Case Study: Demand Forecast, Inventory Management and Capacity design at Pharma.Tech
Section I: Demand Forecast
As the company operations manager, you want to be certain that enough drivers and vehicles are available to deliver orders promptly and that they have adequate inventory of face masks in stock. Therefore, you want to be able to forecast the demand for deliveries during the next period (period 11). From the records of previous orders, management has accumulated demand data for the past 14 years.
Question 1: Compute the demand forecast for period 15 using the Simple Moving Average of order 1, 3, and then 5.
Question 2: Compute the demand forecast for period 15 using the weighed moving average of order 3 (the weights are 0.6, 0.3, and 0.1 from most recent period).
Question 3: Compute the demand forecast for period 15 using the exponential smoothing with alpha equal to 0.3 and F1= 2500 Masks.
Question 4: From the data in your table and your knowledge regarding the pandemic situation that affected the world, can you guess which forecasting method is reliable? Justify your guess.
Question 5: Using the MAD Criterion, which forecasting method is the most accurate?
Section II: Inventory Management
In the following, you need to manage the stock level of the company with respect to some costs that your team already estimated. The team report states that for one order made, the company should pay 20 AED as clerical costs and 30 AED as packing costs. It is stated also that the company spends 10 AED to produce one mask and that 80% of that corresponds to the cost of keeping one mask in stock for one year. With this information at hand you will manage to meet the annual demand for year 2021 and which corresponds to the demand forecast for period 15 (with the most accurate method in method)
Question 1: If the order quantity is 20% of the annual demand, Determine the ordering, holding, and total inventory costs for that order quantity.
Question 2: If the order quantity is 50% of the annual demand, Determine the ordering, holding, and total inventory costs for that order quantity.
Question 3: Can you tell if the order quantity, used in the previous question, is the optimal order quantity or not (that minimize the total inventory cost)? Explain why.
Question 4: Using the EOQ model, Determine the optimal order quantity.
Question 5: How many orders will be placed per year using the optimal order quantity.
Question 6: Determine the ordering, holding, and total inventory costs for the optimal order quantity.
Section III: Capacity Design
Pharma.Tech is planning to expand its production capacity, to meet the growing demands of 2021 and later, by opening a new plant to produce its high selling products (the medical face masks) by using mass production processes for the mass market. The manufacturing team is discussing the potential layout options for the new factory. As the advisor for the company, answer the following questions.
Question 1: Which layout type is most suitable for the new factory? Justify your choice.
Question 2: Discuss the advantages and disadvantages of your proposed layout compared to another alternative layout type in terms of demand volume, flexibility, labor skill, and equipment requirement.
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Attachment:- Operations Management.rar
Attachment:- Demand forecast data.rar