Supply Chain Management for Engineers

SUPPLY CHAIN MANAGEMENT FOR ENGINEERS

HOME WORK 1

Problem Statement

        Julie Williams and her team at Specialty Packaging Corporation (SPC) must consider all the options available to improve the profitability of the supply chain in order to satisfy the demanded forecast and minimize the cost throughout the supply chain. The team needs to take into account the constraints and costs such as transportation cost, inventory cost (public and private), material handling, labor hours and costs. The constraints include inventory balance, usage of inventory and outsource if necessary, worker force balance and equipment constraints. Initially, Julie and her team need select a suitable forecasting technique to forecast the quarterly demand for each of the two types of containers they produce for the years 2010 to 2012 and estimate the likely error. After evaluating the calculated demand and forecast error, Julie has to determine the means to meet the demand by analyzing the outsourcing and Warehousing options.  The team has to determine the overtime working hours, number of workers to be hired or laid off and the number of machines to be kept idle if needed, to meet the demand forecast. The cost associated with the usage of a public or a private warehouse has to be calculated and the appropriate decision needs to be taken so that the overall cost the supply chain over the span of three years is minimal. The team also needs to make a decision regarding the square footage of the private warehouse to be leased, if needed. Julie and her team have to decide if the inventory has to be stored in a private warehouse, public off-site warehouse or a combination of both depending on the incurred cost evaluation.

Solution Methodology

        The demand for the two types of plastic containers for 3 years (12 quarters) is given but the aggregate demand of both the plastics are considered as both of them have a similar manufacturing process. The error in demand forecasting is calculated by using the seasonal forecasting method to obtain the actual demand for all the 12 quarters.  

The evaluations made are by considering the 14 extruders and 25 press machines and that there will be no investment made on the new equipment. The number of extruders to be left idle for a certain quarter is altered so that the backlog at the end of each quarter is zero. Reasonable assumptions are made so as to consider the lowest inventory holding cost ($14 per 1000lb) and the lowest transportation cost ($2 per 1000lb). The overall production of containers from the containers is considered same as the demand for each quarter as there is no inventory available for the containers. The aggregate plan is formulated initially by altering the number of extruders to be kept idle to maintain zero backlog at the end of each quarter. The number of press machines to be kept idle is altered so as to maintain the usage of press machines at their maximum production capacity possible considering the overtime hours with a minimal number of active press machines. The number of extruders is again altered and the backlog obtain is to be compensated by outsourcing to one of SPC’s supply chain partners. Making the employees work overtime with lesser press machines rather than hiring and laying off employees, seems to be feasible. The overtime hours for the extruders are zero for each quarter.