 2 weeks
SCM CHASE AND LEVEL STRATEGY 3
• Production levels vary periodically based on demand • Normal Production Rate for every quarter
• Maintain min Safety stock which is variable throughout the time • Min Inventory or Safety Stock necessary in the time period
periods
CHASE STRATEGY LEVEL STRATEGY
strategic plan 0 Q1 Q2 Q3 Q4 STRATEGIC PLAN 0 Q1 Q2 Q3 Q4
Forcast(units/week 4120 7480 9341 5983 Forcast(units/week 4120 7480 9341 5983
Forcast(units/quarter) 53560 97240 121433 77779 Forcast(units/quarter) 53560 97240 121433 77779
Safety stock 1998 3579 4101 8682 Safety stock 1715 3072 3520 7452
Regular production 0 96408 123188 80340 Regular production 74984 74984 74984 74984
Ending inventory 59407 5847 5015 6770 9331 Ending inventory 59407 80831 58575 12126 9331
No. of employees 6 18 23 15 No. of employees 6 14 14 14 14
New labour 0 12 5 -8
New labour 8 0 0 0
cost of hiring 0 0 6960 2900 2400 Cost of Hiring 4640 0 0 0
Cost of regular prodn 0 2472865.2 3159772.2 2060721
Cost of regular prodn 1922589.8 1922589.8 1922589.8 1922589.8
Holding cost 1169 1003 1354 1866.2 Holding cost 103463.68 74976 16621.28 11943.68
Total cost(Per Q) 1169 2480828.2 3164026.2 2064987.2 Total cost(per Q) 2030692.5 1997565.8 1939211.1 1934533.5
Total cost for the pan 7711011 Total cost for the plan 7902002.9
Average inventory in Chase Strategy = (5847+5015+6770+9331)/4 = 6741 Average inventory in Level Strategy = (80831+58575+12126+9331)/4 = 40216
85% reduction in average inventory levels as compared to Level Strategy
• Chase strategy would be recommended. Advantages Disadvantages
• Because there is a high need to cut down the inventory level by taking Feasible solution Demands Fluctuate
into consideration the overtime, subcontract and other alternatives. Can continue the no lay off policy Inventory levels are high
• Lowest cost & Inventory almost same as safety stock. Expensive strategy
• This would be more responsive to the customer demands Cost of materials may go down