Exercise at Home

Case Study: Apix Polybob Company

Ken Mack, plant manager for the Apix Polybob Company, was having a heated
discussion with Jack Gould, the production and inventory control manager. Ken was
getting tired of frantic calls from Jim Uphouse, the marketing manager, concerning
late orders for their Polybob (polybobs are a fictitious product) customers and was
once again after Jack to solve the problem. Some of the discussion points follow:
Case Study: Apix Polybob Company
Look, Ken, I’m not sure what more we can do. I’ve
reexamined the EOQ (economic order quantity lot size)
values and all the reorder points for all our inventory for
all our Polybob models, including all component levels and
purchased items. I’ve implemented strict inventory control
procedures to ensure our accuracy levels to at least 80%,
and I’ve worked with the production people to make sure
we are maximizing both labor efficiency and utilization of
our equipment. The real problem is with those
salespeople. We no sooner have a production run nicely
going, and they change the order or add a new one. If
they’d only leave us alone for a while and let us catch up
with our current late order bank, we’d be okay. As it is,
everyone is getting tired of order changes, expediting, and
making everything into a crisis. Even our suppliers are
losing patience with us. They tend to disbelieve any order
we give them until we call them up for a crisis shipment.

Jack Ken
Case Study: Apix Polybob Company

I find it hard to believe that you really have the EOQ and
reorder point values right. If they were, we shouldn’t have
all these part shortages all the time while our overall
inventory is going up in value. I also don’t see any way we
can shut off the orders coming in. I can imagine the
explosion from Jim if I even suggested such a thing. He’ll
certainly remind me that our mission statement clearly
points out that our number-one priority is customer
service and refusing orders and order changes certainly
doesn’t fit as good customer service.

Jack Ken
Case Study: Apix Polybob Company

Then maybe the approach is to deal with Frank Adams

(the chief financial officer). He’s the one who is always
screaming that we have too much inventory, too much
expediting cost, too much premium freight costs from
suppliers, and poor efficiency. I’ve tried to have him
authorize more overtime to relieve some of the late order
conditions, but all he’ll say is that we must be making the
wrong models. He continually points to the fact that the
production hours we are paying for currently are more
than enough to make our orders shipped at standard, and
that condition has held for over a year. He just won’t
budge on that point. Maybe you can convince him.

Jack Ken
Case Study: Apix Polybob Company

I’m not sure that’s the answer either. I think he has a

point, and he certainly has the numbers to back him up.
I’d have a real rough time explaining what we were doing
to Ron Marrison (the CEO). There’s got to be a better
answer. I’ve heard about a systems approach called
material requirements planning or something like that.
Why don’t you look into that? Take a representative
model and see if that approach could help us deal with
what appears to be an impossible situation. I’m sure
something would work. I know other factories have similar
production conditions yet don’t seem to have all our
problems

Jack Ken
Case Study: Apix Polybob Company
Following is the information about Polybob model A that Ken suggested as a representative model to use for the analysis:

B C (2 each)

F E (3 each) F (2 each) E D

Component Lot Size Inventory Lead Scheduled Reorder

Time Receipts Point
B 80 10 1 None 5
C 150 40 1 None 15
D 200 180 2 None 50
E 400 300 2 None 70
F 500 50 2 500, Week 1 80
Case Study: Apix Polybob Company
The following are the master schedule production lots for Model A:
Complete 50 units, week 3
Complete 50 units, week 5
Complete 60 units, week 7
Complete 60 units, week 9
Complete 50 units, week 11

Upon seeing this information, Jack stated, “Look at how regular our production schedule is for this
model. The reorder points will more than cover requirements, and none have lead times that make it
tough to respond. This analysis should show that all the work I did on EOQ and reorder points was
right, and the real problem lies with those sales and finance people who don’t understand our
production needs.”
Group Assignment:
1. What are the key issues brought about in the conversation? What are the key
symptoms, and what are the underlying problems? Be specific in your answers.
2. Use the product information to develop an MRP approach to the problems.
Would MRP solve the problems? If so, show specifically how MRP would avoid
the problems discussed by Ken and Jack.
3. Do any conditions bother you about the ability of MRP to deal with the
problems? What specifically are those conditions?
4. Suppose it was discovered that only 250 of component E were in stock instead
of the 300 listed on the inventory record. What problems would this cause (if
any), and what are some of the ways that these problems could be addressed?
How would (if at all) MRP help you when other methods might not?
5. Suppose that the design engineer advises that he has a new design for
component F. It won’t be ready until sometime after week 2, but he wants you
to give a date for the first supplier shipment to come in, and you should be
ready to tell the supplier how many to ship. Since the change is transparent to
the customer, the design engineer advises you to go ahead and use up any
existing material of the model. How will MRP help you to deal with this issue?
6. Can you think of any other “what if’ questions that might be more easily
addressed by a systematic approach such as MRP?