jacob industries simulation report 2014
DESCRIPTION
Always use proper forecasting techniques when planning expansion in factory capacity and anticipating demand.TRANSCRIPT
SIMULATION REPORTJacob Industries
Team
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500
1000
1500
2000
2500
3000
3500
Cash Balance
Cash
Too Much Factory Capacity
On day 859, a decision was taken to increase the current factory capacity from 20 barrels a day to
80.
Cost Savings $3MM
Inefficient use of the Mailing Option
On day 856, a decision was taken to change the delivery option from truck to mail.
A total of 9600 barrels were mailed from day 859 t0 979.
Cost Savings $0.8MM
High Levels of W.I.P Maintained
For the period 859 to 1004The reorder point increased to 400 on average.
Cost Savings $4.9MM.
What To Do?
Option 1
Option 2
ACTION PLAN
1. Shift System: on average 35 days.2. 7 day Moving Average Forecasting Technique.3. Demand more than 100bbls = Trucking4. Demand less than 100bbls = Mailing
Where We Got To
0 200 400 600 800 1000 1200 1400 16000
500100015002000250030003500
Cash
Cash
Closing Cash Position
On day 1460Jacob Industries Closing Cash balance
$2.95MM
What about those Cost Savings?
Post MortemIssue Issue Projected Cost Saving ($MM)
Too much factory capacity 3.0
Inefficient use of mailing option 0.8
High Levels of W.I.P 4.90
Foregone Interest 0.87
Total 8.7
Projected Closing Balance 12.52
Questions