683 4.2 Problem Set 2

Posted: August 25th, 2021

683 4.2 Problem Set 2

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683 4.2 Problem Set 2

Question 1

1. Optimal Production Schedule

Using component cost per unit of a scooter as $40, the optimal production schedule for the company would be (see Excel solution qn. 1 a):

• Number of employees = 81
• Labor cost = 81 * $1.6 = $129.6 per unit of production
• Production cost (labor and material) = 520 per day per unit
• Average production = 70083 per month
• Total cost over planning horizon = $ 202, 840, 314.81 per month
• Optimal Production Schedule

Using component cost per unit of a scooter as $44, the optimal production schedule for the company would be (see Excel solution qn. 1 b):

• Number of employees = 81
• Labor cost = 81 * $1.6 = $129.6 per unit of production
• Production cost (labor and material) = 524 per day per unit
• Average production = 70083.33 units per month
• Total cost over planning horizon = $ 202, 999,609.33 per month

Question 2: Discuss How Ego Can Respond to Predictable Demand Variability by Managing Supply and Demand

Predictable demand variability refers to the changes in demand which can be projected. These types of demand can influence a decrease or increase in costs along the product supply chain (Kersten, 2014). Under this case, eGo company is bound to experience demand variability across its production period over the year. However, since these variations are predictable to the company, there is a need to establish appropriate approaches to handle their influences against the company demand and supply chain. There are two approaches the company can apply to respond to predictable demand variability. The first approach is by managing supply by using inventory, capacity, backlogs and subcontracting. In this case, the Company should undertake the execution of each aspect of this broad approach through the following actions:

1. Managing Capacity

The company management should ensure that workforce performance time is flexible. The move encourages the use of seasonal workforce and subcontracting to guarantee enough personnel capacity thus minimizing costs in both production and supply chain (Vrat, 2014). Subsequently, there is an aspect of shared resources which should be boasted through designing of product flexibility within the production process.

• Managing Inventory

Proper management of inventory includes using common mechanisms across a set of products and designing inventory products that are of high demand. In return, the company costs of inventory carry-over are minimized due to the increase in stock turnover.

The second approach that the company can use is by managing demand through short-term trade promotions and price discounts (Jain, 1999). Trade promotions are meant to increase market share for the commodity besides creating outpacing competitor clout on the current market. Equally, short-term price discounts help to create customer loyalty, thereby attracting their influence among other customers in favor of the commodity (Vrat, 2014). However, eGo Company can only enjoy these benefits if both promotions and discounts are done timely to help realize market growth.

References

Jain, A. (1999). Marketing information products and services: a primer for librarians and information professionals. Ottawa Ont: International Development Research Centre.

Kersten, W. (2014). Next-generation supply chains trends and opportunities. Berlin: epubli.

Vrat, P. (2014). Materials management: an integrated systems approach. New Delhi: Springer.