Create a semiannual production plan for your new business idea,(Starbucks and Alcohol beverages) using notional demand and inventory data.
PRODUCTION PLAN
PRODUCTION PLAN 2
Semiannual Production Plan
MBA 690
February 20, 2017
Semiannual Production Plan – Coca-Cola Company
The production plan created will be a semiannual one (6 months), using notional demand and inventory. Notional demand is the aggregate goods quantity that will be demanded if all the markets are to be in equilibrium during the period the production plan is to be valid (Stevenson & Sum, 2002). The labor hours consumed will also be estimated. In addition, there will be an estimate of the number of worker requirements with consideration for the standard work week, current inventory levels, receipts of new inventory during each month, and varying demand levels for each month of production.
Given an estimated notional demand of 19500 units, the average notional demand should be 19,500/6 which is equal to 3250 per month (Dey, Cheffi, & Nunes, 2014). To produce these units per month given a standard labor rate of 0.64, the workforce required will be:
3250*0.64 = 2080 units.
Units per hour given 160regular hours available = 2080/160 = 13 workers.
Opening Inventory: 2500 units
Current workforce: 14
Regular hours available: 160
Overtime hours available: 20
Standard of Labor: 0.64
|
Month |
1 |
2 |
3 |
4 |
5 |
6 |
|
Demand |
500 |
6000 |
2000 |
1500 |
4000 |
5500 |
|
Production |
3250 |
3250 |
3250 |
3250 |
3250 |
3250 |
|
Cumulative Demand |
500 |
6500 |
8500 |
10000 |
14000 |
19500 |
|
Cumulative Production |
3250 |
6500 |
9750 |
13000 |
16250 |
19500 |
|
Excess Units |
2750 |
0 |
1250 |
3000 |
2250 |
0 |
|
Units Short |
0 |
0 |
0 |
0 |
0 |
0 |
Since the workforce that is needed is 13 workers, the company will have to lay off one worker to minimize costs while maximizing profit.
The table below shows the estimated production costs:
|
Cost |
Per Unit ($) |
Total Cost ($) |
|
Materials |
40 |
40*19500 = 780000 |
|
Labor |
10 |
10*19500 = 195000 |
|
Laying off |
1000 |
1000*1 = 1000 |
|
Total Cost |
|
976000 |
The semiannual production plan above shows that the total cost of production for the six months period is $976,000.
References
Dey, P. K., Cheffi, W., & Nunes, B. (2014). Production Planning & Control. PRODUCTION PLANNING & CONTROL, 25(9), II.
Johnson, L. A., & Montgomery, D. C. (1974). Operations research in production planning, scheduling, and inventory control (Vol. 6). New York: Wiley.
Stevenson, W. J., & Sum, C. C. (2002). Operations management (Vol. 8). New York, NY: McGraw-Hill/Irwin.