Production and Planning and Control Fall 2019
Homework
Release date: 10 October 2019 14:00
Due date: 24 October 2019 14:15
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Signature: Production Planning and Control Homework
1Forecasting
The ProMotors company produces two types of Engines, which are PM-A and PM-B. ProMotors’ main customers are car manufacturers, but some engine components are also sold to Aircraft producers. The sales of PM-A engine have varied significantly from month to month. ProMotors has a good reputation in Delivery reliability and aims to keep it. The manager of ProMotors wants to make sure that there is enough vehicles and drivers to deliver raw materials and finished products in time. The following table shows the sales of PM-A in 2018 and 2019.
1.1 Make a forecast of PM-A for 2020 using four-month simple moving average. Show the calculation of F(Jan 2020), F(Jul 2020), and F(Dec 2020). Put the forecasted sales in Table 2. Assume that actual demand equals to the forecasted demand in 2020. Fill out the 4th column of Table
2. You are allowed to use Excel.
Note: always round up the forecast results! (5 P)
1.2 Make forecast of PM-A for 2020 using weighted moving average with the weights of 0.5, 0.33, and 0.17. Use the weights in the best order. Show the calculation of F(Jan 2020), F(Jul 2020), and F(Dec 2020)! Fill out the 5th column of Table 2! Assume that actual demand equals to the forecasted demand in 2020. You are allowed to use Excel.
Note: always round up the forecast results! (7 P)
Table 2 Forecast for 2019 with moving average
Month 2018 2019 2020 moving average (Q 1.1) 2020 weighted moving average (Q 1.2)
Jan 1,250 1,275
Feb 1,350 1,185
Mar 975 1,175
Apr 800 975
May 1000 1,100
Jun 975 1,095
Jul 1,150 1,115
Aug 1,200 1,225
Sep 1,300 1,750
Oct 1,750 1,700
Nov 1,700 1,160
Dec 1,825 1,700
Total 15,275 15,455
Question 2
2.1 ProMotors realizes now, that there were seasonal factors in the actual demand of PM-A in 2018 and 2019 that follow the quarters. Fill out the
following table and find the seasonal factor of each quarter. Show the calculations! (5 P)
Table 3 Demand of PM-A in 2018 and 2019 following seasonal factor
Quarter Month 2018 2019 Seasonal factor
2.2 Now, ProMotors would like to find out if there is a trend in the deseasonalized sales by determining the linear regression equation. Find the a and b of the linear regression and write the linear regression equation. Fill out the table and show your work. Note: Round up the
deseasonalized demand (13 P)
Year Quarter t Actual demand (y) Deseasonalized demand (𝑦𝑑) 𝑡2 𝑡 × 𝑦𝑑
2.3 Calculate the seasonalized and deseasonalized forecast for 2020 by filling out the following table. Note: Round up the forecasts! (5 P)
Table 4 Seasonalized and deseasonalized forecast for 2020
Quarter Deseasonalized forecast Seasonalized forecast
2.4 Calculate the demand forecast for 2019 using Winters method with 𝛼 = 0.1, 𝛽 = 0.1, 𝛾 = 0.1 by filling out the following table. Please use excel (5 P)
Table 5 Demand forecast using Winters method
Quarter Actual Demand Forecast with winters method
2.5 Calculate the demand forecast for Q1 2020 using Winters method with
𝛼 = 0.1, 𝛽 = 0.1, 𝛾 = 0.1. Show your calculation and round up the result.
2.6 Is it possible to forecast the demand of Q2, Q3, and Q4 of 2020 using Winters method? Explain your answer!
2.7 Compare the forecast errors of Winters method to linear regression of all quarters of 2019 by filling out the following table. Use the results of 2.4! Show the calculation of MAD, MAPE, and TS of linear regression for Q1 and Q3. Which method is the best to forecast the demand of all quarters of 2019?
2Capacity Planning
ProMotors is currently located in Germany. They manufacture their engines from three factories located in Bremen, Stuttgart, and Berlin, which assemble PM-A, PM-B and PM- C respectively. However, due to the predicted increasing demand trend of PM-B from 2020, ProMotors has to adjust their production capacity.
Question 3
The management plans to increase the capacity of its factories, mainly the Stuttgart factory. However, the operation cost in Stuttgart is quite expensive. There are some options that ProMotors can take to increase the capacity:
1.Extend the factory in Stuttgart starting from 2020.
2.Move 20% of the PM-B assembly to Bremen in 2021. It means the factory in Bremen has to be extended and the factory in Stuttgart does not have to be extended.
3.Move the assembly of PM-B to Vietnam in 2022 completely to get larger capacity but with lower cost.
4.Use the current factory in Stuttgart and distribute the assembly work of PM-B 10% to the factory in Bremen 2021 and 10% to the factory in Berlin in 2022.
The following are facts about alternatives and current situation of ProMotors
Table 6 Sales Forecast of PM-B from 2020 to 2024
Year 2020 2021 2022 2023 2024
Units 1500 1200 1700 1350 1400
1.The production in Stuttgart would cost 50,000 Euro per unit and the extension of the factory in Stuttgart in 2020 would cost 10 Mio Euro.
2.The production cost in Bremen would be 45,000 Euro per unit; the extension of the factory in 2021 would cost 5 Mio Euro.
3.The production cost in Berlin would be 42,000 Euro per unit; the extension of the factory in 2022 would cost 7.5 Mio Euro.
4.The production and logistics in Vietnam would cost 32,000 Euro per unit. In 2022, the setup of the factory in Vietnam would cost 20 Mio Euro and the moving cost would be 10 Mio. Euro.
5.The moving costs within Germany can be ignored.
6.Assume all other costs and revenues are the same for all options.
7.The decision has to be made in the beginning of 2020.
3.1 Construct a decision tree that considers all options. (5 P)
3.2 Find the best option by calculate the Net Present Value using the interest rate of 10% (14 P)
Question 4
To assemble PM-B in the factory in Stuttgart, it requires four steps performed in four workstations as depicted below. The assembly line has throughput target of three jobs per day and 1 machine can handle 1 job.
Table 7 The property values corresponding to the workstations
Workstation Setup cost (000 Eur) Unit cost (000 Eur) 𝒕𝒆
(days) 𝒄𝒆𝟐
1 20 10 2.5 1
2 30 14 1.25 2
3 25 18 1.75 4
4 5 5 3 3.5
4.1 Calculate the Minimum Cost Capacity-Feasible (MCCF) and the Cycle Time of the production line that assembles PM-B. Calculate the cost capacity and cycle time for each workstation first. Show the calculations of Workstation 1 and 4. Fill out the following table (Table 8). (13 P)
Table 8 MCCP and cost of assembly line PM-B
Workst ation Number of Jobs Number of Machines Utiliza tion Costs
4.2 The target cycle time for the assembly line is CT=20 days. The different options to achieve the target is give in Table 9. Find the cheapest options
to achieve the targeted cycle time by filling out the Table 9 and Table 10. Calculate the cost and the cycle time of the best option. (13 P)
Table 9 Different options to reduce the cycle time
Workstation Current
number of machines Change Cost
increase (000 Eur) CT
decrease (days) Ratio of cost increase/day
1 Upgrade all
machines to automatic ones 20 3.50
2 Add two
additional machines 15 4
3 Reduce the variability 5 1.17
4 Add four
additional machines 20 5.5
Table 10 The states after performing the changes
Workstation Number of machines after change Utilization Cost of workstation (000 Eur)