Supply Chain Game #1 Write-up
Jacobs Industries is a company with a single factory and warehouse in Calopeia that manufactures and sells air conditioning retrofitting kits. Its only products, a light-weight foam, is an industrial chemical that can be mixed with air to create an efficient thermal acoustic insulator. Jacobs Industries produces chemicals in batches and loads the drums to be shipped by truck to the warehouse. If Jacobs Industries cannot fill the order within 24 hours of receiving the order then the business is lost.
The chemical is packed and shipped in drums costing $1450 apiece. The company has been running for two years (730 days) and has shown a seasonal trend in sales. In two years’ time a new foam technology will brand the current Jacobs Industry’s foam product obsolete. All customers are knowledgeable of the forthcoming new technology, leading to the conclusion that demand will decrease to zero on day 1460.
In the Jacobs factory, the chemical is produced in batches and shipped in trucks to the warehouse as soon as they are finished. A truck can hold up to 200 drums and cost $15,000 regardless of how many drums are in a the truck and takes 7 days to get to the warehouse for sale; mailing the product to customers will cost $150 per drum and take only 1 day.
The company has been operating for two years already and within the following two years the product that they are producing will be outdated and obsolete. The company is also losing demand, and they don’t know why. There’s not enough capacity to meet demand and they don’t understand inventory planning or forecasting. Our team, Brofessionals00, was called up to assess and fix issues within Jacobs Industries’ operations. Our job was to generate the most profit for Jacobs, and our first issue at hand was to decrease costs and increase revenue. Lowering the costs is composed of changing the number of drums that are loaded into the truck, along with changing the batch size. In order to increase revenue, we needed to change the capacity of the machines, along with the reorder point so we can be certain the factory would never shut down.
The company had already accrued $2,738,867.06 which we could use for future operations. And we were also provided with two years of past data (below) to work with Jacobs Industries for the next two years (from day 730 to 1460)
According to the given data from the past two years, we calculated the total demand to be 28,611 drums total. We can assume this would mimic the next two years because of its seasonal trend. We need to see if we are producing enough with the capacity that we have. Below is data that shows how much demand was lost due to lack of inventory. The lack of inventory happens at the peaks of our seasonal business times. Many lost business was taken elsewhere due to this. Below is a graph that shows when the demand was lost, how much was lost on top of the demand graph.
The points where we lose demand is very substantial because our lost business is occurring at these high points of our demand. We have to be certain we have enough inventory to cover these increase in demand.
To immediately address this problem we decided to invest our money in increasing our capacity to produce from 20 drums a day to 40 drums. We decided to increase our capacity to 40 drums a day because in the past two years we had a total of 28,611 drums so on average we would have to sell 28,611 drums/730 day or 39.19 drums every day (rounded to 40). Any less than 39.19 and there would be a shortage, so we conservatively chose an even 40 as capacity. This was the first variable we changed because we knew it took time to build up to the new capacity. To increase our capacity, we needed 90 days for the change in capacity to be in effect. so our first 90 days (days 730-820) of operation was still at a capacity of 20 drums.
explain optimal of 44. show timeline
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