Decision Analysis

Decision Analysis

Inventory and Production Planning

Production planning is simply inventory control with the added variable of the workforce--for example, the cost of work hours, the cost of layoffs, the cost of overtime and the cost of temporary help. The same type of multi-item models used in inventory control theory is many times modified to include the workforce as another type of inventory. Parallels are drawn between work hours, including overtime and layoffs, and inventory costs of shortage, ordering and storage.

Tables for Optimum Number of Shoelaces to Order for the Shuzworld Factory

Parameter

Value

Parameter

Value

Demand rate(D)

300000

Optimal order quantity (Q*)

27386.13

Setup/Ordering cost(S)

125

Maximum Inventory Level (Imax)

27386.13

Holding cost(H)

0.1

Average inventory

13693.06

Unit cost

0

Orders per period(year)

10.95



Annual Setup cost

1369.31



Annual Holding cost

1369.31



Unit costs (PD)

0



Total Cost

2738.61

As the demand of shoelaces for the Shuzworld Shanghai plant is 300,000 pairs. Order cost is $125 and holding cost is $ 0.10. So as per their requirements the optimal order quantity should be 27386.13. According to these stats Orders per period (year) must be 10.95. By achieving this optimal value they will reduce their costs of ordering laces as well as will reduce their total costs they are incurring.

Above graph states the optimal order quantity will is meeting at 27386.13 at $ 2738.61. This means that when the order is placed Shuzworld Company should order 27386.13 pairs and in a year or period they should order 10.95 times.

Recommendations

In a manufacturing organization where large unit items are produced daily for instance, large quantities of materials and component parts have to be provided daily as well. This obviously means a lot of money and it is therefore to organize store function so that investment cost is kept to the specific standard system of stores control, which can be universally recommended or applied, but in the course of time, certain principles and practices of more or less general application have been evolved. A material as used in this write-up has the same meaning as inventory or stock. It is necessary to bring out the points at this stage because in Financial Accounting, material is often known as stock or inventory. As on accounting category, material stock is a current asset represented by goods owned by the business at a particular point in time and help for the purpose of future sale or for the manufacturing of goods for sale.

Materials management is concerned basically with planning and control of materials. Control is a process by which events are made to conform to a plan. Therefore to control materials, there must be a store, where to buy, when to buy, and how much to buy. The items to be stored will be dictated by the basic functions of the firm and the customers it serves. The suppliers to be selected will be influenced by such factors as the ability of the supplier to supply the quantity of the right quality at the right time and at the right price (right from the point of view of the purchaser).

Part D:

In this task we will be comparing the characteristics ...