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Homework answers / question archive / The Good and Rich Candy Company makes a variety of candies in three factories worldwide
The Good and Rich Candy Company makes a variety of candies in three factories worldwide.Its line of chocolate candies exhibits a highly seasonal demand pattern with peaks during thewinter months (for the holiday season and Valentine’s Day) and valleys during the summermonths (when chocolate tends to melt and customers are watching their weight). Given thefollowing costs and quarterly sales forecasts, determine whether a) level productionstrategy or b) chase production strategy would more economically meet the demand forchocolate. (Use Hiring Cost= $100 per worker, Firing Cost = $500, Inventory carrying cost =$0.50 per pound per quarter, Regular production cost per pound = $2.00, Production per employee = 1,000 pounds per quarter, Beginning Workforce = 100 workers).Quarter: Forecast Sales (lb)Spring 80,000Summer 50,000Fall 120,000Winter 150,0002. Formulate a linear programming model for the problem above that will satisfy demand forGood and Rich chocolate candies at minimum cost. Solve the model with Excel Solver.Compare the solution with Chase and Level strategies you obtained.3. Build the Excel Spreadsheet for the Level Operating Plan with Constant Number ofEmployees example in Manufacturing Planning and Control for SCM (Jacobs et al.) on page132. Keep your excel macros and change the Sales Forecast data for each month in the planto the average of the data provided in the example. Compare total costs.
| quater forcast sales(ib) |
| spring 80,000 |
| summer 50,000 |
| fall 120,000 |
| winter 150,000 |
here we need to find out the:
?1.level protction strategy:
Level Production Strategy: This strategy involves averageing out the production.
Average Production in all four quarters: (80000 + 50000 + 120000 + 150000)/4
=100000 units.
Since each worker can produce 1000 pounds per quarter hence to produce 1,00,000 pounds we will require
: 1,00,000/1000 = 100 workers
Since we already have 100 workers hence no hiring and firing costs would be incurred.
Let us compute production and inventory costs:
| Quater | Production | Forecast | inventory |
| spring | 100,000 | 80,000 | 20,000 |
| summer | 100,000 | 50,000 | 70,000 |
| Fall | 100,000 | 120,000 | 50,000 |
| winter | 100,000 | 150,000 | 0 |
| Total | 400,000 | 140,000 |
Hence total costs incurred is production of 400,000 pounds at the rate of $2 and holding inventory of 140,000 @0.5
= 400,000 * $2 + 140,000 * $0.5
=$870,000
2)Chase demand Strategy:
Here any additional workers apart from what is required to fulffill the demand are fired and if there is a shortfall then hiring is done.
| Quater | Forecast | production | Worker required | Hired | fired |
| spring | 80,000 | 80,000 | 80 | - | 20 |
| summer | 50,000 | 50,000 | 50 | - | 30 |
| Fall | 120,000 | 120,000 | 120 | 70 | - |
| Winter | 150,000 | 150,000 | 150 | 30 | - |
| Total | 400,000 | 100 | 50 |
Hence total cost in this strategy is :
400,000 * $2 + 100 * $100 + 50 *$500
= $835000
Since the second strategy yeilds less cost hence it shall be adopted.
Notes: a)Inventory Computation in Level Production Strategy:
Spring : Production - Forecast = 100000- 80000 = 20000
Summer : 100000-50000 = 50000; Total inventory = opening inventory + current
:20000 + 50000 = 70000
Fall : Since here production is less than demand hence opening stock is utilised.
100000 - 120000 = (20000)
Closing stock = 70000 - 20000 = 50000
Winter : 100000 - 150000= (50000)
Closing stock = 50000 - 50000 = 0
2.Chase demand strategy:
Workers required column is computed by : Production / 1000 ( since each worker produces 1000 pound)
Workers Fired Column : It is computed by comparing workers required column and existing workers. Excess are fired.
Spring : 100 - 80 = 20.
Closing number of workers = 80
Summer : 80 -50 = 30
Closing number of worker : 50
Workers Hired :
Fall : 120 - 50 = 70
Closing number of workers : 120
Winter : 150 -120 : 30
