Operations and Supply Chain Management The Core

100 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
that can package 150,000 bottles each year (each machine has two operators). It also has five
machines that can package 250,000 plastic bags per year (each of these machines has three operators).
Will the company have enough packaging capacity to meet future demand?
YEAR
1 2 3 4 5
Paul’s
Bottles (000s) 60 100 150 200 250
Plastic bags (000s) 100 200 300 400 500
Newman’s
Bottles (000s) 75 85 95 97 98
Plastic bags (000s) 200 400 600 650 680
SOLUTION
Step 1. Use forecasting techniques to predict sales for individual products within each product line.
The marketing department, which is now running a promotional campaign for Newman’s dressing,
provided the forecast demand values (in thousands) given in the table above for the next five years.
The campaign is expected to continue for the next two years. The table of expected future demand is
presented above.
Step 2. Calculate equipment and labor requirements to meet product line forecasts. Currently,
three machines that can package up to 150,000 bottles each per year are available. Each machine
requires two operators and can produce bottles of both Newman’s and Paul’s dressings. Six bottle
machine operators are available. Also, five machines that can package up to 250,000 plastic bags
each per year are available. Three operators are required for each machine, which can produce
plastic bags of both Newman’s and Paul’s dressings. Currently, 15 plastic bag machine operators are
available.
Total product line forecasts can be calculated from the preceding table by adding the yearly
demand for bottles and plastic bags as follows:
YEAR
Bottles (000s)
Plastic bags (000s)
1 2 3 4 5
135
300
185
600
245
900
297
1,050
348
1,180
We can now calculate equipment and labor requirements for the current year (year 1). Because
the total available capacity for packaging bottles is 450,000/year (3 machines × 150,000 each), we
will be using 135/450 = 0.3 of the available capacity for the current year, or 0.3 × 3 = 0.9 machine.
Similarly, we will need 300/1,250 = 0.24 of the available capacity for plastic bags for the current
year, or 0.24 × 5 = 1.2 machines. The total number of machine operators required to support our
forecast demand for the first year will equal the operators required for the bottle machine plus the
operators required for the plastic bag machine.
The labor requirement for year 1’s bottle operation is
0.9 bottle machine × 2 operators = 1.8 operators
​
1.2 bag machines × 3 operators ​ = ​ 3.6 operators ​
Step 3. Project labor and equipment availabilities over the planning horizon. We repeat the preceding
calculations for the remaining years: