MBA 576 Unit 4
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Unit #4 Discussion
Elias Eichhorn
Park University
MBA576: Operations Management
Dr. John Wilson
April 7, 2024 Dear COO,
As the Production Manager of Kibby and Strand, I am thrilled to introduce our new capacity plan
for the receiving department. Our aim at Kibby and Strand is to guarantee that our long-term supply capabilities perfectly align with the anticipated level of long-term demand. Our plan will effectively reduce the risks of overcapacity and undercapacity, which can increase operating costs and strain our resources, ultimately harming our customer relationships. By implementing this capacity plan, we will proactively position ourselves to manage our operations efficiently and enhance our competitiveness in the industry to our competitors.
Department
The receiving department has been selected as the focus of our capacity analysis due to its crucial role in our operations. As the center through which raw materials and resources enter our facility, it is positioned between our suppliers and the production line. The efficiency of this department directly impacts on our ability to meet production schedules and fulfill customer orders promptly. The three key questions we will focus on in the department capacity planning strategy are “What type of capacity is required?”, “How much is needed to meet demand?”, and “When is it needed?”. To optimize our receiving operations and support our production requirements promptly, we must answer three fundamental questions. By focusing on this crucial point, we can ensure that we maintain the appropriate level of capacity to
manage incoming materials effectively and can always serve our customers best.
Capacity Tracking Strategy Our capacity plan in the receiving department involves the tracking strategy. We will add capacity in small increments to align with increasing demand and seasonal trends we have seen in the past. This choice was made based on live data from our sales department, which provides updates on every bid and signed contract, as well as real-time production information. Our dynamic information stream enables us to accurately track demand fluctuations and react swiftly to any changes. Our strong connections with suppliers also provide us with the flexibility to respond quickly to shifts in demand, minimizing inventory costs. This would give us a competitive advantage since many companies lose millions of dollars in inventory costs. “In the United States, total retailer inventories rose by $78 billion to around $740 billion throughout 2022—an increase of about 12 percent.” (Baum, C., Hauer, M., Joglekar, A., & Turco, A. 2023) Additionally, our focus on standard products has allowed us to maintain a relatively small capacity cushion. Our organization, which deals primarily in standard products and services, maintains smaller capacity cushions to ensure agility and cost efficiency in responding to fluctuating demands. The textile industry's revenue will grow at a compound annual rate of 7.4%
from 2024 to 2030. (Grandview Research, 2024) This growth is driven by the increasing demand
for apparel in the fashion sector and the rapid expansion of e-commerce platforms. Our tracking strategy, combined with qualitative analysis, will effectively manage demand fluctuations. This approach will consider the uncertainty surrounding demand escalation and will allow us to make
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Related Questions
1. What factors should be considered when selecting the appropriate capacity cushion? Howdoes the choice of capacity cushion relate to other decisions in operations management?To other functional areas?
2. Capacity planning requires a demand forecast for an extended period of time into thefuture. What concerns would you have regarding an extended forecast as a capacityplanner?
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Charles Lackey operates a bakery in Idaho Fals, Idaho. Because of its excellent product and excelent location, demand has inoreased by 25% in the last year. On far boo many occasions,
customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a statf meeting, one employee suggested ways to load the
ovens differently eo that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only
production change that will be made in order to meet the increased demand. The bakery currently makes 1,500 loaves per month, Employees are paid S8 per hour. In addtion to the labor cost.
Charles also has a constant utity cost per month of $850 and a per loaf ingredient cost of $0.50
Current multtactor productivity for 640 wark hourn per month - 0223 loavesidolar (round your response to three decimal places)
Ater increasing the number of…
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Required:
a. What cost per frame should the cost system report to facilitate management decision making?
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Capacity planning requires a demand forecast for an extended period of time into the future. What concerns would you have regarding an extended forecast as a capacity planner?
arrow_forward
Charles Lackey operates a bakery in Idaho Falls,Idaho. Because of its excellent product and excellent loca-tion, demand has increased by 25% in the last year. On far toomany occasions, customers have not been able to purchasethe bread of their choice. Because of the size of the store, nonew ovens can be added. At a staff meeting, one employeesuggested ways to load the ovens differently so that moreloaves of bread can be baked at one time. This new processwill require that the ovens be loaded by hand, requiring addi-tional manpower. This is the only thing to be changed. If thebakery makes 1,500 loaves per month with a labor produc-tivity of 2.344 loaves per labor-hour, how many workers willLackey need to add? (Hint: Each worker works 160 hours permonth.)
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Give an example of capacity requirement planning
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What models and methodologies are applicable to capacity planning ?
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Deforrest Marine Motors manufactures engines for the speedboat racing circuit. As part of their annual planning cycle, they forecasted
demand for the next four quarters. The number of available days of production and the anticipated demand are given below.
Employees
Production Rate
Production Cost
Backorder Cost
Overtime Cost
Overtime Limit
Demand
Q1
2,400
6,019,000
They also estimated many of the costs required to conduct operations planning. Some of these key figures are listed below.
30
70 units/employee/quarter
Q2
2,200
$1,000/unit
$200/unit/quarter
$1,500/unit
<= 25% of Reg. Production
Q3
1,700
Q4
1,800
Hire Cost
Fire Cost
Subcontracting Cost
Subcontracting Limit
Inventory Cost
Initial Inventory
$1,200/employee
$800/employee
$1,800/unit
400 units maximum
$100/unit/quarter
280 units
Deforrest Marine Motors wishes to maintain the current number of employees for the entire year to follow a level strategy balanced with
inventory and backorders as needed. What is the total cost of this…
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The planner at a company that makes garden tractors is about to prepare an aggregate production plan that will cover the next 6 months. She has collected the following information:
Month
Demand Forecast Above the available capacity through permanent workforce
1
1,000
2
1,000
3
2,000
4
3,000
5
4,000
6
1,000
Total:
12,000
Production per month = 20 units per worker
Initial inventory = 500 units
Desired ending inventory (at the end of month 6) = 0 units
Cost:
Hire cost = $500 per temporary worker
Inventory = $10 per tractor per month
Backorder = $150 per tractor per month
The optimum aggregate plan is:
Month
1
2
3
4
5
6
Total
Forecast Demand above regular capacity
1,000
1,000
2,000
3,000
4,000
1,000
12,000
# of temporary workers required
50
50
100
150
200
50
Temp. Workers hired
25
25
50
75
0
0
Temp. workers laid off
0…
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a)
GOT7 Soda Pop, Inc., has a new fruits drink. The production planner has
assembled the following cost data and demand forecast as follow:
[GOT7 Soda Pop, Inc., mempunyai minuman buah-buahan yang baru, Perancang pengeluaran
telah mengumpul data tentang kos dan ramalan permintaan seperti berikut:]
Quarter Demand
1,800
First
Second 1,200
Third
1,600
Fourth 1,300
Table 1: Cost and demand forecast
[Jadual 1: Kos dan ramalan permintaan]
Previous quater's output 1,300 cases
Beginning inventory
0 cases
Stockout cost
Inventory holding cost
Hiring employees
Terminating employees
Subcontracting cost
Unit cost on regular time
Overtime cost
RM150
RM40 per case at the end of quater
RM40 per case
RM80 per case
RM60 per case
RM30 per case
RM15 extra per case
You as the production planner need to develop an aggregate planning. You are required
to:
[Anda sebagai perancang pengeluaran perlu membangunkan perancangan agregat Anda dikehendaki
untuk:]
i)
Assess plan A: strategy that hires and fires…
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What do you understand by capacity planning? Explain the decision tree modeling for capacity expansion
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A. What are some sources of demand variation
B. Describe three classical strategies for capacity and demand planning and management
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How is a systems-based approach to capacity planning advantageous?
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How does capacity planning contribute to effective system management?
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How does capacity planning contribute to efficient system management? Describe the steps involved in capacity planning for an enterprise-level system.
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How can system approach to capacity planning be useful?
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A washing machine manufacturer works on 8 hours shift in a year (assume 2021 calendar) excluding Saturday and Sunday. Demand estimates for the number of washing machine that could be sold next year are shown below:
Demand (units)
2000
4000
5000
Processing Time (std time hrs)
3.0
5.0
6.0
(a) Assuming the firm produces on an expected value basis, what is the annual production capacity of one machine in standard hours?
(b) What capacity is required to meet 170% percent of expected demand?
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Kwame after his National Service and with no hope of securing a job in the formal sector has decided to run a taxi service. The following forecast has been made for the operation of a service between Abisim and Sunyani.
i) Revenue totaling GH¢300 a week for 52 weeks in a year. This is net of fuel and other variable costs.
ii) Tyres; four pieces for a year at GH¢120 per unit.
iii) Maintenance and servicing; GH¢120 per month.
iv) Salaries GH¢3,000 per year
v) Insurance GH¢350 per year
The net cash flow will increase at 5% per annum for the next five years due to inflation. The cost of the vehicle is estimated at GH¢28,000. The project appears quite profitable based on the NPV criteria using the Government policy rate of 26%. However the banks are offering rates far higher than the policy rate.
Required:
You are to calculate the break-even rate for the project.
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What are demand forecasting and capacity strategy?
Give an example of demand forecasting for a business.
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Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is 249,000 units. The facility has a practical capacity of 264,000 units annually. The company leased the current facility because facilities capable of manufacturing the unit require machines that can produce 66,000 units each. The annual cost of the facility is $1,013,760. The variable cost of a part is $4.
Required:
What cost per unit should the cost system report to facilitate management decision making?
Note: Round your answer to 2 decimal places.
What is the cost of excess capacity?
cost per unit
cost of excess capacity
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The current data for five trees that will be analyzed in the exercise are shown in the following table
Expected
Yearly Demand
Quantity For
Sale
In-Field
Quantity
440
74
Trees
Christmas Palm
Washingtonia
Gumbo Limbo
Yellow Poinciana
Weeping Podo
81
165
159
49
185
Trees
Christmas Palm
Washingtonia
Std Dev
31
155
35
32
68
Gumbo Limbo
Yellow Poinciana
The "expected yearly demand" is an estimate of the demand over the next year for the tree. The "std dev" is the standard deviation, a
measure of the error, that corresponds to the forecast. For-sale and in-field quantities are given, and finally the total number of trees
planted on the farm. The demand forecast and quantities are updated on an ongoing basis as trees are sold and planted on the farm.
374
70
42
290
Your first task is to evaluate the inventory "position" of each tree. The farm does not keep any backorder information, so the only data
you have is "for-sale" and "in-field" quantities. Think about "for-sale" as on-hand trees, and…
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Related Questions
- 1. What factors should be considered when selecting the appropriate capacity cushion? Howdoes the choice of capacity cushion relate to other decisions in operations management?To other functional areas? 2. Capacity planning requires a demand forecast for an extended period of time into thefuture. What concerns would you have regarding an extended forecast as a capacityplanner?arrow_forwardCharles Lackey operates a bakery in Idaho Fals, Idaho. Because of its excellent product and excelent location, demand has inoreased by 25% in the last year. On far boo many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a statf meeting, one employee suggested ways to load the ovens differently eo that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased demand. The bakery currently makes 1,500 loaves per month, Employees are paid S8 per hour. In addtion to the labor cost. Charles also has a constant utity cost per month of $850 and a per loaf ingredient cost of $0.50 Current multtactor productivity for 640 wark hourn per month - 0223 loavesidolar (round your response to three decimal places) Ater increasing the number of…arrow_forwardBasil's Framing manufactures picture frames in one workshop, which has a practical capacity of 40,000 frames. The variable cost of a frame is $24 per unit, and the fixed costs of the workshop are $392,000 annually. Current annual demand is 28,000 frames. Basil's Framing bought the current workshop because of forecasts that demand for the frames would grow. Required: a. What cost per frame should the cost system report to facilitate management decision making?arrow_forward
- Capacity planning requires a demand forecast for an extended period of time into the future. What concerns would you have regarding an extended forecast as a capacity planner?arrow_forwardCharles Lackey operates a bakery in Idaho Falls,Idaho. Because of its excellent product and excellent loca-tion, demand has increased by 25% in the last year. On far toomany occasions, customers have not been able to purchasethe bread of their choice. Because of the size of the store, nonew ovens can be added. At a staff meeting, one employeesuggested ways to load the ovens differently so that moreloaves of bread can be baked at one time. This new processwill require that the ovens be loaded by hand, requiring addi-tional manpower. This is the only thing to be changed. If thebakery makes 1,500 loaves per month with a labor produc-tivity of 2.344 loaves per labor-hour, how many workers willLackey need to add? (Hint: Each worker works 160 hours permonth.)arrow_forwardGive an example of capacity requirement planningarrow_forward
- What models and methodologies are applicable to capacity planning ?arrow_forwardDeforrest Marine Motors manufactures engines for the speedboat racing circuit. As part of their annual planning cycle, they forecasted demand for the next four quarters. The number of available days of production and the anticipated demand are given below. Employees Production Rate Production Cost Backorder Cost Overtime Cost Overtime Limit Demand Q1 2,400 6,019,000 They also estimated many of the costs required to conduct operations planning. Some of these key figures are listed below. 30 70 units/employee/quarter Q2 2,200 $1,000/unit $200/unit/quarter $1,500/unit <= 25% of Reg. Production Q3 1,700 Q4 1,800 Hire Cost Fire Cost Subcontracting Cost Subcontracting Limit Inventory Cost Initial Inventory $1,200/employee $800/employee $1,800/unit 400 units maximum $100/unit/quarter 280 units Deforrest Marine Motors wishes to maintain the current number of employees for the entire year to follow a level strategy balanced with inventory and backorders as needed. What is the total cost of this…arrow_forwardThe planner at a company that makes garden tractors is about to prepare an aggregate production plan that will cover the next 6 months. She has collected the following information: Month Demand Forecast Above the available capacity through permanent workforce 1 1,000 2 1,000 3 2,000 4 3,000 5 4,000 6 1,000 Total: 12,000 Production per month = 20 units per worker Initial inventory = 500 units Desired ending inventory (at the end of month 6) = 0 units Cost: Hire cost = $500 per temporary worker Inventory = $10 per tractor per month Backorder = $150 per tractor per month The optimum aggregate plan is: Month 1 2 3 4 5 6 Total Forecast Demand above regular capacity 1,000 1,000 2,000 3,000 4,000 1,000 12,000 # of temporary workers required 50 50 100 150 200 50 Temp. Workers hired 25 25 50 75 0 0 Temp. workers laid off 0…arrow_forward
- a) GOT7 Soda Pop, Inc., has a new fruits drink. The production planner has assembled the following cost data and demand forecast as follow: [GOT7 Soda Pop, Inc., mempunyai minuman buah-buahan yang baru, Perancang pengeluaran telah mengumpul data tentang kos dan ramalan permintaan seperti berikut:] Quarter Demand 1,800 First Second 1,200 Third 1,600 Fourth 1,300 Table 1: Cost and demand forecast [Jadual 1: Kos dan ramalan permintaan] Previous quater's output 1,300 cases Beginning inventory 0 cases Stockout cost Inventory holding cost Hiring employees Terminating employees Subcontracting cost Unit cost on regular time Overtime cost RM150 RM40 per case at the end of quater RM40 per case RM80 per case RM60 per case RM30 per case RM15 extra per case You as the production planner need to develop an aggregate planning. You are required to: [Anda sebagai perancang pengeluaran perlu membangunkan perancangan agregat Anda dikehendaki untuk:] i) Assess plan A: strategy that hires and fires…arrow_forwardWhat do you understand by capacity planning? Explain the decision tree modeling for capacity expansionarrow_forwardA. What are some sources of demand variation B. Describe three classical strategies for capacity and demand planning and managementarrow_forward
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SEE MORE QUESTIONS
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ISBN:9781285869681
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