Cookware Inc. (CI) produces a line of pots and pans in various types and sizes. For example, saucepans are produced in three sizes: 1, 2, and 3 quarts. The saucepans and covers are made of stainless steel with plastic handles. The stainless steel parts are fabricated in plant, and all other parts are purchased according to specifications. Following the fabrication of the stainless steel parts, they are routed to the saucepan (SP) assembly facility for the assembly of handles and covers, packaging and final movement to the factory warehouse. There are separate assembly facilities for the other products.
Planning and Scheduling:
Forecasts for each product are made for four week planning periods and a 24week horizon. Master schedules are constructed based on forecasts, capacities, and inventories on hand, and are updated every four weeks. The production runs for each product are set in each four week period to match the forecast, but the scheduler “eyeballs” the future and tries to average out differences, attempting to stabilize output. Also, inventories of purchased parts are maintained on a monthly basis, with the intention of ordering a one month’s supply for items that have a two week lead time and a two months’ supply for items with a four week lead time. The preparation cost of purchase orders is cp = $20 and the preparation and set up costs for fabrication and assembly orders is cp = $75. The inventory holding cost is 25 percent of the inventory value.
When the master schedule was updated for each four week planning period, it was forwarded to the assembly department supervisors the fabrication department supervisor, and the purchasing department, who were responsible for the coordination necessary to have the required parts available according to the master assembly schedule. However, it was the assembly department supervisors who were responsible for the coordination process, and the development of weekly schedules by products for the upcoming eight weeks (two planning periods), because the maintenance of the assembly master schedule was theirs and it depended on the availability of all required parts. For example, Joe White, the SP assembly department supervisor, coordinated with the fabrication department supervisor for the supply of pans, brackets, and covers, and with the purchasing department for the supply of the required purchased parts.
When asked, Joe White said that the system worked reasonably well except for the part shortages that often occurred. He said that he dealt with problems resulting from the poor match up between the master schedule and hid resources by scheduling short hours or overtime, and by working with the master schedulers to modify the schedule by shifting orders forward or backward in time to smooth the load. He could also lay off or hire new workers and train them within two weeks because the assembly work involved only simple skills. He preferred not to hire workers for temporary load increase, however, because he would have to lay them off soon, and CI’s policy was to maintain a stable work force size. The latest forecasts and master schedules for saucepans have just been issued are shown. Joe is studying the schedule to see if there will be problems with the normal assembly capacity of 4200 pans per week. Joe can increase capacity by scheduling up to 15 percent overtime, which results in 630 additional pans per week.
What actions should he take? What recommendations would you make to Joe White in developing a weekly schedule? Do you have any recommendations for developing better planning, scheduling, and control systems? What should the schedule be for Part 101, given your weekly schedule?
In line with the policy of maintaining stable work force additional order quantities must be met through the overtime and motivating suppliers to supply within a shorter lead time. The additional costs of overtime are averaged out by the additional quantities where the margins may decrease marginally.