Assignment

Instructions. Analyze Problem 2 Sailco Production Planning. Propose a solution. Your solution for this problem will be graded based on effort, not on the numerical value (production quantities) you propose. Submit a report (no more than one page) to explain clearly how your decision is made. Exploratory analysis of the historical production and demand data is useful. Your decision does not have to be based on any mathematical model.

Problem 2. Sailco Production Planning: Sailco must determine how many sailboats to produce during each of the next four quarters. Quarterly sales data and production data of the past 10 years can be found in Figure 1 below. The data is also available in Sailco_Data.xlsx. The product has been very profitable. It is sold at $2000 per sailboat with a production cost of $1200 per unit. In the first seven years, Sailcos production capacity could allow them to produce up to 500 units a quarter. Due to the steady increase in demand, Sailco has expanded its capacity to 600 units per quarter since Year 8. Most of the time the production capacity is not fully utilized. In Quarter 2 of Year 9, they produced more than 650 sailboats (50 units higher than the regular capacity) by having employees working overtime. This incurs an additional cost of $200 per unit for each sailboat beyond the regular production capacity. Sailco tries it best to satisfy customers demand on time. For simplicity, assume that sailboats made during a quarter can be used to meet demand for that quarter (as well as future quarters). In some of the quarters, the production quantity is less than the demand. This is because they produced more than demand in earlier quarters and thus have inventory, which can be used to meet future demand as well. However, holding inventory is costly. At the end of each quarter (after production has occurred and the current quarters demand has been satisfied,), a holding cost of $60 per sailboat is incurred.

How can you help the production manager make the production plan for the next four quarters?