Mastering the Bread Making Master Schedule and
Producing Automobiles Leaner
BUS 307 Operations Management and Quantitative Techniques
The Realco Breadmaster
A master production schedule is used by business organizations as a metric to ascertain whether or not their production (outputs) meets their supply demands (inputs). There are times when a business wants to have a surplus and at others letting inventory dwindle to smaller numbers is optimal. The idea is to ensure that customers get their orders in a timely manner to retain loyalty, maximize profits, and reduce overhead and direct costs. The Realco Breadmaster Company has a new bread maker in the hopes of increasing their revenue. In question is the cost and efficiency of the new bread maker. The owner of Realco, Johnny Chang, wants a Master Production Schedule (MPS) designed.
With the MPS on hand it is clear that Realco will indeed meet their customer’s requirements based on the production available to include the promised shipments in 3 weeks. On the 8th week however, they will have a surplus of inventory. Mr. Chang the owner stated that the ending inventory of 51,650 units was too high and should be used as a Reorder Point (ROP) to indicate that there is a problem with overproducing. Fortunately Realco has not overpromised since they are able to meet their customer’s demands with the excess inventory. This does indicate that production numbers need to be readjusted to accommodate consumer demand.
According to Marketing Manager Jack Jones, “nearly all orders can be filled within two weeks, so we promise them three weeks. That gives us a cushion, just in case.” (Bozarth & Handfield, 2008). The thinking behind this is to ensure that customers can get their orders without delay and provide a cushion if there is a delay somewhere upstream in the supply chain. The negative aspect to this is the inventory on hand is going to be higher than it should be which costs money to keep on hand without true need, it also limits the amount of orders that can be produced if each order is extended to 3 weeks instead of the 2 weeks actually needed. With a MPS inventory can be properly tracked and adjusted as needed for production and consumers requirements. This would allow Realco to begin the lead/match capacity and match production to begin controlling the overhead in handling unnecessary inventory on the input and output side. It would also allow Realco to provide their bread makers in a timelier fashion making customers happier with services rendered.
Although it may seem counter-intuitive, with Realco continuing to produce 20,000 bread makers a week as opposed to 40,000 every the surplus will drop considerably although after the 8th week there will still be considerable excess.
Johnny Chang now needs to make a decision; should Mr. Chang lower production and keep the excess after 8 weeks in order to fill orders quickly or lower total inventory to match production needs and possibly fail to meet a large order from a customer? With the information at hand there is not enough information to justify a proper MPS. From the 1st week at a whopping 23,500 units to the end of the 8th week to 1,800 units there is a considerably small amount that could cause hardship with customers who may have a high volume need. In a few months there would be nothing on hand to send to customers.
New methods of production whether it’s adjusting the capacity or your business, changing your production to match/chase or even using a different IS software are always a risk. Owners and business managers will never be fully sure if their new product or service will be able to meet consumer demand or if it will cause significant loss in purchasing more inventory than is needed or over production which could cost a lot in storing until needed. Creating a Master Production Schedule can help businesses ensure that the correct of...
Cited: Bloomsberg Weekly. (2011, January 01). Retrieved November 27, 2011, from Business Business Weekly: http://www.businessweek.com
Bozarth, C. C., & Handfield, R. B. (2008). Introduciton to Operations adn Supply Chain Management. Upper Saddle River: Pearson Prentice Hall.
Kaizen Institute of America. (2011, January 01). Retrieved November 27, 2011, from Kaizen Institute: http://www.kaizen.com
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