In: Operations Management
The Donald Fertilizer Company produces industrial chemical fertilizers. The projected manufacturing requirements (in thousands of gallons) for the next four quarters are 80, 50, 80, and 130, respectively. A level workforce is desired, relying only on anticipation inventory as a supply option. Stockouts and backorders are to be avoided, as are overtime and undertime.
a. Determine the quarterly production rate required to meet total demand for the year, and minimize the anticipation inventory that would be left over at the end of the year. Beginning inventory is zero.
b. Specify the anticipation inventory that will be produced.
c. Suppose that the requirements for the next four quarters are revised to 80, 130, 50, and 80, respectively. If total demand is the same, what level of production rate is needed now, using the same strategy as part (a)?
Please use excel solution and post the table in formula auditing mode as well so that I may see how the cells were solved. Thank you!
Total Demand = 80 + 50 + 80 + 130 = 340
Level Production = Total Demand / No. of Quarters = 340 / 4 = 85
Hence,
a) Answer = 85
b) We find the anticipation inventory as shown below:
The above table in the form of formulas is shown below for better understanding and reference:
As seen from above, Ending Inventory = Beginning Inventory + Production - Demand
c) Total Demand = 80 + 130 + 50 + 80 = 340
We prepare a table as shown below:
Since there is a shortage in Quarter 2, the new level of production = Total Demand in 1st 2 period / No of periods = (80 + 130) / 2 = 105. This will be the level of production. We get the revised table as:
Answer: 105
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