Chapter 9 Sales and Operations Planning: Planning Supply and Demand in a Supply Chain

Exercise 1 and 2

EXERCISE 1

Lavare, located in the Chicago suburbs, is a major manufacturer of stainless steel sinks. Lavare is in the middle of the demand and supply planning exercise for the coming year. Anticipated monthly demand from distributors over the 12 months is shown in TABLE 9-4.

Capacity at Lavare is governed by the number of machine operators it hires. The firm works 20 days a month, with a regular operating shift of eight hours per day. Any time beyond that is considered overtime. Regular-time pay is $15 per hour and overtime is $22 per hour. Overtime is limited to 20 hours per month per employee. The plant currently has 250 employees. Each sink requires two hours of labor input. It costs $3 to carry a sink in inventory for a month. Materials cost per sink is $40. Sinks are sold to distributors at a price of $125 each. We assume that no stockouts are allowed and the starting inventory entering January is 5,000 units and the desired ending inventory in December is also 5,000 units.

Market research has indicated that promotion dropping prices by 1 percent in a given month will increase sales in that month by 20 percent and bring forward 10 percent demand from each of the following two months. Thus, a 1 percent drop in price in March increases sales in March by 3,000 (= 0.2 x 15,000) and shifts 1,800 = 0.1 x 18,000) units in demand from April

and 2,500 (= 0.1 x 25,000) units from May forward to March.

QUESTIONS TO ANSWER

a. What is the optimal production plan for the year if we assume no promotions?

What is the annual profit from this plan?

What is the cost of this plan?

b. Is it better to promote in April or July?

How much increase in profit can be achieved as a s result?

c. If sinks are sold for $250 instead of $125, does the decision about the timing of the promotion change? WHY?

TABLE 9-4 Anticipated Monthly Demand at Lavare

MONTH DEMAND MONTH DEMAND
January 10,000 July 30,000
February 11,000 August 29,000
March 15,000 September 21,000
April 18,000 October 18,000
May 25,000 November 14,000
June 26,000 December 11,000
EXERCISE 2

Consider the data for Lavare in Exercise 1. We now assume that Lavare can change the size of the workforce by laying off or hiring employees. Hiring a new employee incurs a cost of $1,000; laying off an employee incurs a layoff cost of $2,000.

a. What is the optimal production plan for the year if we assume no promotions?

What is the annual profit with this plan?

What is the cost of this plan?

b. Is it better to promote in April or July?

How much increase in profit can be achieved as a result?

c. If the holding cost for sinks increases from $3 per month to $5 per month, does the decision of the timing of promotion change? WHY or Why not?

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Benefits of our college essay writing service

  • 80+ disciplines

    Buy an essay in any subject you find difficult—we’ll have a specialist in it ready

  • 4-hour deadlines

    Ask for help with your most urgent short tasks—we can complete them in 4 hours!

  • Free revision

    Get your paper revised for free if it doesn’t meet your instructions.

  • 24/7 support

    Contact us anytime if you need help with your essay

  • Custom formatting

    APA, MLA, Chicago—we can use any formatting style you need.

  • Plagiarism check

    Get a paper that’s fully original and checked for plagiarism

What the numbers say?

  • 527
    writers active
  • 9.5 out of 10
    current average quality score
  • 98.40%
    of orders delivered on time
error: