coursework pcp
TRANSCRIPT
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LOUGHBOROUGH UNIVERSITY
MMC203: Manufacturing Planning & Control
Coursework (Semester 2)
Guilherme Scandolara Rubio B310755
March 24, 2014
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Introduction and Assumptions
This report presents the analysis of an industrial scenario and the proposal of five different
medium term capacity plans that ensure sufficient capacity to meet the projected customer
requirements, comparing them and selecting the one that better fits the situation. In this
section will be presented the assumptions for the performed study. These assumptions are:
Analysing the actual orders for the first two months (in table 1) indicates that theforecast is a little conservative. Comparing these two months actual orders with their
forecasts a correction factor was calculated and applied for the rest of the forecast.
The new forecast is presented in the Appendix 1.
It is assumed that there is no variation in the production process, and that the unitsproduced by the workers meet the quality standards.
It is assumed that the hired employees will have the same production rate as the olderones.
It is assumed that when the overtime is required the operator will perform it all theworking days of the month.
It is assumed that when used the agency labor, the temporary worker will be hired forthe whole month.
The appendix 2 shows the production rates and costs of each type of working force. The cost of keeping finished products in inventory is 1,00 per unit per month.
Capacity Plans
There are three main types of capacity plans: level capacity, chase demand and demand
management. The level capacity plan consists in keeping the processing capacity constant
through the planning period while the inventory levels are allowed to fluctuate to absorb thevariations in market demand. In the chase demand plan the inventory levels are kept to a
minimum and the capacity is constantly adjusted in line with the variation of the demand.
These are called pure strategies, however they are only suited to very specific situations,
and usually the best approach is a mixed strategy, using elements of both of them. In this
report are presented one pure level capacity plan, two pure chase demand plans and two
mixed plans. The plan considered being the most suited for the scenario was the plan 5, using
mixed strategy. The data of the plans and the table comparing them is in the appendix 3 until
appendix 8.
Plan 1Level Capacity
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This strategy has some advantages compared to the others, like minimizing the changes to
working force, that is kept constant, and simpler production scheduling and ordering system.
However the inventory levels and costs are higher than in the other plans and it is unable to
respond to sudden changes in the demand above the inventory level. In the plan tested for the
scenario using this strategy the total cost of the plan was the higher among the five plans,
316,710, being 51,750 just the inventory holding costs. The average inventory level was of2156 units with a maximum of 3090 in one month.
Plan 2 and 3Chase demand
The chase demand strategy has the advantage of keeping the inventory levels to a minimum,
maintaining only the safety stock, and being more responsive to demand changes. This is
particularly used in industries with high stock costs. However the utilization of the resources
in this strategy is lower than in the level capacity one, since the maximum production is
almost never achieved, in order to avoid creating stock. Also the effort to schedule and recruit
are higher and the moral is lower, due to the job insecurity and stress due overtime. The Plan
2 adopted the chase demand strategy manly by changing the production rates, while in the
Plan 3 the tactic to chase demand was achieved by changing the workforce size.
The Plan 2 had a considerable reduced total cost 301,206, since the inventory costs were
only related to the 200 units in the safety stock. The direct labor costs were higher than the
other plans, since three new employees were hired, however the costs of changing the
workforce were not very high, since the capacity was adjusted by changing the production
rate.
The Plan 3 had the most changes in the workforce size, in 14 of the 24 months there was at
least one change in the workforce, costing 42,500 for all of them. However this strategy was
more efficient in chasing the demand and had the best cost of the pure strategies, 287,300.
Plan 4 and 5 Mix Strategies
These strategies used elements of both of the pure strategies. In the Plan 4 instead of
leveling the capacity for the whole period of 24 months, this period was divided into two
smaller periods, and the capacity was leveled for each of them independently. This resulted in
smaller inventory costs by the end of the period than the pure level capacity strategy and a
total cost of 298,466.
The Plan 5 had some advantages comparing to the other plans, beginning with the total cost
that was the lowest of the five, 280,147. This strategy was more similar to the chase demandstrategies, however while in the pure chase demand strategies the actual production was
almost never equal the capacity of the period (to avoid stock) in this plan it was allowed to
form stock at the end of each period. This way the utilization of the workforce was always
kept to a maximum. And although the stock costs were higher than in the chase demand
strategies, the extra stock produced each period could be used in the next one, requiring less
changes in the workforce than in the Plan 3. In the end only 4 months required changes in the
working force and still the inventory levels were not as high as in the level capacity strategy,
with an average of 851 units per period and a total of 20,427 of inventory costs.
Conclusion
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It was observed that the best-suited plan for this scenario was the mixed strategy plan 5. It
had the lowest cost and some advantages compared to the others like higher utilization of the
resources, low workforce changes and not so high inventory levels to deal with sudden
changes in the demand. It is important to notice that if the demand continues to grow in the
way presented in this scenario in the long term it must be necessary to make changes in the
equipment in order to have extra capacity. The machinery was already with a utilization ofmore than 60% with 2000 units a month, and with a demand of 2900 units a month it is
getting closer to its maximum capacity. Also since the demand is clearly seasonal, lower in
the first months and higher in the last months of the year, some marketing strategies might be
used to try to smooth the demand.
Appendix 1 - Forecast
Forcasting
Month
Orders
Received
Forecast
Requests Correction
1 1850 1800 1850
2 1430 1400 1430
3 1425 1400 1435
4 1875 1900 1947
5 1950 1998
6 1950 1998
7 2000 2050
8 2000 20509 2500 2562
10 2500 2562
11 2500 2562
12 2500 2562
13 1900 1947
14 1500 1537
15 1500 1537
16 2040 2091
17 2100 2152
18 2100 2152
19 2200 2255
20 2200 2255
21 2800 2869
22 2800 2869
23 2800 2869
24 2800 2869
Table 1: Forecast Correction
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Appendix 2 - Workforce production rate and costs per month
Full TimeN of employees Production Cost Recruitment Cost
1 333 1600
2 666 3200
3 1000 4800
4 1333 6400
5 1666 8000
6 2000 9600
7 2333 11200 2500
8 2666 12800 5000
9 3000 14400 7500
Overtime
N of employees Additional Production Cost
1 66 480
2 133 960
3 200 1440
4 266 1920
5 333 2400
6 400 2880
Agency Labour
N of employees Additional Production Costs
1 250 2000
2 500 4000
3 750 6000
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Appendix 3 Plan 1: Level Capacity
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Appendix 4 Plan 2: Chase demand changing production rate
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Appendix 5
Plan 3: Chase Demand changing workforce
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Appendix 6
Plan 4: Mix Strategy 1
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Appendix 8
Total Costs Comparasion
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Appendix 7
Plan 5: Mix Strategy 2
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