Concept explainers
Interpretation:One of the system for
Concept Introduction:The input toMRP is the demand of the final item for which the dependent items are to be managed. Demand of the final item over the planning timeframe can be taken in many ways-ranging from just historical data to forecasting/estimation methods. The forecasting methods can make, rather accurate forecasts, allowing fluctuations during different periods, even if wide. Alternatively, the forecasts can be evened out so as to keep on producing without major fluctuations. (In lean terminology, this is called levelling the load). Each of these i.e forecasts with accuracy or with consistency, has its own advantages and disadvantages.
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EBK PRODUCTION AND OPERATIONS ANALYSIS
- Scenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. Is Ben Gibson acting legally? Is he acting ethically? Why or why not?arrow_forwardScenario 3 Ben Gibson, the purchasing manager at Coastal Products, was reviewing purchasing expenditures for packaging materials with Jeff Joyner. Ben was particularly disturbed about the amount spent on corrugated boxes purchased from Southeastern Corrugated. Ben said, I dont like the salesman from that company. He comes around here acting like he owns the place. He loves to tell us about his fancy car, house, and vacations. It seems to me he must be making too much money off of us! Jeff responded that he heard Southeastern Corrugated was going to ask for a price increase to cover the rising costs of raw material paper stock. Jeff further stated that Southeastern would probably ask for more than what was justified simply from rising paper stock costs. After the meeting, Ben decided he had heard enough. After all, he prided himself on being a results-oriented manager. There was no way he was going to allow that salesman to keep taking advantage of Coastal Products. Ben called Jeff and told him it was time to rebid the corrugated contract before Southeastern came in with a price increase request. Who did Jeff know that might be interested in the business? Jeff replied he had several companies in mind to include in the bidding process. These companies would surely come in at a lower price, partly because they used lower-grade boxes that would probably work well enough in Coastal Products process. Jeff also explained that these suppliers were not serious contenders for the business. Their purpose was to create competition with the bids. Ben told Jeff to make sure that Southeastern was well aware that these new suppliers were bidding on the contract. He also said to make sure the suppliers knew that price was going to be the determining factor in this quote, because he considered corrugated boxes to be a standard industry item. As the Marketing Manager for Southeastern Corrugated, what would you do upon receiving the request for quotation from Coastal Products?arrow_forwardThe Tinkan Company produces one-pound cans for the Canadian salmon industry. Each year the salmon spawn during a 24-hour period and must be canned immediately. Tinkan has the following agreement with the salmon industry. The company can deliver as many cans as it chooses. Then the salmon are caught. For each can by which Tinkan falls short of the salmon industrys needs, the company pays the industry a 2 penalty. Cans cost Tinkan 1 to produce and are sold by Tinkan for 2 per can. If any cans are left over, they are returned to Tinkan and the company reimburses the industry 2 for each extra can. These extra cans are put in storage for next year. Each year a can is held in storage, a carrying cost equal to 20% of the cans production cost is incurred. It is well known that the number of salmon harvested during a year is strongly related to the number of salmon harvested the previous year. In fact, using past data, Tinkan estimates that the harvest size in year t, Ht (measured in the number of cans required), is related to the harvest size in the previous year, Ht1, by the equation Ht = Ht1et where et is normally distributed with mean 1.02 and standard deviation 0.10. Tinkan plans to use the following production strategy. For some value of x, it produces enough cans at the beginning of year t to bring its inventory up to x+Ht, where Ht is the predicted harvest size in year t. Then it delivers these cans to the salmon industry. For example, if it uses x = 100,000, the predicted harvest size is 500,000 cans, and 80,000 cans are already in inventory, then Tinkan produces and delivers 520,000 cans. Given that the harvest size for the previous year was 550,000 cans, use simulation to help Tinkan develop a production strategy that maximizes its expected profit over the next 20 years. Assume that the company begins year 1 with an initial inventory of 300,000 cans.arrow_forward
- Prepare a Master Production Schedule (MPS) for an Agri-Chemical company in Malawi given the following information: The forecast for each week of an eight-week schedule is 50 units. The MPS rule is to schedule production if the projected on-hand inventory would be negative without it. Customer orders (committed) are as follows:Week Customer Orders1 522 353 204 12Use a production lot size of 75 units and no beginning inventory.arrow_forward5 X Month fx B C D E F G H Problem 7 Given the following forecast and cost information, determine the total cost of a chase plan that uses regular time production output of 400 units per month, overtime is used when needed up to a maximum of 40 units per month, and subcontracting is used if additional units are needed to meet the forecast. 1 2 3 45 6 Font Forecast Cover 440 400 450 460 480 490 Totals Problem 6 Accessibility: Investigate √5 Level Production. Production Overtime Problem 7 Alignment Subcontr acting Inventory Total Holding Cost Problem 8 Problem 18 F Number Ty Costs Formatting Table Styles Production Costs. Regular Overtime Subcontracting $ 555 E 50.00 65.00 75.00 Regular Time Overtime Subcontracting Total Cost Marrow_forwardWine Accessories Inc. (WAI) produces two models of corkscrews, the standard model and a deluxe model. WAI follows a level aggregate plan, producing 20,000 corkscrews per month, or 5000 corkscrews per week. Th e MPS is developed in weekly time periods. Th e forecasts for each model and the projected available are shown in the next two tables. Th e replenishment order quantity is 2000 units for the standard model and 1000 units for the deluxe model. Note that you can place multipleorders if a single order is insuffi cient to cover the forecast (you can produce 4000 units of the standard model if necessary, or 2000 or 3000 units of the deluxe model). Remember that total weekly production is limited to 5000 corkscrews. Develop an MPS for each of the products.arrow_forward
- CASE 4: PROJECTING SALES USING MOVING AVERAGE The sales (in thousands) of a particular beverage of a popular milk tea shop for each quarter of the following months and trend values were found using moving averages as follows: Actual Sales (in thousands) Year Quarter Trend 4 3 4 24 1 2 30 30 3 60 31 4 20 35 1 20 40 50 45 3 80 50 4 40 54 7 1 40 57 62 3 92 4 1 LO COarrow_forwardSpring and Summer Fashions, a clothing producer, has generated a forecast for the next eight weeks. Demand is expected to be fairly steady, except for periods 3 and 4, which have higher demands. Period 1 2345678 Total Forecast 1,200 1,200 1,400 3,000 1,200 1,200 1,200 1,200 11,600 The company typically hires seasonal workers to handle the extra workload in periods 3 and 4. The cost for hiring and training a seasonal worker is $50 per worker, and the company plans to hire two additional workers and train them in period 3, for work in period 4, and then lay them off (no cost for layoff). Develop an aggregate plan that uses steady output from regular workers with added output from the two seasonal workers in period 4. The output rate for the seasonal workers is slightly less than that of regular workers, so their cost per unit is higher. The cost per unit for regular workers is $4 per unit, while cost per unit for the seasonal workers is $5 per unit. Backlog cost is $1 per unit per…arrow_forwardSpring and Summer Fashions, a clothing producer, has generated a forecast for the next eight weeks.Demand is expected to be fairly steady, except for periods 3 and 4, which have higher demands.Period 1 2 3 4 5 6 7 8 TotalForecast 1,200 1,200 1,400 3,000 1,200 1,200 1,200 1,200 11,600The company typically hires seasonal workers to handle the extra workload in periods 3 and 4. Thecost for hiring and training a seasonal worker is $50 per worker, and the company plans to hire twoadditional workers and train them in period 3, for work in period 4, and then lay them off (no cost forlayoff). Develop an aggregate plan that uses steady output from regular workers with added outputfrom the two seasonal workers in period 4. The output rate for the seasonal workers is slightly lessthan that of regular workers, so their cost per unit is higher. The cost per unit for regular workers is$4 per unit, while cost per unit for the seasonal workers is $5 per unit. Backlog cost is $1 per unitper period.arrow_forward
- Simple exponential smoothing (with a 0.2) is beingused to forecast monthly beer sales at Gordon’s LiquorStore. After observing April’s demand, the predicted demandfor May is 4,000 cans of beer.a At the beginning of May, what is the prediction forJuly’s beer sales?b Actual demand during May and June is as follows:May, 4,500 cans of beer; June, 3,500 cans of beer. Afterobserving June’s demand, what is the forecast for July’sdemand?c The demand during May and June averages out to 4,5002 3,500 4,000 cans per month. This is the same asthe forecast for monthly sales before we observed theMay and June data. Yet after observing the May andJune demands for beer, our forecast for July demand hasdecreased from what it was at the end of April. Why?arrow_forwardGunes Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were: Cost PercentCompleteMaterials costs $ 10,600 65% Conversion costs $ 12,800 30% A total of 8,500 units were started and 7,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month: CostMaterials costs $ 142,100 Conversion costs $ 359,500 The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs. The cost per equivalent unit for conversion costs for the first department for the month is closest to:$44.58$46.16$40.03$48.47arrow_forwardCotton Island Fashions, a clothing producer, has generated a forecast for the next eightweeks. Demand is expected to be fairly steady, except for periods 3 and 4, which havehigher demands.Month 1 2 3 4 5 6 7 8 TotalForecast 1200 1200 1400 3000 1200 1200 1200 1200 11600The company typically hires seasonal workers to handle the extra workload in periods 3and 4. The cost for hiring and training a seasonal worker is $50 per worker, and thecompany plans to hire two additional workers and train them in period 3, for work in period4, and then lay them off (no cost for layoff). Develop an aggregate plan that uses steadyoutput from regular workers with added output from the two seasonal workers in period 4.The output rate for the seasonal workers is slightly less than that of regular workers, sotheir cost per unit is higher. The cost per unit for regular workers is $4 per unit, while costper unit for the seasonal workers is $5 per unit. Backlog cost is $1 per unit per period.arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage Learning