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Wilkins Aggregate Production Planning

Wilkins produces water control products and experiences seasonal demand. It faces challenges from fluctuating demand levels between products and seasons that cause production capacity constraints or excess capacity. The document analyzes using a level or chase production strategy to reduce inventory levels by 30% while maintaining a 99% customer service level. A level strategy keeps production constant but holds more inventory, while a chase strategy adjusts production up or down to match demand but incurs hiring and firing costs. The chase strategy is found to reduce average inventory by 87% compared to 34% for the level strategy.

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guntupalli manoj
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101 views10 pages

Wilkins Aggregate Production Planning

Wilkins produces water control products and experiences seasonal demand. It faces challenges from fluctuating demand levels between products and seasons that cause production capacity constraints or excess capacity. The document analyzes using a level or chase production strategy to reduce inventory levels by 30% while maintaining a 99% customer service level. A level strategy keeps production constant but holds more inventory, while a chase strategy adjusts production up or down to match demand but incurs hiring and firing costs. The chase strategy is found to reduce average inventory by 87% compared to 34% for the level strategy.

Uploaded by

guntupalli manoj
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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WILKINS, A ZURN COMPANY: AGGREGATE PRODUCTION

PLANNING

GROUP-6

Anirban (188031)
Ankit(188034)
Ankur (188039)
Nishant (177128)
Pratyush(188183)
Rahul (188189)
Rohit (188149)
Shantnu (177128)
Tarun (177219)
Nature of Wilkins business

 Wilkins is in high quality water control products


 PVB is a seasonal business with max demand in Q3. Fire Valves is a
business with high demand uncertainty
 PVB made to stock (54% FG) and Fire Valves are made to order (85% RM)
 FG Inventory was spread across 52 locations in USA. Thus, it had
decentralized distribution
 Demand for the company’s product is growing
 Currently production capacity constrains in peak season and excess
capacity in other season due to seasonal demand
 Low labor cost
Major Challenges

 Seasonal demand of PVB causing production capacity constraints


in peak season and excess capacity otherwise
 Irregular demand of Fire Valves
 Excess inventory at plant
 No inter supplier transfer
Target to reduce the inventory by 30%

Assumptions for the year 2005


• δq1 = 1877, δq2 = 3361, δq3 = 3851, δq4 = 8154. (where q1 –quarter 1, q2-
quarter 2, q3 – quarter 3, q4 – quarter 4)

• Customer Service Level of 99% and Lead Time of 2 weeks

• 6 Employees of PVB cell manage both Dept 101 which supplies Machine
Castings to the PVB cell and Dept 104 which produce PVB cell

CSL 99% z value 2.326347874    


    Q1 Q2 Q3 Q4
Std Dev.   1877 3368 3851 8154
Safety Stock   1712.703765 3073.194609 3513.916995 7440.269846
GIVEN DATA
Holding Cost 20%
Std. Cost($) 25.65
Holding Cost($/unit/quarter) 1.2825
Inventory Value($) 1523789
InventoryValue(units) 59407
   
Production Rate(unit/day/employee) 100
Labour Usage 82.40%
Production Rate(units/quarter) 5356
Hiring Cost per employee ($) 580
Level Strategy
  0 Q1 Q2 Q3 Q4

Forcast(Units/week)   4,120 7,480 9,341 5,983

Forecast(Units/Quarter)   53,560 97,240 1,21,433 77,779

Safety Stock   1,713 3,073 3,514 7,440


Regular Production (/
Quarter)   74,511 74,511 74,511 74,511

Ending Inventory(units) 59,407 80,358 57,630 10,708 7,440


           

Number of Employee 6 14 14 14 14

New Employee   8 - - -

Cost of Hiring   4,588.81 - - -


Cost of Regular Production   19,11,215.43 19,11,215.43 19,11,215.43 19,11,215.43

Holding Cost   1,03,059.52 73,909.99 13,732.94 9,542.15


Total Cost   20,14,274.95 19,85,125.42 19,24,948.37 19,20,757.58

Total Annual Cost 78,45,106.32


Chase Strategy
  0 Q1 Q2 Q3 Q4

Forcast(Units/week)   4,120 7,480 9,341 5,983

Forecast(Units/Quarter)   53,560 97,240 1,21,433 77,779

Safety Stock   1,877 3,368 3,851 8,154

Regular Production (/ Quarter)   - 1,04,293 1,12,384 82,082

Ending Inventory(units) 59,407 5,847 12,900 3,851 8,154


           

Number of Employee 6 - 19 21 15

New Employee   -6 19 2 -6

Cost of Hiring   - 11,293.87 876.17 -

Cost of Regular Production   - 26,75,116.00 28,82,649.60 21,05,403.30

Holding Cost   7,498.75 16,544.25 4,938.91 10,457.51

Total Cost   7,498.75 26,91,660.25 28,87,588.51 21,15,860.81

Total Annual Cost 77,02,608.31


Level Strategy

Average Inventory 39,034


Average Inventory Reduction 34.29% Results
Chase Strategy

Average Inventory 7688


Average Inventory Reduction 87%
“Chase” and “Level” strategy

 In level strategy changes in demand are met by inventory, overtime subcontracting,


etc.
 In chase demand workforce level or production rate is changed in order to meet
demand.
 The planning on choosing the strategy depend on which cost is higher cost of hiring
and firing is high or cost of subcontracting.
 In level strategy we can manage with 2 shifts as the upper limit of 7 employees to
be employed at the PVB cell in a single shift
 In chase strategy we will have to plan for both hiring and firing also going with the 3
shifts.
Thank you!

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