EXAMPLE 12.8 PLANNING PRODUCTION OF BLOUSES AT SHIRTTAILS 1hirtTails is a clothing manufacturer that operates its own chain of discount retail stores. DAt the beginning of November 2014, ShirtTails is trying to plan its production of a new blouse that is worn primarily in the warmer months. Based on production constraints from other products, the company knows it has two opportunities to produce this blouse- in November 2014 and later in April 2015. The production capacity (for this blouse) is 1250 in November. In April, the capacity will increase to 2500. By April, demand for the blouses produced in November will be known. Using this information, ShirtTails will then be able to plan its production in April. The unit cost of producing a blouse is $25, and the selling price will be $40. These remain constant. There is a $3 holding cost per blouse still in inventory after the pre-April demand. By November 2015, any remaining blouses in inventory will be sold at a mark- down price of $20. (This is because ShirtTails plans to introduce a new blouse the next year.) Demand for the blouses before April is not known with any certainty, but ShirtTails believes it should be somewhere between 100 and 1000. After April, the demand for blouses is expected to be anywhere from 3 to 7.5 times as large as the demand before April. What production plan should the company use to maximize the expected profit from these blouses? Objective To develop an optimization model that specifies production quantities of blouses in two time periods, where the second production quantity can be based on demand information from the first period. Solution You first need to recognize that a production plan is really a contingency plan. This means that the company will determine a production quantity in November, but it will not com- mit to a production quantity in April until after it observes the pre-April demand. In other words, the contingency plan will specify a single production quantity in November and a production quantity in April for each pre-April demand that might be observed.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
The problem in Example 12.8 assumes that the heaviest demand occurs in the second (post-April) phase of
selling. It also assumes that capacity is higher in the
second production opportunity than in the first. Suppose
the situation is reversed, so that the higher capacity and
most of the demand occur in the first phase. Make some
reasonable assumptions for the resulting input parameters, and then solve for the optimal production plan. Do
you get qualitatively different results? Which situation
would you rather face if you were ShirtTails?
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