4 6. A manufacturer of an agri-equipment manufactures four varieties of motors. The type equipment requires...

 

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4 6. A manufacturer of an agri-equipment manufactures four varieties of motors. The type equipment requires a larger amount of customization than the other three. The production planning department has estimated the number of hours required for manufacturing one unit of equipment of each variety. Type 1 requires 125 hours; Type 2 requires 175 hours; Type 3 requires 200 hours; and Type 4 requires 350 hours. The forecasts for the four varieties are given below Month April May June July August September Type 1 100 90 80 130 70 90 Forecast of Motor Demand (units) Туре 2 40 30 50 40 30 50 Type 3 60 30 50 70 30 50 Type 4 10 5 10 20 15 5 The overtime (OT) premium is estimated to be INR 20 per hour while undertime (UT) costs are 50 percent of the OT premium. The cost of carrying inventory is INR 15 per hour per month and the backordering/shortage costs are 1200 percent of inventory carrying costs. The company can subcontract capacity from a reputed vendor and the additional cost related to subcontracting is INR 25 per hour of capacity. Evaluate the following alternatives for AOP: (i) Prepare a level strategy. Use inventory/backlogging to absorb the demand-supply mismatch. OR (ii) Maintain a production level of 31,000 hours per month and use OT/UT alternatives to chase the demand. (iii) What are the key inferences? [10 marks] 4 6. A manufacturer of an agri-equipment manufactures four varieties of motors. The type equipment requires a larger amount of customization than the other three. The production planning department has estimated the number of hours required for manufacturing one unit of equipment of each variety. Type 1 requires 125 hours; Type 2 requires 175 hours; Type 3 requires 200 hours; and Type 4 requires 350 hours. The forecasts for the four varieties are given below Month April May June July August September Type 1 100 90 80 130 70 90 Forecast of Motor Demand (units) Туре 2 40 30 50 40 30 50 Type 3 60 30 50 70 30 50 Type 4 10 5 10 20 15 5 The overtime (OT) premium is estimated to be INR 20 per hour while undertime (UT) costs are 50 percent of the OT premium. The cost of carrying inventory is INR 15 per hour per month and the backordering/shortage costs are 1200 percent of inventory carrying costs. The company can subcontract capacity from a reputed vendor and the additional cost related to subcontracting is INR 25 per hour of capacity. Evaluate the following alternatives for AOP: (i) Prepare a level strategy. Use inventory/backlogging to absorb the demand-supply mismatch. OR (ii) Maintain a production level of 31,000 hours per month and use OT/UT alternatives to chase the demand. (iii) What are the key inferences? [10 marks]

Answer rating: 100% (QA)

Solution Alternative 1 Prepare a level strategy Use inventory backlogging to absorb the demandsupply mismatch In this alternative the company will mai... View the full answer