Case Study

Apix Polybob Company

Ken Mack, plant manager for the Apix Polybob Company, was having a heated discussion with Jack

Gould, the production and inventory control manager. Ken was getting tired of frantic calls from Jim

Uphouse, the marketing manager, concerning late orders for their Polybob (polybobs are a fictitious

product) customers and was once again after Jack to solve the problem. Some of the discussion points


Jack : “Look, Ken, I’m not sure what more we can do. I’ve re-examined the EOQ (economic order

quantity lot size) values and all the reorder points for all our inventory for all our Polybob models,

including all component levels and purchased items. I’ve implemented strict inventory control

procedures to ensure our accuracy levels to at least 80%, and I’ve worked with the production people to

make sure we are maximizing both labour efficiency and utilization of our equipment. The real problem

is with those salespeople. We no sooner have a production run nicely going, and they change the order

or add a new one. If they’d only leave us alone for a while and let us catch up with our current late order

bank, we’d be okay. As it is, everyone is getting tired of order changes, expediting, and making

everything into a crisis. Even our suppliers are losing patience with us. They tend to disbelieve any order

we give them until we call them up for a crisis shipment.”

Ken : “I find it hard to believe that you really have the EOQ and reorder point values right. If they were,

we shouldn’t have all these part shortages all the time while our overall inventory is going up in value. I

also don’t see any way we can shut off the orders coming in. I can imagine the explosion from Jim if I

even suggested such a thing. He’ll certainly remind me that our mission statement clearly points out that

our number-one priority is customer service, and refusing orders and order changes certainly doesn’t fit

as good customer service.”

Jack : “Then maybe the approach is to deal with Frank Adams (the chief financial officer). He’s the one

who is always screaming that we have too much inventory, too much expediting cost, too much

premium freight costs from suppliers, and poor efficiency. I’ve tried to have him authorize more

overtime to relieve some of the late order conditions, but all he’ll say is that we must be making the

wrong models. He continually points to the fact that the production hours we are paying for currently

are more than enough to make our orders shipped at standard, and that condition has held for over a

year. He just won’t budge on that point. Maybe you can convince him.”

Ken : “I’m not sure that’s the answer either. I think he has a point, and he certainly has the numbers to

back him up. I’d have a real rough time explaining what we were doing to Ron Marrison (the CEO).

There’s got to be a better answer. I’ve heard about a systems approach called material requirements

planning or something like that. Why don’t you look into that? Take a representative model and see if

that approach could help us deal with what appears to be an impossible situation. I’m sure something

would work. I know other factories have similar production conditions yet don’t seem to have all our



B C (2)

F E (3) F (2) E D

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Following is the information about Polybob model A that Ken suggested as a representative model to

use for the analysis:

Component Lot Size Inventory Lead Time Scheduled Receipts Reorder Point

B 80 10 1 None 5 C 150 40 1 None 15 D 200 180 2 None 50 E 400 300 2 None 70 F 500 50 2 500, week 1 80

The following are the master schedule production lots for Model A:

Complete 50 units, week 3 Complete 50 units, week 5 Complete 60 units, week 7 Complete 60 units, week 9 Complete 50 units, week 11

Upon seeing this information, Jack stated, “Look at how regular our production schedule is for this

model. The reorder points will more than cover requirements, and none have lead times that make it

tough to respond. This analysis should show that all the work I did on EOQ and reorder points was right,

and the real problem lies with those sales and finance people who don’t understand our production


Q1 Use the product information to develop an MRP approach to the problems. Would MRP solve the

problems? If so, show specifically how MRP would avoid the problems discussed by Ken and Jack.

Q3. Do any conditions bother you about the ability of MRP to deal with the problems? What specifically

are those conditions?

Q4. Suppose it was discovered that only 250 of component E were in stock instead of the 300 listed on

the inventory record. What problems would this cause (if any), and what are some of the ways that

these problems could be addressed? How would (if at all) MRP help you when other methods might


Q5. Suppose that the design engineer advises that he has a new design for component F. It won’t be

ready until sometime after week 2, but he wants you to give a date for the first supplier shipment to

come in, and you should be ready to tell the supplier how many to ship. Since the change is

transparent to the customer, the design engineer advises you to go ahead and use up any existing

material of the model. How will MRP help you to deal with this issue?

This study source was downloaded by 100000766544102 from on 07-08-2021 18:57:57 GMT -05:00

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