SCM WEEK FOUR

Answer the following questions:

Question 1

A company makes standard-specification kit-cars. The indicative order book for the next 3 months is a forecast of 640 cars broken down as follows:

• January: 230 cars
• February: 200 cars
• March: 210 cars

The company employs 20 full-time people who can each produce 9 cars a month at the cost of £500 per car. Inventory carrying costs are £50 per car per month and stockout costs are £590 per car per month. If the company has an inventory of 10 cars at the end of December, develop the following plans and select the least expensive. Highlight any assumptions you make in your calculations.

• Plan A involves hiring no new workers or using overtime. Any shortfalls are made up with subcontracting at a cost of £675 per car
• Plan B involves working overtime with each employee producing 1 extra car per month at an extra cost of £150 per car.
• Plan C involves employing temporary workers on an as needed monthly basis with a hiring cost of £1000 per employee and termination costs of £500. Temporary employees can only produce 6 cars a month.

By Day 3,submit your Key Concept Exercise.

Be sure to demonstrate your work and provide a brief interpretation (200 words maximum) before submitting it. Make sure the spelling and grammar for your interpretation are correct, and the language, citing and referencing you use when providing your opinion are appropriate for academic writing.

Question 2

Why is capacity management important to an organisation? (300 words maximum)