Reference no: EM13350698

Problem 1 - Demand Forecasting

Company A produces products P1 and P2. Historically, demand for P1 peaks in the summer months, while demand for P2 peaks in the fall months. Based on historical trends, demand is expected to grow until 2012, after which it is expected to plateau.

Using the historical data provided below, select the appropriate forecasting method and forecast the demand for the years 2010 to 2012.

Year	Quarter	P1	P2
2005	I	2250	3200
	II	1737	7658
	III	2412	4420
	IV	7269	2384
2006	I	3514	3654
	II	2143	8680
	III	3459	5695
	IV	7056	1953
2007	I	4120	4742
	II	2766	13673
	III	2556	6640
	IV	8253	2737
2008	I	5491	3486
	II	4382	13186
	III	4315	5448
	IV	12035	3485
2009	I	5648	7728
	II	3696	16591
	III	4843	8236
	IV	13097	3316

Problem 2 - Aggregate Planning

You are the facility production planning manager for Company A. Your problem is to determine a 3-year aggregate production plan (planning horizon is from Quarter I of 2010 to Quarter IV of 2012). The company produces two products, P1 and P2. Your team has provided to you a 3-year production plan.

		Demand Forecast
Year	Quarter	P1	P2
2010	I	6650	7462
	II	4576	18250
	III	6293	8894
	IV	13777	4064
2011	I	7509	8349
	II	5149	20355
	III	7056	9891
	IV	15399	4507
2012	I	8367	9235
	II	5721	22461
	III	7819	10889
	IV	17021	4950

Furthermore, it has gathered various data for the production, possible subcontracting options, labor costs, inventory handling costs, material costs and others. In particular, the production floor consists of 9 machines. Each machine can produce 4 items (either P1 or P2) per hour. The fixed cost for operating a machine is 200$ per quarter, and requires for its operation 4 workers. The material and variable production cost per unit is 20$. The initial starting inventory at the beginning of the planning horizon is 500, and the inventory holding cost is 2$ per unit at the end of each quarter. The marginal cost of stock out is 4$ per unit per quarter, and it is assumed that backlogged orders are fully fulfilled at the beginning of the next quarter. The hiring and training cost for each worker is 300$ and the layoff cost is 500$ per worker. Each worker cost 4$ per hour, and the current workforce is 20 (beginning of the first quarter of 2010) . On the other hand, the production facility operates 20 days per month, and the regular working hours are 8 hours per day. Finally, there is also available with no limitations a subcontracting option for the production that comes with a cost of 24$ per unit. The table below summarizes part of the above data.

Item	Cost
Material and Production cost/unit	20
Inventory holding cost/unit/quarter	2
Marginal cost of stockout/unit/quarter	4
Hiring and training cost/worker	300
Layoff cost/worker	500
Number of Workers required/machine	6
Regular time cost/hour	4
Subcontracting cost/unit	24
Available Machines	9
Machine Capacity / hour	4
Fixed machine operating cost / quarter	200

The goal of the aggregate planning is to determine the production and subcontracted quantities per quarter, the inventory held and Backlog/stockout quantities per quarter, the number of workers and the number machines used per quarter such that the overall cost is minimized and the available inventory at quarter IV of 2012 is 500 units.

Problem 3 - DecisionTrees

Moon micro is a small manufacturer of servers that currently builds its entire production in Santa Clara, California. As the market for servers has grown dramatically, the Santa Clara plant has reached it capacity of 10,000 servers per year. Moon is considering 2 options to increase capacity. The first option is to add 10.000 units of capacity to the Santa Clara plant at a fixed annualized cost of $10,000,000 plus $500 labor per server. The second option is to have Molectron, an independent assembler, manufacture servers for Moon at a cost of $2000 for each server, excluding raw materials cost. Raw materials cost $8000 per server, and Moon sells each server for $15000.

The demand for Moon's servers is has a 80% chance of increasing 50% and a 20% chance of remaining the same as the year before. Determine whether Moon should add capacity to its Santa Clara plant or it should outsource to Molectron.

Problem 4 - Network Design

Blue Computers, a major PC manufacturer in the US, currently has plants in Kentucky and Pennsylvania. The Kentucky plant has a capacity of 1 million units per year, and the Pennsylvania plant has a capacity of 1.5 million units per year. The firm divides the US into 5 markets: Northeast, Southeast, Midwest, South and West. Each PC sells for $1000. The firm anticipates a 50% growth in demand (in each region) this year (after demand will stabilize) and wants to build a plant with a capacity of 1.5 million units per year to accommodate the growth. Potential sites being considered are in North Carolina and California. Currently the firm pays federal, state and local taxes on the income from the plant. Federal taxes are 20% of income, and all state and local taxes are 7% of income in each state. North Carolina has offered to reduce taxes for the next 3 years from 7% to 2%. Blue Computers would like to take the tax break in consideration when planning its network. Consider income over the next 3 years in your analysis. Assume that all costs remain unchanged over 3 years. Annual fixed costs, production and shipping costs per unit, and current regional demand (before the 50 percent growth) are shown below.

How should the network be structured setting as objective to maximize after tax profits?

	Variable Production and Shipping Cost ($ / unit)					Annual Fixed Cost (million $)
	Northeast	Southeast	Midwest	South	West
Kentucky	185	180	175	175	200	150
Pennsylvania	170	190	180	200	220	200
N. Carolina	180	180	185	185	215	150
California	220	220	195	195	175	150
Demand ('000 units / month)	700	400	400	300	600