Production Optimization is specially caters for manufacturing companies in assisting their production planning. This analysis is done to obtain lowest Production Cost in face of varying demand. Production should remain as stable as possible, yet it should maintain minimum inventory and experience minimum shortages. The costs of production, overtime, subcontracting, inventory, shortages, and changes in production levels must be balanced. Production planning problems are characterized by a demand schedule, a set of capacities, various costs, and a method for handling shortages. Consider the following example.
Consider a situation where demands in the next four periods are for 1200, 1500, 1900, and 1400 units. Current inventory is assumed to be 100 units. Suppose that regular time capacity is 1000 units per month and that overtime is 100 and subcontracting is 900. The costs are RM 8 for each unit produced during regular time, RM 9 for overtime, RM 11 for subcontracting, RM 3 for each unit held per period, RM 4 for each unit short period ( cost of Short Handling ) , RM 5 for each unit by which production is increased from the previous period, and RM6 for each unit by which production is decreased from the previous period. Under such circumstances, how many the company should produce or subcontract each period that would results in the lowest production costs?
Performing such Analysis may save companies millions in dollar yearly in production costs. It also helps to assists companies in planning their resources efficiently. Various Scenarios and Strategies can be optimized.
Production Optimization Analysis (POA)
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