Question
In: Operations Management
A company which produces a single product has definite orders for this product over the next...
A company which produces a single product has definite orders for this product over the next four quarters as follows:
| Quarter | 1 | 2 | 3 | 4 |
| Demand | 460 | 600 | 340 | 500 |
The company ended the previous year with an inventory of 300 units, and the final quarter production level was 420 units. The company wishes to end this year with an inventory of at least 280 units.
It costs $30 per unit to increase the production level from one quarter to the next, and $56 per unit to decrease it. The cost of holding inventory from one quarter to the next is $40 per unit per quarter. No shortages are permitted. The company wishes to minimize the sum of production level change costs and inventory costs over the four quarter planning horizon.
Formulate (but do not solve) a model for this situation.
Solutions
Expert Solution
Production( In Yellow) is the decision variable. Total Cost is objective Function.
Projected Onhand (C4)=B4+C3-C2 (Closing OnHand of the last Bucket+Production-Demand).
Change of Production(C5)= =ABS(C3-B3) (Absolute of Production Difference)
CHangeOver(C6)= =IF(C3=B3,0,IF(C3<B3,56,30))*C5 ( Change of Production*ChangeOver Cost/Unit)
Holding Cost(C7)= 40*IF(C4>0,C4,0) (Projected Onhand* Holding Cost)
Total Cost= ChangeOver Cost+Holding Cost
Solver Input.
Objective= Minimize Cost.
Constraint
1. Closing Projected Onhand>280
2. Production should be greater than=0
3. It should be Integer.
keosha answered 1 month agoRelated Solutions
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