Case Study: M&L Manufacturing

Questions

1. What are some of the potential benefits of a more formalized approach to forecasting?

 One of the potential benefits of using a formalized approach to forecasting is that it

will be easier for managers to develop and revise forecast quickly and it is easier to

quantify the information using the forecasting. It also helps the business to have a

proper inventory management and control over the stocks. Areas that can benefit for

a more formalized approach to forecasting are: Accounting, Finance, HR, Marketing,

MIS, Operation, Product/Service Design.

2. Prepare a weekly forecast for the next four weeks for each product. Briefly explain why

you chose the methods you used. (Hint: For product 2, a simple approach, possibly some

sort of naive/ intuitive approach, would be preferable to a technical approach in view of

the manager’s disdain of more technical methods.) efficiency

 Product 1 shows continuous increase for 14 weeks that’s why I used a linear trend

method and it has an upward sloping trend and the case study is asking for a forecast

for the next four weeks only, linear trend method predict short term demand for

products. Because the demand for 7th week is an outlier, we’ll get the average demand

from the previous week and the next week in the time series. Therefore (67 + 76) / 2

= 71.5
 t y ty 𝑡2 Trend Equation
1 50 50 1
2 54 108 4
3 57 171 9
4 60 240 16 Ft = Forecast for period t
5 64 320 25
6 67 402 36 a = Value of Ft at t = 0
7 71.5 500.5 49
b = slope of the line
8 76 608 64
9 79 711 81 t = Specified number of time
10 82 820 100 periods from t = 0
11 85 935 121
12 87 1044 144
13 92 1196 169
14 96 1344 196
105 1020.5 8449.5 1015

Where n = Number of periods

y = Value of time series

𝑛 ∑ 𝑡𝑦 − ∑ 𝑡 ∑ 𝑦 (14 ∗ 8449.5) − (105 ∗ 1020.5)

𝑏= = = 𝟑. 𝟓
𝑛 ∑ 𝑡 2 − (∑ 𝑡)2 (14 ∗ 1015) − (105 ∗ 105)

∑𝑦 − 𝑏∑𝑡 1020.5 − (3.5 ∗ 105)

𝑎= = = 𝟒𝟔. 𝟔𝟒
𝑛 14

Trend equation
Ft = 46.64 + 3.5t
Forecasts for the next four weeks are:

𝐹15 = 46.64 + 3.5 * 15 = 99.14 (Week 15)

𝐹16 = 46.64 + 3.5 * 16 = 102.64 (Week 16)

𝐹17 = 46.64 + 3.5 * 17 = 106.14 (Week 17)
𝐹18 = 46.64 + 3.5 * 18 = 109.64 (Week 18)
 Product 2 shows complex patterns as there is an increase of products demand once
every four months. I used naive method, because naïve approach can be used with a
stable series (variations around an average) with seasonal variations, or with trend.

Week Product 2 Period Forecast

1 40 Week 15 43.33
2 38 Week 16 52
3 41 Week 17 44.44
4 46 Week 18 44.44
5 42
6 41
7 41
8 47
9 42
10 43
11 42
12 49
13 43
14 44
Case Study: Home Style Cookies

Questions

1. Briefly describe the cookie production process.

 Before they start the production of cookies, they determine first the quantity of the

cookies they need to produce so that they can log it to the system that will determine

the amount of ingredients needed to produce the amount of cookies ordered by their

customer. After releasing the ingredients, they now start mixing the ingredients in their

giant machine. After mixing, the cookies are cut diagonally to consume lesser space

before they are placed to the ovens. Cookies are now placed in to a spiral cooling

rack, then workers place cookies inside a box manually and remove any broken

cookies produced. Boxes are automatically wrapped, sealed and labeled.

2. What are two ways that the company has increased productivity? Why did increasing

the length of the ovens result in a faster output rate?

 Cutting the cookies diagonally because it requires lesser space. The second way is

increasing the length of the ovens because it will simply allow them to bake more

cookies at a time.

3. Do you think that the company is making the right decision by not automating the

packing of cookies? Explain your reasoning. What obligation does a company have to its

employees in a situation such as this? What obligation does it have to the community? Is

the size of the town a factor? Would it make a difference if the company was located in a

large city? Is the size of the company a factor? What if it were a much larger company?
 I think it will be better if they will automate the process of packing because although

labor costs are not high, they can save money and increase efficiency. Also making

the packing manually can be safer since the atmosphere in the company is informal.

The company should compensate the employees if they are going to be replaced by

a machine. The company must ensure that the machine that will be used will not affect

the environment in the community. Yes size of the town is a factor, because it can

affect on decision making for the machines that will be used, it can be easier for the

company to use a machines in a larger city. If it is a larger company they really need

to use an automated way of packing because it is cost efficient.

4. What factors cause the company to carry minimal amounts of certain inventories? What

benefits result from this policy?

 Limited shelf life of cookies is one of the factor that cause the company to carry

minimal amounts of certain inventories. That’s also the reason why they shipped

immediately the cookies to their distributors. Since the bakery run very efficiently they

have a minimal amounts of scrap, and that minimal amount of scrap was sold for a

dog food.

5. As a consumer, what things do you consider in judging the quality of cookies you buy

in a supermarket?

 As a consumer, what I consider in judging the quality of cookie is the cookie can be

eaten easily and not as hard as a rock. I also check always the expiration date.

6. What advantages and what limitations stem from the company’s not using

preservatives in cookies?
 Companies who does not use preservatives in cookies can produce a better tasting

cookies but will suffer a shorter life and needs to be distributed and consumed as early

as possible.

7. Briefly describe the company’s strategy.

 The company’s strategy is first to produce a good tasting cookie by not using

preservatives on it but needs to distribute them as soon as possible and minimize the

cost of producing them by simply having a sequence of the kind of cookies that needs

to be produced first. They also aim to get supplies for their ingredients inside the

community and not from far areas to lessen transportation costs. While implementing

these strategies, the company also allows job opportunities for the people of the

community where their factory is located.

 Facilities. The design of facilities, including size and provision for expansion, is key. Locational factors,

such as transportation costs, distance to market, labor supply, energy sources, and room for

expansion, are also important. Likewise, layout of the work area often determines how smoothly

work can be performed, and environmental factors such as heating, lighting, and ventilation also

play a significant role in determining whether personnel can perform effectively or whether they

must struggle to overcome poor design characteristics.

 Product and Service Factors. Product or service design can have a tremendous influence on capacity.

For example, when items are similar, the ability of the system to produce those items is generally

much greater than when successive items differ. Thus, a restaurant that offers a limited menu can

usually prepare and serve meals at a faster rate than a restaurant with an extensive menu. Generally

speaking, the more uniform the output, the more opportunities there are for standardization of

methods and materials, which leads to greater capacity. The particular mix of products or services

rendered also must be considered since different items will have different rates of output.

 Process Factors. The quantity capability of a process is an obvious determinant of capacity. A more

subtle determinant is the influence of output quality. For instance, if quality of output does not meet

standards, the rate of output will be slowed by the need for inspection and rework activities.

Productivity also affects capacity. Process improvements that increase quality and productivity can

result in increased capacity. Also, if multiple products or multiple services are processed in batches,

the time to change over equipment settings must be taken into account.

 Human Factors. The tasks that make up a job, the variety of activities involved, and the training, skill,

and experience required to perform a job all have an impact on the potential and actual output. In

addition, employee motivation has a very basic relationship to capacity, as do absenteeism and labor

turnover.
 Policy Factors. Management policy can affect capacity by allowing or not allowing capacity options

such as overtime or second or third shifts.

 Operational Factors. Scheduling problems may occur when an organization has differences in

equipment capabilities among alternative pieces of equipment or differences in job requirements.

Inventory stocking decisions, late deliveries, purchasing requirements, acceptability of purchased

materials and parts, and quality inspection and control procedures also can have an impact on

effective capacity. Inventory shortages of even one component of an assembled item (e.g.,

computers, refrigerators, automobiles) can cause a temporary halt to assembly operations until the

components become available. This can have a major impact on effective capacity. Thus, insufficient

capacity in one area can affect overall capacity.

 Supply Chain Factors. Supply chain factors must be taken into account in capacity planning if

substantial capacity changes are involved. Key questions include: What impact will the changes have

on suppliers, warehousing, transportation, and distributors? If capacity will be increased, will these

elements of the supply chain be able to handle the increase? Conversely, if capacity is to be decreased,

what impact will the loss of business have on these elements of the supply chain?

 External Factors. Product standards, especially minimum quality and performance standards, can

restrict management’s options for increasing and using capacity. Thus, pollution standards on

products and equipment often reduce effective capacity, as does paperwork required by government

regulatory agencies by engaging employees in nonproductive activities. A similar effect occurs when

a union contract limits the number of hours and type of work an employee may do.