MOS GAME Summary: The overall objective was to maximize the net operating contribution of the company. As the price was not in our hand, our strategy strate gy was to minimize mini mize operating operat ing costs. co sts. As the major chunk of costs are assigned to two parameters, one, varying production rate @ ! per unit in addition to change in shift charges of ",### from $ shift to ! shifts and %,### to back from ! shifts to $ shift and secondly the order backlog cost of & per unit of order backlog, in order to optimize, initially we focused on these two major aspects. To minimize the variation in production rate from one period to other, we decided to run at ! shifts from the start of the period and predict ranges of demand from the forecast and expected errors for next two periods. This allowed us to plan for consistent production rate over a considerable period of time. To avoid backlogs, we kept some buffer stock in order to meet the sudden unexpected hike for a particular period. The hike was estimated on the basis of extreme deviation provided for the period i.e. %%'. As for the second secon d period we were to fulfill the backlog of ( orders and also from previous period)s order we were to produce &( units. *or the second period the forecast was +!,### and we calculated the range of the demand which can vary between ,###-%%'/ and $#0,###-1%%'/. 2ith this demand around !# to %#' we would have to produce in the same period, so for the period ! our production plan was decided to be around $#,### -&+,### previous orders 1 !,### expected order that needs to be fulfilled in the same period 1 $#,### inventory inventory for the next period/. Third Third period was expected to be the peak period and demand was expected to be over our production capacity, so considerable inventory needs to be kept in order to satisfy the orders, hence we chose to produce $#,### unit keeping around !#,### units of inventory for next period. 3ut the demand was as low as 0,### units but owing to previous period demand the overall re4uirement shoot up to $!,### units which we were able to satisfy given we had inventory held with us. As all the inventory was utilized and also the demand for third period was only 0,### and we would gain gain only only &,## &,### # of addi additi tion onal al sale saless with with Type $ adve advert rtis isin ing g stra strate tegy gy,, appl applyi ying ng any any advertisement strategy would not yield higher profits, so we stick to no additional advertising strategy. *or (th and th period demand was going to be bit low so we adjusted our capacity to +#,### units for next two periods and risk to keep the inventory to meet any spike in demand. 5owever demand was 4uite stable and had little variation of the forecast, this lead to increase in inventory of the level of %#,### units for ! consecutive periods. This however helped further in "th period where the demand spiked with $(&,### need to be served, and we were left with only backlog backlog order despite despite sudd sudden en spike spike in the orders. orders. This period period also saw no advertising campaign as we were not left with any capacity to supply the demand. 6nce the two cycles -+ periods/ of demand were available, it was bit easy to predict the demand for next four periods, so taking into account we maintained our production rate at 0#,### units with linear increase in inventory for two periods, as it was expected to get demand spike in the third period. As expected the third period saw the demand of $#,### units with around $(#,### need to be delivered in that very period, we fall short of $!,### units owing to maintain stable production schedule of 0#,### and were forced to produce to our full capacity of $$#,### units.
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Units (in '000) 60 Production Rate
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Inventory
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7eferring to the above graph, we maintained almost consistent production rate despite the spiked variation in the demand and follow the cyclic inventory patterns in order to meet the demand which had the cyclic variation with the cycle period of ( periods. 8ost of the time our strategy worked out well, and we were able to predict the demand for future periods and maintained a constant production flow in most occasion. There were two spikes in the "th and $$th period which were expected looking at the forecast patterns but we were bit conservative about it. And we have to face back orders in these periods because of two reasons a/ To maintain the consistency in production rate b/ The spike was around (' which was above our expectation of around %#%'. 5ence through this exercise we were able to learn how the forecast are to be manipulated and significance of variation in the demand. This is also helped us to learn the significance of keeping limited inventory so as to cater to peak season or unexpected hike in demand. This assignment also helped us how to plan for consistent production rate, to build up inventory for peak season and then subse4uent stock out once the lean period comes. 9n the graph also it was clearly visible the cyclic nature of the demand and subse4uent planning helped us to get greater :et 6perating ;ontribution.
