In: Operations Management
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?
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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