Marcy Chocolate

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Marcy Chocolates

Marcy Chocolates produces more than 600 different products (SKUs).  Marcy has five different regional warehouses.  The products are divided into 12 distinct families.  The basic chocolate material for all 12 families is produced by two dedicated lines.  The basic material is then transferred to the 12 production departments.  Each department has between 1-3 fast lines that produce and pack all the variety of SKUs that belong to the family.

Each department has its own small warehouse to store up to 2 days of production.  Every day the trucks of the logistic department transport the goods, from all the 12 departmental warehouses, to the five regional warehouses from where all the company sales are done.

There is no practical way to have one large warehouse at the plant, because there is no space to expand and because the products need to be kept in certain temperature. Building such a warehouse is huge investment.

The regional warehouses sell 7 days a week.  The production facilities work only 6 days every week.

The current production policy in Marcy is the following:

1. Every week the global sale-day is calculated.  According to the calculation all the stocks are expressed in sale-days.
2. The target maximum stock for every item in each warehouse is:  30 days.  The required minimum is 12 days.  
3. Every week the department manager and his/her people plan their rolling master production schedule for the next 3 weeks.  They look for the items/location that are below 12 days or close to it, then they aggregate the replenishment to 30 days for all the warehouses plus 3 days for transportation.  According to the agreed priority the manager decides upon the sequence for the next three weeks.
4. New products are getting a target level of stock for each of the warehouses from Marketing.
5. Products that are going to be replaced get a warning three weeks ahead.  Efforts are done not to cause any shortage before the replacing product is ready for sale.
6. When a line is setup for a specific product, the operator checks the quantity again to validate all the stocks would be replenished to 30 days (plus 3 days for transportation).

Marcy Chocolates does not use forecasts.  Still, it is known that the demand is highly seasonal.  Certainly Christmas represents a peak and so is Halloween, while the sales during July-August are only 40% of the average.  This information is used intuitively in the MPS meetings, but the formal policies are fixed throughout the year.