WILKINS, A ZURAN

COMPANY
AGGREGATE PRODUCTION
Name :Pratik Biswas
Case Summary
• The Chris Cannors, general manager of Wilkins plant in Paso Robles,
California has received instruction to reduce inventory by 30% Next quarter.
• Raw material Inventory had been accumulating over the past few years.
• Benefits form accumulated raw material
• Cost of raw material has increase from past year, due to inventory in stock it did not affected
production cost.
• Due to inventory in stock, it allow company to minimize the use of overtime of temporary worker.
• Problem due to accumulated raw material
• It has taken significant physical space of plant. Sometime furnished goods are kept in open space,
which cost additional cost due to cleaning and polishing.
• Accounting significant portion of asset on the balance sheet.
• The company has policy of no layoff.
• General manager is planning to revise the production Plan. Need to find
wither revising the production plan, will be enough to solve Wilkins
inventory problem.
Product
• Pressure Vacuum Breaker (PVBs)
• Its Made to stock.
• Its demand is seasonal in nature. It increase in spring.
• Fire Valves
Problem
• Reduce inventory by 30% in the next quarter without
compromising current business strategy.
• Need to identify either a level production plan or chase demand
method plan will help in decreasing the inventory cost and
increase ability to provide same level of service on-time delivery
rate. (i.e 99%).
Aggregate Production Planning
Safety Stock Inventory-PVB
• Safety Stock is to prevent the stock out.
• Safety Stock = Z score *(Standard Deviation of Demand)*Square root of
Lead time
• Z =2.33 for 99 % of confidence level
• Lead time =2 week

Quarter STD Safety Stock

1 1877
2 3361
3 3851
4 8154
Calculation
• Initial inventory =Inventory Value / (std. cost /unit)
= 1523789/25.65=59406.978
= 59407 unit
• Holding Cost = 20%
• Holding cost Yearly = 0.2*25.6 =$5.13 unit per year
• Holding cost Quarterly= 5.13/4= $1.28 unit per quarter
• 6 labour is producing 600 units in 8 hour shift.
• 100 unit per labour per day
• 5 days working
• 13 week / quarter
• Production Rate per labour = 100*5*13=6500
• We need to consider that labour of department 104 spend
• 0.096/0.116=0.828 i.e 82.8%
• So actual production rate = 6500*0.828=5382 Unit / labour/quarter
• Quarter = 13 weeks
• Standard Cost $/unit =25.65
• Holding cost$ /Unit = 1.28
• Hiring cost/ labour = 580
• Termination cost/ Labour (Temporary labour)=negligible
• Termination cost/ labour (Full time)=300
• Production rate (unit/labour/quarter) =5382
• Initial number of labour =6
• Initial inventory = 59407 units
Period (Quarter) 0 1 2 3 4
Forcast (Unit per week) 4120 7480 9341 5983
Forcast ( Unit per Quarter) 53560 97240 121433 77779
Safety Stock (units)
Current Production (with 6 Labour) 32292.00 32292.00 32292.00 32292.00
Revised Production(2 shift 7 in each) 75348.00 75348.00 75348.00 75348.00
Starting Inventory 59407.00 81195.00 59303.00 13218.00
End Inventory 59407.00 81195.00 59303.00 13218.00 10787.00

Average Inventroy : ( (Start Inventory +End Inventory)/2) 70301.00 70249.00 36260.50 12002.50
Labour required 6.00 14.00 14.00 14.00 14.00

New Labour (max 7 can deployed in shift) 8.00 0.00 0.00 0.00
Hiring Cost (580 /Labour) 4640.00 0.00 0.00 0.00
Cost of Labor : ((Regular Labour cost/unit)X(Quantity of regular
output))

7233.41 7233.41 7233.41 7233.41

Production Cost 1932676.20 1932676.20 1932676.20 1932676.20

Holding Cost/ Quarter (Holding Cost Per Unit X Average Inventory) 89985.28 89918.72 46413.44 15363.20

Inventory Cost / Quarter 2027301.48 2022594.92 1979089.64 1948039.40

Total Cost 7977025.44
 Level Demand Management Strategy Single Shift
Wilkins, A Zuran Company
PVB
Regular Labour Hour Cost/Unit 1.081
Total Labor Hours /Unit 0.096
Regular Worker Avg Wage ($/hrs) 20.32
Standard Cost $/Unit 25.65
Holding cost per Unit (Yearly) 5.13
Holding Cost per Unit (Quarter) 1.28

Period (Quarter) 0 1 2 3 4
Forcast (Unit per week) 4120 7480 9341 5983
Forcast ( Unit per Quarter) 53560 97240 121433 77779
Safety Stock (units)
Current Production (with 6 Labour) 32292.00 32292.00 32292.00 32292.00
Revised Production(2 shift 7 in each) 75348.00 75348.00 75348.00 75348.00
Starting Inventory 59407.00 81195.00 59303.00 13218.00

End Inventory 59407.00 81195.00 59303.00 13218.00 10787.00

Average Inventroy : ( (Start Inventory +End Inventory)/2) 70301.00 70249.00 36260.50 12002.50
Labour required 6.00 14.00 14.00 14.00 14.00
New Labour (max 7 can deployed in shift) 8.00 0.00 0.00 0.00
Hiring Cost (580 /Labour) 4640.00 0.00 0.00 0.00
Cost of Labor : ((Regular Labour cost/unit)X(Quantity of regular output))
7233.41 7233.41 7233.41 7233.41

Production Cost 1932676.20 1932676.20 1932676.20 1932676.20

Holding Cost/ Quarter (Holding Cost Per Unit X Average Inventory) 89985.28 89918.72 46413.44 15363.20

Inventory Cost / Quarter 2027301.48 2022594.92 1979089.64 1948039.40

Total Cost 7977025.44
Chase Demand Management Strategy
Wilkins, A Zuran Company
PVB
Regular Labour Hour Cost/Unit 1.081
Total Labor Hours /Unit 0.096
Regular Worker Avg Wage ($/hrs) 20.32
Standard Cost $/Unit 25.65
Holding cost per Unit (Yearly) 5.13
Holding Cost per Unit (Quarter) 1.28
Regular Production / Labour 5283

Period (Quarter) 0 1 2 3 4
Forcast (Unit per week) 4120 7480 9341 5983
Forcast ( Unit per Quarter) 53560 97240 121433 77779
Safety Stock (units)

Revised Production(2 shift 7 in each) 0.00 96876.00 123786.00 80730.00

Starting Inventory 59407.00 5847.00 5483.00 7836.00

End Inventory 59407.00 5847.00 5483.00 7836.00 10787.00

Average Inventroy : ( (Start Inventory +End Inventory)/2) 32627.00 5665.00 6659.50 9311.50
Labour required 6.00 0.00 18.00 23.00 15.00
New Labour (max 7 can deployed in shift) -6.00 18.00 5.00 -8.00
Hiring Cost (580 /Labour) 0.00 10440.00 13340.00 0.00
Firing cost (300/Labour) -1800.00 -2400.00
Cost of Labor : ((Regular Labour cost/unit)X(Quantity of regular
output)) 0.00 9300.10 11883.46 7750.08

Production Cost 0.00 2484869.40 3175110.90 2070724.50

Holding Cost/ Quarter (Holding Cost Per Unit X Average
41762.56 7251.20 8524.16 11918.72
Inventory)

Inventory Cost / Quarter 39962.56 2502560.60 3196975.06 2082643.22

Total Cost 7822141.44
Comparison Between Level Strategy and
Chase Strategy