Also it did not account for the pattern of production i. Usage of latest data for predicting demand and accounting for the pattern of production ensures that the setting up costs are low and service level is high. The advantage of on-line systems is that they are always up-to-date.
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Carousel Previous Carousel Next. Jump to Page. Search inside document. Disadvantages- 1 Due to the patter of production of batch wise production based on size as well as to maintain high level of service a higher level of finished goods inventory is being produced, this is tying down the capital in form of inventory.
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Saurabh Singh. Words: Pages: 9. Preview Full text Loading documents preview Blanchard Importing and Distributing Co. Bob Young, Eliot Wallace and the two administrative employees accrue fixed amounts and a reasonable number of setup changes per year would not alter these costs.
So the only relevant costs are those of the 5 temporary employees who are hired for each run and equal squats to the 30 idle minutes caused by the label change. Reducing demand variability between the various stages of production. In order to implement EOQ, a continuous inventory review mechanism is enabled, which usually represents a high cost. EOQ does not take into account production factors, such as the times required for the production phase as in this case, all elements of a size are produced at once rather than resized and therefore a sufficient number of other sizes must be on hand in order to reduce the amount of situations.
A high cost that Blanchard incurs is due to the high number of times that format changes set up times must be made, therefore, it is necessary to reduce this time, reducing the format changes as much as possible. Bob and Hank are working that way. Bob and Hank are not following the EOQ set in , as it became obsolete as the basis on which it was calculated was based on the pattern of demand according to data. In addition, it did not take into account the production model that is, all items of the same size in a single batch.
Using the latest data to predict demand and accounting of the production structure ensures that cost adjustment is low and service level is high. Disadvantages Due to the production structure, based on size-based batches, as well as maintaining a high level of inventory of finished products, capital is being tying up in inventory form.
The company could implement an inventory control and verification system with as close control time as possible, the advantage of this is that you have up-to-date information and allow you to make decisions in less time. The company may consider reducing the range of products types and sizes depending on the profitability of each item.
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