you will choose a local service-based organization and suggest how it might empl
ID: 328173 • Letter: Y
Question
you will choose a local service-based organization and suggest how it might employ a level, chase, or mixed strategy to best meet its demand. You should explain how your suggestion would enable the firm to best meet their typical demand in a way that minimizes cost or maximizes profit. You should also discuss the drawbacks to this strategy and if any of their competitors would employ a different strategy and why. Finally, create a sample aggregate plan for the organization for the next 12 months, making forecasts for their future demand, estimating the relevant costs and determining the estimated total cost of your plan. Make sure to upload a soft copy of the assignment here as well as bring a hard copy to class.
Explanation / Answer
Local Family Owned Car wash
> strategy to best meet its demand:
It can employ a level strategy since it has a fixed and limited number of employees available. This means that the organization would have to plan it’s inventory according to expected demand. The inventory will be at a lower level during summers which is a slow season for a car wash and high during season for precipitation.
If the Employee numbers are to be stable then the work hours can be adjusted depending to the season and expected demand.
> explain how your suggestion would enable the firm to best meet their typical demand in a way that minimizes cost or maximizes profit:
A Car wash demand fluctuates with the weather, therefore there will be a seasonality in demand and some spikes depending upon the weather. For example, Summer months will be slower as compared to winter or when it rains/snows.
The inventory stock therefore can be planned according to the weather forecast.
Scheduling work hours and ordering inventory in sync with past customer inflow data and weather forecast would maximize productivity and minimize inventory carrying cost and obsolescence.
> drawbacks to this strategy and if any of their competitors would employ a different strategy and why:
A large corporate chain can employ a mixed strategy where it can increase promotions when the demand is slow or they can reduce labor during the slow season. This would give them the advantage of a better utilized workforce and lower costs.
> sample aggregate plan for the organization for the next 12 months, making forecasts for their future demand, estimating the relevant costs and determining the estimated total cost of your plan.
Services offered:
Full wash/Exterior wash/Interior Clean
Fixed employee cost per month. Assume 4 employees working at average wage rate.
Map demand Proportion: 10%/70%/20%
Number of car washes per month:
Map Cost, Inventory needed as per unit of service offered.
Forecast demand as per month .
Inventory requirement per month = Demand forecast per month * Inventory needed per wash
Machine maintenance would be required more during peak season.
Set requirement for maintenance after a fixed number of washes: 30% of total done in a year. ( Roughly 3 times a year)
Add it to Annual inventory cost To get annual cost.
0.41 $
Maintainence cost 11,000$
Employee Cost Yearly: 80,000$
Total Annual Costs:
Full Exterior Interior Cost of inventory per wash 0.7 0.4 0.3 Percentage demand 10% 70% 20% Peroduct 0.07 0.28 0.06 Average cost per wash0.41 $
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