Assignment No.

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Operation rs e Three Jays Case Study
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Management
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Group Members:
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Sl No. Name Location Roll Number Contact Number

1 Rakesh G Bhosale Mangalore EPGCOM-09-022 +919916339386
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2 Sunil Kumar S R Mumbai EPGCOM-09-029 +917045313641

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3 Arokianath Christy Bangalore EPGCOM-09-008 +919980061427

4 Bikash Ranjan Sahoo Coimbatore EPGCOM-09-009 +919677224769
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Executive Post Graduation Certificate in Operation Management 1

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 Three Jays Case Study Questions & Answers:

1. Using the data in Exhibit 4 and the 2012 annual demand, calculate the EOQ and ROP (re-order point)
quantities for the five SKUs scheduled to be produced in the last week of June. How do these amounts
compare with those calculated in 2011? Compare the increases in EOQs with the increase in annual
demand.

ANSWER:

As at 2011
Total Set Annual %
12 ounce Jar EOQ ROP
Up Cost Demand Carrying Unit Cost **
2011 (Cases)
(S)* 2011 Cost (i)

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Strawberry Jam 63.70 2,993 9% 28.34 387 173

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Raspberry Jelly 63.70 2,335 9% 30.52 329 135

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Peach Jam 63.70 1,492 9% 26.86 280 86

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Blueberry Jam 63.70 886 9% 29.01 208 51

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Apple/Mint Jelly 63.70 625 9% 26.32 183 36
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As at 2012
Total Set Annual %
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12 ounce Jar EOQ ROP

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Up Cost Demand Carrying Unit Cost

2012 (Cases)
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(S)* 2012 Cost (i)

Strawberry Jam 63.70 3,869 9% 28.34 440 223
Raspberry Jelly 63.70 3,006 9% 30.52 373 173
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Peach Jam 63.70 1,970 9% 26.86 322 114

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Blueberry Jam 63.70 1,211 9% 29.01 243 70

Apple/Mint Jelly 63.70 832 9% 26.32 212 48
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2011 to 2012
12 ounce Jar Increase % increase in % increase in Increase in % increase in
Demand demand EOQ ROP 2012 ROP

Executive Post Graduation Certificate in Operation Management 2

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 Strawberry Jam 876 29% 14% 51 29%
Raspberry Jelly 671 29% 13% 39 29%
Peach Jam 478 32% 15% 28 32%
Blueberry Jam 325 37% 17% 19 37%
Apple/Mint Jelly 207 33% 15% 12 33%

Estimated demand 2013 and EOQ for June 2013

12 ounce Jar Total Set Annual %

EOQ ROP
Up Cost Demand Carrying Unit Cost
2013 (Cases)
(S)* 2013 Cost (i)
Strawberry Jam 63.70 6,896 9% 28.34 587 398
Raspberry Jelly 63.70 6,561 9% 30.52 552 379

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Peach Jam 63.70 1,352 9% 26.86 267 78

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Blueberry Jam 63.70 1,283 9% 29.01 250 74

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Apple/Mint Jelly 63.70 1,199 9% 26.32 254 69

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Conclusion: rs e
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1. With the Increase in Annual Demand EOQ is also increasing and ROP is also inceasing.
2. Percentage increase in Demand is same as ROP
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2. Brodie is uncertain if the costs presented in Exhibit 2 are appropriate for determining the EOQs. What
changes would you recommend and why? Why should the cost of the three idle part-time workers be
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included when the production line is down? Using the 2012 annual demand, and your recommendations,
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recalculate the EOQs for the five SKUs

ANSWER:
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The total Setup cost should include the cost of three part time workers when production line is down as
they are utilized for cleaning of Holding tank, feed pipe and Filling machine when they shift between
products.
Hence $12.5 X 3 workers X 30 Minutes = $18.75 for all 5 SKUs i.e., $3.75
Executive Post Graduation Certificate in Operation Management 3
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 Total Set up cost will be $67.45.

With revised Setup cost the EOQ and ROP for 2012 will be.
Annual %
Total Set Up Unit EOQ ROP
12 ounce Jar Demand Carrying
Cost (S)* Cost (Cases) (Cases)
(D)** Cost (i)
Strawberry Jam 67.45 3,869 9% 28.34 452 223
Raspberry Jelly 67.45 3,006 9% 30.52 384 173
Peach Jam 67.45 1,970 9% 26.86 332 114
Blueberry Jam 67.45 1,211 9% 29.01 250 70
Apple/Mint Jelly 67.45 832 9% 26.32 218 48

As the Setup cost increases, the EOQ has marginally increased. This is to minimize ordering requirement
and optimizing the inventory.

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3. Compare your results with those obtained using the data in Exhibit 2. What do you attribute the
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differences to? After speaking to Jake and Josh, Brodie is now not sure if the EOQ model if the most
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appropriate for the current production process. Evaluate the scheduling method that Jake and Josh are
using. Why are they not following the established system?
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ANSWER:

The mixed strategy used by Jake & Josh is effective time being, due to change and uncertainty in demand
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3J’s need to use methodology of continuous monitoring. This also means a high input variable quotient
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between the 5 SKU’s. The EOQ and ROP methods may not be the best Jake and Josh are presently
following and review strategy. Consider alternative method such as Least Total Cost in the MRP
Which we believe will be most effective in this case. They shall do planning for 9 weeks instead of 6
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weeks.
The total cost will be high with present EOQ model, LTC should be done with 9 weeks planning. This
will reduce the total cost.

Executive Post Graduation Certificate in Operation Management 4

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 4. Compare the established EOQ/ROP procedure (described in Exhibit 2) with the one that Jake and Josh
are using. Which system do you prefer? What improvements do you recommend?

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ANSWER:

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1. New Investments in Jam Filling Machine:-
We recommend a further investment in machinery for filling of all size of jar, the additional

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investment expenses may be deferred over the period of 5 years.
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2. Reduction of safety stock level:-
Higher inventory level means increase in working capital, reducing lead time will benefit in
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lowering safety stock and inventory.

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3. Reduction in Lead time and Set-up time:-

The investments in new filling machine will certainly reduce the lead time and setup time by
reducing time taken for changeover of products types.
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4. Cross Train part-time worker:-

Effective utilization of part time workers – ideal time through cross train and help Jakes and Josh
in reducing the time for set up
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5. Increase carry cost:-

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Carry cost is indirectly proportionate to EOQ

6. Shorter Inventory Planning :-

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Inventory as planning can be done on weekly or fortnightly basis to meet the demand.

Executive Post Graduation Certificate in Operation Management 5

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