Meridian Water Pumps

University of Arkansas

Name: Mahmoud Ahmad

Subject: OMGT 4613 – Lean Production and Inventory Control

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Due Date: 20 January 2013

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Prof. Brown

* Case Study: Meridian Water Pumps

Month | 1 | 2 | 3 | 4 | 5 | 6 |

Forecasted Demand | 600 | 750 | 1000 | 850 | 750 | 700 |

Initial number of workers is 20.

Initial Production is 25×20 = 500.

a)

Total production = Total Forecast + back orders + ending inventory – opening inventory

Month | 1 | 2 | 3 | 4 | 5 | 6 | Total |

Forecast | 600 | 750 | 1000 | 850 | 750 | 700 | 4650 |

Production | 500 | 771 | 771 | 771 | 771 | 771 | 771 | 4626* |

Ending Inventory | 50 | 221 | 242 | 13 | 0 | 0 | 26** | |

(*) and (**): Total production and ending inventory are 4626 and 26, respectively, due to rounding the production per month.

Total Production = 4650 + 25 - 50 = 4625 units

Production each month = 4625/6= 770.83 ≈ 771 units

Ending inventory = opening inventory + production – demand

Ending inventory after the first month = 50+771-600= 221

Ending inventory after the second month = 221+771-750 = 242

Ending inventory after the third month = 242+771-1000 = 13

Ending inventory after the fourth month = 13+771-850 = -66.

This implies that the ending inventory is zero with shortage in production equal to 66.

Ending inventory after the fifth month = 0+771-750-66 = -45

This implies that the ending inventory is zero with shortage in production equal to 45.

Ending inventory after the sixth month = 0+771-700-45=26

The additional cost of carrying inventory = (221+242+13+26) (5$) = (502) ($5) = $2510

For the company to produce a level of production of 771 units per month, the company needs approximately 31 workers (771/25=30.84).

So, additional 11 workers have to be hired.

The associated HR cost = 11($100) = $1100

Extra costs involved in this plan = $2510 + $1100 = $3610

This plan had backorder for months 4 and...