Question

Expected demands for next 5 weeks for Plant A are given as:

      Week:                    1                      2                      3                      4                      5

      Demand:               12000              7000                9500                11000              8000 (units)

      Desired capacity of Plant A is 10000 units/week. Plant manager wants that the average

      inventory must be less than 500 (units) and the average utilization of plant is above 80%.

      The beginning inventory is 2000. (8 points)

      a) Complete the following MPS with given information. (4 points)

      Week:                    1                      2                      3                      4                     5

      --------                    -------            ---------            ---------           ---------            --------

      Master Schedule: 10000              _____             10000              10000              8000

      Demand:               12000              7000                9500                11000              8000

      Ending Inventory: _____             500                  _____              0                      _____

            b) Does this schedule satisfy the manager's objective? Why?

Answer 1

Week	Demand
1	12000
2	7000
3	9500
4	11000
5	8000

Beginning Inventory = 2000

Desired capacity of plant = 10000 units per week

Average utilization should be above 80%.

As we have 2000 units in beginning inventory

For Week – 1:

Demand = 12000

Beginning Inventory = 2000

Master Production = 10000

Ending Inventory = (beginning inventory + master production) – Demand = (2000 + 10000) – 12000 = 0

Ending Inventory = 0

For Week – 2:

Demand = 7000

Beginning Inventory = Ending Inventory of Week 1 = 0

Ending Inventory = 500

Hence Master Production = Demand – Beginning Inventory + Ending Inventory = 7000 – 0 + 500 = 7500 units

For Week – 3:

Demand = 9500

Beginning Inventory = Ending Inventory of Week 2 = 500

Master Schedule = 10000

Ending Inventory = (beginning inventory + master production) – Demand = (500 + 10000) – 9500 = 10500 – 9500 = 1000 units

For Week – 4:

Demand = 11000

Beginning Inventory = Ending inventory of week 3 = 1000 units

Master Schedule = 10000 units

Ending Inventory = (beginning inventory + master production) – Demand = (1000 + 10000) – 11000 = 0

For Week – 5:

Demand = 8000 units

Beginning Inventory = 0

Master schedule = 8000 units

Ending Inventory = (beginning inventory + master production) – Demand = 8000 – 8000 = 0 units

Now the chart:

Week:	1	2	3	4	5
Beginning Inventory	2000	0	500	1000	0
Master Schedule	10000	7500	10000	10000	8000
Demand	12000	7000	9500	11000	8000
Ending Inventory	0	500	1000	0	0
Average Inventory = (beginning + ending)/2	1000	250	750	500	0

The utilization:

Total Master Schedule Production = sum of master schedule of all weeks

= 10000 + 7500 + 10000 + 10000 + 8000 = 45500

Capacity in 5 weeks = 5*capacity per week = 5*10000 = 50000

Hence utilization = (master schedule production/capacity)*100% = (45500/50000)*100% = 0.91*100 = 91%

Utilization = 91%

Average Inventory = (beginning inventory + ending inventory)/2

From the above chart, we can see that the average inventory varies.

The average inventory of the whole period = (beginning inventory of week 1 + ending inventory of week 5)/2

= (2000 + 0)/2

= 1000 units

The plant manager desires to have less than 500 units of average inventory and have at least 80% utilization.

Here the average inventory is 1000 units (which don’t satisfy the case)

Here the utilization is 91% (which satisfies the case)

Hence, the manager’s objective has not been satisfied by this schedule. The utilization objective has been achieved but the average inventory doesn’t satisfy.

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