BUS3500 Operations Management_Case Study 3 Developing an Aggregate Plan - Bradford Manufacturing The Situation You are the operation manager for a manufacturing plast that produces padding food products. One of your important responsibilities is to prepare an agregate plan for the plant. This plan is an important input into the annual procent. The plan provides information on production manufacturing the equirements and pleted the porodimetylfe the next year You make these te bones of golding mis on packaging lines in your plant. A packaging line has a number of machines that are linked by cows. At the start of the line, the polding in mind the placed in small pacte These clits are insered into the wall odding on which are collected and placed in the hold 48 boses padiding. Finally, 16 cases are collected and put on a pollet. The policts are aged in a shipping area from which they Test in four distribution centers. Deer the years, the technology of the packaging lines has improved so that will be different flors can be made in relatively small butches with no setup time to switch between two. The plants of the lines, but currently only 10 are being used. Samples are required to us cache The demand for this ponduct fluctuates from month to month. In addition, there arenal component with peak ale before Thanking Christmas and Easter each year. To complicate matters at the end of the first quarter of each year the main group prwhich special dah made for any purchase is so well and the company has been experiencing a general increase in sales The plant sendepeoduct to four large distribution wachsesstrategically located in the United States. Trucks more product daily. The amounts stepped are based on maintaining target inventory levels at the house. There are are calculated based on anticipated weeks of supply cachache Current targets are set at two weeks of supply In the past, the company has had a poley of producing wery close to what is expects les to be hece of limited capacity for storing finished goods. Production capacity has been adequate to support this policy A sales forecast fornut year has been prepared by the marketing department. The forecast is based on quarterly quotas, which are used to set up an incentive program for the salespeople. Sales are mainly to the largestal protes. The pudding is shipped to the groetes from the distributie warehouses toseden enders taken by the alespeople Your immediate task is to prepare an erregte plan for the coming year. The technical and committee that must be comidered in this plan are shown text Forecast Demand by Quarter (1,000 = Case Units) 3.000 2.500 2.000 1.500 1.000 500 0 4th IN (1-13) 2nd (14-26) 3rd (27-39) (40-52) (Next Year) Hanson College - Winter 2021 BUS3500 Operations Management_Case Study 3 Technical and Economic Information 1. The plant runs 5 days each week, and currently is running 10 lines with no overtime. Each line requires six people to run. For planning purposes, the lines are run for 7.5 hours cach normal shift. Employees, though, are paid for hours' work. It is possible to run up to 2 hours of overtime each day, but it must be scheduled for a week at a time. and all the lines must run overtime when it is scheduled. Workers are paid $20.00/hour during a regular shift and $30.00/hour on overtime. The standard production rate for each line is 450 cases/hour 2. The marketing forecast for demand is as follows: Q1-2,000 Q2-2.200, Q3-2.500: Q4-2.650, and I next year) 2.200. These numbers are in 1,000-case units. Each number represents a 13-week forecast Management has instructed manufacturing to maintain a two-week safety stock supply of padding inventory in the warehouses. The two-week supply should be based on future expected sales. The following are ending inventory target levels to comply with the safety stock requirement for each quarter: Q1-338 02-385: 03-408:04-338. 4. Inventory carrying cost is estimated by accounting to be $1.00 per case per year. This means that if a case of pudding is held in inventory for an entire year, the cost to just carry that case in inventory is $1.00. If a case is carried for only one week, the cost is $1.0052. or $0.01923. The cost is proportional to the time carried in inventory. There are 200,000 cases in inventory at the beginning of Q1 (this is 200 cases in the 1,000-case units that the forecast is given in) 5. If a stock out occurs, the item is backordered and shipped at a later date. The cost when a backorder occurs is $2.40 per case due to the loss of goodwill and the high cost of emergency shipping 6. The human resource group estimates that it costs $5.000 to hire and train a new production employee. It costs $3,000 to lay off a production worker. 7. Make the following assumptions in your cost calculations Inventory costs are based on inventory in excess of the safety stock requirement. Backorder costs are incurred on the negative deviation from the planned safety stock requirement, even though planned inventory may be positive. . Overtime must be used over an entire quarter and should be based on hours per day over that time. Questions 1. Prepare an aggregate plan for the coming year, assuming that the sales forecast is perfect. Use the spreadsheet Bradford Manufacturing. In the spreadsheet an area has been designated for your agregate plan solution Supply the number of packaging lines to run and the number of overtime hours for each quarter. You will need to set up the cost calculations in the spreadsheet You may want to try using the Excel Solver to find a low-cost solution. Remember that your final solution needs an integer number of lines and an integer number of overtime hours for each quarter. (Solutions that require 8.9134 lines and 1.256 hours of overtime are not feasible.) It is important that your spreadsheet calculations are set up so that any values in the number of lines and overtime hours rows evaluates correctly. Your spreadsheet will be evaluated based on this 2. Find a solution to the problem that goes beyond just minimizing cost. Prepare a short write-up that describes the process you went through to find your solution and that justifies why you think it is a good solution 1,000 case units Forecast Demand Ending Inventory Target 1st (1-13) 2.000 338 Quarter (Week Numbers) 2nd (14-26) 3rd (27.39) 2,200 2,500 385 408 4th (40-52) 2,650 338 ist (Next Year) Notes 2200 Each number is a 13 week forecast This is calculated based on 6 weeks of future forecast demand. Forecast Demand by Quarter (1,000 Case Units) Planning Data Initial number of employees Empleos perine Standard production rate (each line) Employee pay rate Overtime pay rate Standard hours per shit! Maximum overtime per day Inventory carry cost Stockout cont Employee hiring and training cost Employee layoff cost 4,000 3,000 Numbers Units of measure Notes 60 employees 6 450 Cases per hour $20.00 per hour $30.00 per hour 7.5 hours 2 hours $1.00 per case (per year) $2.40 percase 55,000.00 per employee 53,000.00 per employee Quarter (Week Numbers) 1st (1-13) 2nd (14-26) 3rd (27.39) 10 10 10 0 0 2.000 1.000 0 1 (1-13) 2nd 1426) 3rd 27.01 440-62) fs Next Year) Aggregate Plan 4th (40-62) 10 0 Notes Construction here Une Overtime hours per day Beginning Inventory Production Expected Demand Ending Inventory 200.0 2.193.8 2.000.0 393.8 30.0 2.193.8 2.2000 3875 3875 2.193.8 2.5000 81.3 813 2.193.8 2.650.0 -375.0 553 60 2.0 60 3264 60 -713.5 60 Deviation from Inventory Target Employees Cost of Plan Labor Regular Time Labor Overtime Hiring and Training Layoff Inventory Carry Cost Stockout Cost Quarter Budget Employees are paid for hes work per day 60 employees are employeed currently Canying cost per year divided by 4, multiplied by 1,000 Based on negative deviation from target 50 SO 50 SO Total Cost of Plan $0 BUS3500 Operations Management_Case Study 3 Developing an Aggregate Plan - Bradford Manufacturing The Situation You are the operations manager for a manufacturing plant that produces pudding food products. One of your important responsibilities is to prepare an aggregate plan for the plant. This plan is an important input into the annual budget process. The plan provides information on production rates. manufacturing labor requirements, and projected finished poods inventory levels for the next year. You make those little boxes of pudding mix on packaging lines in your plant. A packaging line has a number of machines that are linked by conveyors. At the start of the line, the pudding is mixed it is then placed in small pockets These packets are inserted into the small pudding boxes, which are collected and placed in cases that hold 48 bones of pudding. Finally, 160 cases are collected and put on a pallet. The pallets are staged in a shipping area from which they are sent to four distribution centers. Over the years, the technology of the packaging lines has improved so that all the different flavors can be made in relatively small batches with no setup time to switch between flavon. The plant has 15 of these lines, but currently only 10 are being used. Six employees are required to run each line. The demand for this product fluctuates from month to month. In addition, there is a seasonal component with peak sales before Thanksgiving. Christmas and Easter each year. To complicate matters at the end of the first quarter of cach year the marketing group runs a promotion in which special deals are made for large purchases. Business is going well, and the company has been experiencing a general increase in sales The plant sends product to four large distribution warehouses strategically located in the United States. Trucks more product daily. The amounts shipped are based on maintaining target inventory levels at the warehouses. These targets are calculated based on anticipated weeks of supply at cach warehouse. Current targets are set at two weeks of supply In the past, the company has had a policy of producing very close to what is expects sales to be because of limited capacity for storing finished poods. Production capacity has been adequate to support this policy A sales forecast for next year has been prepared by the marketing department. The forecast is based on quarterly sales quotas, which are used to set up an incentive program for the salespeople. Sales are mainly to the large US. retail grocers. The pudding is shipped to the procers from the distribution warehouses based on orders taken by the salespeople Your immediate task is to prepare an aggregate plan for the coming year. The technical and economic factors to 22 that must be considered in this plan are shown next Forecast Demand by Quarter (1,000 = Case Units) 3.000 2.500 2.000 1.500 1.000 500 0 Ist (1-13) 2nd (14-26) 3rd (27-39) 4th Ist (40-52) (Next Year) Technical and Economic Information 1. The plant runs 5 days each week, and currently is running 10 lines with no overtime. Each line requires six people to run. For planning purposes, the lines are run for 7.5 hours cach normal shift. Employees, though, are paid for 8 hours' work. It is possible to run up to 2 hours of overtime each day, but it must be scheduled for a week at a time. and all the lines must run overtime when it is scheduled. Workers are paid $20.00/hour during a regular shift and $30.00/hour on overtime. The standard production rate for each line is 450 cases/hour. 2. The marketing forecast for demand is as follows Q1-2.000: Q2-2.200; Q32,500:042.650, and Q1 (next year) 2.200. These numbers are in 1.000-case units. Each number represents a 13-week forecast 3. Management has instructed manufacturing to maintain a two-week safety stock supply of pudding itsventory in the warehouses. The two-week supply should be based on future expected sales. The following are ending inventory target levels to comply with the safety stock requirement for each quarter: Q1338, Q2385 03-408, 04-338. 4. Inventory carrying cost is estimated by accounting to be $1.00 per caso per year. This means that if a case of pudding is held in inventory for an entire year, the cost to just carry that case in inventory is $1.00. 1a case is carried for only one week, the cost is $1.00/52, or $0.01923. The cost is proportional to the time carried in inventory. There are 200,000 cases in inventory at the beginning of Q1 (this is 200 cases in the 1.000 case units that the forecast is go 5. If a stock out occurs, the item is backordered and shipped at a later date. The cost when a backorder occurs is $2.40 per case due to the loss of goodwill and the high cost of emergency shipping 6. The human resource group estimates that it costs $5,000 to hire and train a new production employee. It costs $3,000 to lay off a production worker. 7. Make the following assumptions in your cost calculations Inventory costs are based on inventory in excess of the safety stock requirement Backorder costs are incurred on the negative deviation from the planned safety stock requirement, even though planned inventory may be positive. Overtime must be used over an entire quarter and should be based on hours per day over that time given in) . . Questions 1. Prepare an aggregate plan for the coming year, assuming that the sales forecast is perfect. Use the spreadsheet "Bradford Manufacturing." In the spreadsheet, an area has been designated for your aggregate plan solution. Supply the number of packaging lines to run and the number of overtime hours for each quarter. You will need to set up the cost calculations in the spreadsheet. You may want to try using the Excel Solver to find a low cost solution. Remember that your final solution needs an integer number of lines and an integer number of overtime hours for each quarter. (Solutions that require 8.9134 lines and 1.256 hours of overtime are not feasible.) It is important that your spreadsheet calculations are set up so that any values in the number of lines and overtime hours rows evaluates correctly. Your spreadsheet will be evaluated based on this. 2. Find a solution to the problem that goes beyond just minimizing cost. Prepare a short write up that describes the process you went through to find your solution and that justifies why you think it is a good solution