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    Three Jays Corporation: Diksha (PGP/23/204)

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    Diksha
    Brodie Arens is an intern at Three Jays Corporation, a jam and jelly manufacturer. His first assignment is to update the production planning system, including calculating Economic Order Quantities (EOQ) and Reorder Points (ROP) for each product. However, he discovers the factory workers do not follow the formal system. The document then discusses calculating EOQ and ROP using annual demand data, as well as distinguishing between fixed and variable costs. Recalculating EOQ and ROP while excluding certain fixed costs leads to a reduction in the optimal order quantity.

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    Three Jays Corporation: Diksha (PGP/23/204)

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    Diksha
    187 views6 pages
    Brodie Arens is an intern at Three Jays Corporation, a jam and jelly manufacturer. His first assignment is to update the production planning system, including calculating Economic Order Quantities (EOQ) and Reorder Points (ROP) for each product. However, he discovers the factory workers do not follow the formal system. The document then discusses calculating EOQ and ROP using annual demand data, as well as distinguishing between fixed and variable costs. Recalculating EOQ and ROP while excluding certain fixed costs leads to a reduction in the optimal order quantity.

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    Brodie Arens is an intern at Three Jays Corporation, a jam and jelly manufacturer. His first assignment is to update the production planning system, including calculating Economic Order Quantities (EOQ) and Reorder Points (ROP) for each product. However, he discovers the factory workers do not follow the formal system. The document then discusses calculating EOQ and ROP using annual demand data, as well as distinguishing between fixed and variable costs. Recalculating EOQ and ROP while excluding certain fixed costs leads to a reduction in the optimal order quantity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    187 views6 pages

    Three Jays Corporation: Diksha (PGP/23/204)

    Uploaded by

    Diksha
    Brodie Arens is an intern at Three Jays Corporation, a jam and jelly manufacturer. His first assignment is to update the production planning system, including calculating Economic Order Quantities (EOQ) and Reorder Points (ROP) for each product. However, he discovers the factory workers do not follow the formal system. The document then discusses calculating EOQ and ROP using annual demand data, as well as distinguishing between fixed and variable costs. Recalculating EOQ and ROP while excluding certain fixed costs leads to a reduction in the optimal order quantity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 6

    Three Jays corporation

    Diksha (PGP/23/204)
    Overview
    Brodie Arens is an MBA student and summer intern at Three Jays
    Corporation.
    Three Jays Corporation is a jam and jelly manufacturer in
    Michigan
    Brodie's first internship assignment is to update the production
    and inventory planning system. Initially, he begins by updating
    the Economic Order Quantities (EOQ) and Reorder Points (ROP)
    for each product. However, he soon learns that the formal
    production planning system was being ignored by the workers on
    the factory floor. Consequently, Brodie has to decide what should
    be done with the system and how to implement his
    recommendations.
    Economic order quantity
     Economic order quantity (EOQ) is the ideal order quantity a company should purchase
    to minimize inventory costs such as holding costs, shortage costs, and order costs.
     This case illustrates the 2 major types of errors that can occur when using Economic
    Order Quantity (EOQ) as a tool in production scheduling. It can be used in an
    inventory control or trade-off analysis section in a production and operations
    management course or in a supply chain management course.
     Economic Order Quantity (EOQ) = sqrt(2SD/iC)
     Reorder Point Quantity (ROP) = 3D/52

    where D=demand
    S=setup costs
    i=Carrying cost %
    C=unit cost
    Using the five SKUS 2012 annual demand data the Company
    EOQ and ROP will be as follows

    • Weekly demand = monthly demand / 4


    • When the data obtained from this calculation is compared with
    the one of 2011, it comes out clearly that the annual demand has
    been increasing.
    Fixed and variable costs

    Variable costs differ with the level of production, and thus the
    value of EOQ should be obtained by putting into consideration
    all the inputs which actively participated in the production.
    Therefore, in this case, the costs attributable to the three works
    should not be included in total costs. This leads to a reduction
    of the total costs incurred by the three workers from the total
    cost as follows.
    63.7 – (1.29*3) = 59.80
    Recalculation of EOQ & ROP

    From the comparison of the two calculations, the cost of the two laid-
    off workers should not be included in the calculation. This is because
    their costs rise the quantity demanded. This is quite evident when the
    EOQ figures are compared in the two table. Therefore, excluding their
    costs, it will lead to reducing the quantity ordered by the company.

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