Scotburns Forecast
Scotburns Forecast
Scotburns Forecast
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Executive Summary
To find the feasible set of lot sizes for Scotburn Dairy company, the following steps were
used. Determining the demand for each family over the next three weeks. We have two families,
F1 and F2 and their respective demands are 100 units, 150 units and 200 units over the three-
week period therefore the demand is forecasted. Calculating the total demand for each family is
guiding us in knowing the expected cost and time. The paper also focuses on determining the
production time available per week and since each week has 40 hours available, we have a total
of 120 hours over the three-week period. Calculating the production rate for each family which is
the total demand divided by the available production time. For example, the production rate for
Family F1 is x units / 120 hours = x units per hour. Calculating the setup cost for each family
incurred each time a new production lot is started. The forecast results indicated that the demand
in production hours were 36, 34 and 24 hours respectively of each week. The cost included
equipment setup, labor and other related expenses. Estimating the holding cost for each family is
calculated for storing and holding inventory. The cost could include storage fees, insurance and
the opportunity cost of fixing the capital in inventory goods. Lastly, the total cost for each lot
size for each family is calculated including the setup cost and holding cost for each lot size.
Table of Contents
Executive Summary...................................................................................................................2
Table of Contents.......................................................................................................................3
List of Tables and Charts..........................................................................................................4
Background information...........................................................................................................5
Production forecast in Hours and Cost....................................................................................5
Total Working hours for change requirements......................................................................................5
Costs............................................................................................................................................6
Recommendation on how to save costs....................................................................................8
Just-in-time (JIT) inventory management..............................................................................................8
Regular review of lot sizes.....................................................................................................................8
Accurate demand forecasting.................................................................................................................9
Employee training and engagement.......................................................................................................9
Economic order quantity (EOQ)............................................................................................................9
Utilize technology and automation........................................................................................................9
Conclusion...................................................................................................................................9
Appendices................................................................................................................................12
List of Tables and Charts
Table 1 Production Forecast............................................................................................................5
Table 2 Cost distribution.................................................................................................................5
Table 3 Aggregate Planning details...............................................................................................10
One method they plan to use is the Economic Production Quantity (EPQ) model. The
EPQ model is a widely used tool in inventory management that aims to calculate the maximum
lot size for production. By determining the lot sizes for each item in every week, Scotsburn can
effectively balance its setup and holding costs. The company will meet the demand while
minimizing inventory costs and ensuring efficient production. In this particular case Scotsburn
needs to determine the lot sizes for each family of items for each week over the next three weeks.
The challenge lies in meeting the demand while adhering to the 40-hour workweek constraint.
By finding the optimal lot sizes, Scotsburn can make the most of its available production hours
and ensure efficient utilization of their resources.
Forecasting
25
20
Production hours
15
10
0
Week 1 Week 2 Week3
Week Forecast
F1 F2
Costs
$300 changeover plus $300 in mix loss is the setup cost. $600
Setting up cost / carry cost = $600 / $60 = 10 units.
Table 2 Cost distribution
It is preferable to do it for the exact same family this week to maintain it for one week if
the output of a product is fewer than ten units the following week. Week 3 is not going to be
sufficient to meet the expectations of Week 3 (42 > 40 hours per week); therefore, it is crucial to
submit either F1 wk3 or F2 wk3 earlier. It should be created and held for one week in Week 2
because F1 Week 3 is shorter. However, the combined needs for this week (18 hours) will be
longer than Week 2's 40 hours. Then, either F2-wk2 or F1-wk2 would be moved to Wk 1. For.
Since. It may be moved to the first week. F1-wk2 is shorter (12 hours), hence 24 is the lowest
option to cut deployment and maintenance costs.
To minimize the total setup and holding cost, it is essential to determine the most feasible
and efficient lot sizes for each family in each week.
Conclusion
In a nutshell, minimizing total setup costs requires careful analysis of demand patterns,
optimization of production and inventory management processes. By employing strategies such
as demand forecasting and lot size revision, Scotburn Dairy can achieve significant cost savings.
Additionally, employee training and engagement will facilitate the development of a holistic
approach that will enhance overall operational efficiency. Regular monitoring is crucial to ensure
that cost-saving efforts remain effective and aligned with changing market dynamics.
References
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