The Electric Guitars Corporation is manufacturing electric guitars. There are 20 different models. The sales forecasts for the year to come is as follows (in terms of thousand units):
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
10 10 5 5 10 10 60 40 80 20 40 150
During the ending year, production output was 400,000 units for 11 months
(August being the month for vacations).
The total headcount remained stable at 700 persons, out of which 400 were production workers.
A 10% productivity increase is expected for the coming year.
The inventory level is 20,000 units.
Besides, the different models of guitars are manufactured by monthly campaign, that is to say that
each model is made sequentially in the same job shop once a month.
This rule, as one thinks, makes compulsory the existence of a minimum amount of inventory of a half month of sales, at the beginning of each month (except for the beginning of August where 1,5 month are needed).
The Electric Guitars Corporation is manufacturing electric guitars. There are 20 different models. The sales forecasts for the year to come is as follows (in terms of thousand units):
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
10 10 5 5 10 10 60 40 80 20 40 150
During the ending year, production output was 400,000 units for 11 months
(August being the month for vacations).
The total headcount remained stable at 700 persons, out of which 400 were production workers.
A 10% productivity increase is expected for the coming year.
The inventory level is 20,000 units.
Besides, the different models of guitars are manufactured by monthly campaign, that is to say that
each model is made sequentially in the same job shop once a month.
This rule, as one thinks, makes compulsory the existence of a minimum amount of inventory of a half month of sales, at the beginning of each month (except for the beginning of August where 1,5 month are needed).
The average unit cost of final inventory is $500 out of which $100 is for direct labour. Holding costs are 30% of the inventory costs per year.
Is the proposed solution worthy compared to question 2) ? Is there any other solution in terms of terms of labor management? Should the monthly run be applied all year round for each model? Should the monthly run be applied all year round for each model?