Cornwell Glass produces replacement automobile glass for all makes of cars. Corn
ID: 465137 • Letter: C
Question
Cornwell Glass produces replacement automobile glass for all makes of cars. Cornwell has a sophisticated forecasting system that uses data from past years to find seasonal factors and long-term trends. The system uses data from past weeks to find recent trends. The following table presents the forecasted demands for the coming year on a weekly basis.
Demand
Week
Demand
April
15
1,829
November
4
1,864
22
1,820
11
1,989
29
1,887
18
2,098
May
6
1,958
25
2,244
13
2,011
December
2
2,357
20
2,063
9
2,368
27
2,104
16
2,387
June
3
2,161
23
2,402
10
2,258
30
2,418
17
2,307
January
6
2,417
24
2,389
13
2,324
July
1
2,434
20
2,204
8
2,402
27
2,188
15
2,385
February
3
2,168
22
2,330
10
2,086
29
2,323
17
1,954
August
5
2,317
24
1,877
12
2,222
March
3
1,822
19
2,134
10
1,803
26
2,065
17
1,777
September
2
1,973
24
1,799
9
1,912
31
1,803
16
1,854
April
7
1,805
23
1,763
30
1,699
October
7
1,620
14
1,689
21
1,754
28
1,800
Cornwell uses these forecasts for its production planning. It manufactures several types of glass, and demand is aggregated across products and measured in pounds.
It is obvious from the demands that there is a great deal of seasonality/cyclicality in the demand pattern. Cornwell will need to take this into account in developing a production plan for the coming year.
Cornwell must consider the costs of hiring or firing workers; using overtime; subcontracting; and holding inventory or running out of the product. The holding cost for glass is $.12 per pound per week. The company estimates that the cost of a late order is $20 per pound per week late.
Cornwell currently costs out each hire at $5.63 per pound (based on training costs and production rates per worker). It costs out each fire at $15.73 per pound (based on unemployment compensation and loss of good will). The company currently has the capacity to manufacture 1,900 pounds of glass per week. This capacity cannot be exceeded under any plan. At most, 2,000 pounds can be subcontracted in a given week, and overtime is limited to 250 pounds per week. Glass that is manufactured during overtime costs $8 per pound more than glass manufactured during regular time. Glass that is subcontracted costs $2 more per pound than glass that is produced during overtime.
The current inventory is 73 units, and currently production is working at full capacity, 1,900 units. Cornwell has not been able to determine whether demands not met in the current month can be met later or whether these orders are lost.
DISCUSSION QUESTIONS
Find the production schedule Cornwell should follow under the various assumptions and policies, and detail the differences among these schedules.
Week
Demand
Week
Demand
April
15
1,829
November
4
1,864
22
1,820
11
1,989
29
1,887
18
2,098
May
6
1,958
25
2,244
13
2,011
December
2
2,357
20
2,063
9
2,368
27
2,104
16
2,387
June
3
2,161
23
2,402
10
2,258
30
2,418
17
2,307
January
6
2,417
24
2,389
13
2,324
July
1
2,434
20
2,204
8
2,402
27
2,188
15
2,385
February
3
2,168
22
2,330
10
2,086
29
2,323
17
1,954
August
5
2,317
24
1,877
12
2,222
March
3
1,822
19
2,134
10
1,803
26
2,065
17
1,777
September
2
1,973
24
1,799
9
1,912
31
1,803
16
1,854
April
7
1,805
23
1,763
30
1,699
October
7
1,620
14
1,689
21
1,754
28
1,800
Explanation / Answer
Plan 1
Chase plan with no modification
Total hiring=10752
total firing=2008
cost of the plan=$92119.6
This paln is not feasible as production capacity cannot be more than 1900 and hiring will not increase the capacity.
Plan 1 is not feasible
Plan 2=mixed plan strategy with subcontracting and overtime
cost of subcontracting units=33350
cost of overtime units=48184
cost of holding units=1326
plan 2= $83000
plan 3=mixed plan -more emphasis on cheaper element -effective overtime to save costs
cost of subcontracting units=4270
cost of overtime units=71448
cost of holding unit=3953.88
plan 3=$80,000
plan 3 is preferred