Alex Processing

Alex Processing produces a line of food products that are used as key ingredients in mass-
produced meals. The CEO, who recently hired you as his assistant, requested you to prepare
an equipment acquisition plan.

After consulting Sam English, the executive engineer, you are able to tabulate the equipment
holding, the last 10 years' annual aggregate throughputs, and the next 10 years' expected
annual aggregate demands.

You can now begin work by estimating the equipment requirements for each equipment type.
But before you start, you recall the following advice given you by the CEO:
◦ Past forecasts and acquisition plans were very crude, though they were adequate in the
fast business growth phase.
◦ Demand growth rate has slowed significantly, and from hereon such rough planning may
lead to buying equipment too early and even possible expensive over-purchase mistakes.
◦ Productivity will continue to improve, but its change rate will eventually approach saturation.

This exercise was written as a basis for class discussion. It illustrates neither the effective nor ineffective
management of the given situation. Data provided may be entirely hypothetical.

LeongTY 532677396.xlsx/Home
Alex Processing © 2004 Leong Thin Yin. All rights reserved.

Unit Cost ($) 100,000 50,000 250,000 70,000 120,000 90,000 110,000
Order Leadtime (yrs) 1 1 3 1 1 2 2
Holding & Requirement

Aggregate Grinder Grader Seive Sorting Bonding Packing Test

Year Demand Machine Machine Machine Equipment Machine Machine Equipment
(yyyy) (ton) (qty) (qty) (qty) (qty) (qty) (qty) (qty)
1997 3.91 4 5 2 9 1 2 5
1998 5.06 4 5 2 10 1 3 6
1999 6.05 4 4 3 11 1 4 7
2000 7.77 5 7 3 13 2 5 8
2001 10.03 6 8 4 15 2 5 9
2002 12.01 7 11 4 16 3 7 10
2003 14.61 7 12 5 19 3 7 11
2004 17.39 8 15 6 20 3 8 12
2005 20.82 9 16 6 23 5 9 14
2006 23.92 10 19 7 24 5 10 14
2007 27.74
2008 31.90
2009 36.04
2010 40.73
2011 45.22
2012 50.19
2013 55.36
2014 62.02
2015 68.03
2016 73.29

LeongTY 532677396.xlsx/Proto
Alex Processing © 2004 Leong Thin Yin. All rights reserved.

Unit Cost ($) 100,000 50,000 250,000 70,000 120,000 90,000 110,000
Order Leadtime (yrs) 1 1 3 1 1 2 2
Holding & Requirement
Aggregate Grinder Grader Sieve Sorting Bonding Packing Test
Year Demand Machine Machine Machine Equipment Machine Machine Equipment
(yyyy) (ton) (qty) (qty) (qty) (qty) (qty) (qty) (qty)
1997 3.91 4 5 2 9 1 2 5
1998 5.06 4 5 2 10 1 3 6
1999 6.05 4 4 3 11 1 4 7
2000 7.77 5 7 3 13 2 5 8
2001 10.03 6 8 4 15 2 5 9
2002 12.01 7 11 4 16 3 7 10
2003 14.61 7 12 5 19 3 7 11
2004 17.39 8 15 6 20 3 8 12
2005 20.82 9 16 6 23 5 9 14
2006 23.92 10 19 7 24 5 10 14
2007 27.74 10 21 7 25 6 11 15
2008 31.90 10 23 8 26 7 12 15
2009 36.04 11 25 8 27 7 13 16
2010 40.73 11 28 9 28 8 14 16
2011 45.22 12 30 9 29 9 14 17
2012 50.19 12 32 9 29 10 15 17
2013 55.36 12 34 10 30 11 16 18
2014 62.02 12 36 10 31 13 16 18
2015 68.03 13 38 10 31 14 17 18
2016 73.29 13 40 11 31 15 17 19

Performance Ratio
Aggregate Grinder Grader Sieve Sorting Bonding Packing Test
Year Demand Maching Machine Machine Equipment Machine Machine Equipment
(yyyy) (ton) (ton/unit) (ton/unit) (ton/unit) (ton/unit) (ton/unit) (ton/unit) (ton/unit)
1997 3.91 0.978 0.782 1.955 0.434 3.910 1.955 0.782
1998 5.06 1.265 1.012 2.530 0.506 5.060 1.687 0.843
1999 6.05 1.512 1.512 2.016 0.550 6.049 1.512 0.864
2000 7.77 1.555 1.111 2.591 0.598 3.887 1.555 0.972
2001 10.03 1.671 1.254 2.507 0.669 5.014 2.006 1.114
2002 12.01 1.715 1.091 3.002 0.750 4.002 1.715 1.201
2003 14.61 2.086 1.217 2.921 0.769 4.868 2.086 1.328
2004 17.39 2.174 1.159 2.898 0.869 5.796 2.174 1.449
2005 20.82 2.313 1.301 3.469 0.905 4.163 2.313 1.487
2006 23.92 2.392 1.259 3.417 0.997 4.784 2.392 1.709
2007 27.74 2.780 1.340 3.790 1.120 4.800 2.520 1.880
2008 31.90 3.050 1.380 4.080 1.230 4.810 2.680 2.070
2009 36.04 3.320 1.430 4.360 1.340 4.820 2.840 2.260
2010 40.73 3.630 1.480 4.680 1.460 4.830 3.010 2.470
2011 45.22 3.920 1.520 4.980 1.580 4.850 3.180 2.670
2012 50.19 4.240 1.580 5.320 1.710 4.860 3.370 2.900
2013 55.36 4.580 1.630 5.670 1.850 4.880 3.560 3.130
2014 62.02 5.010 1.700 6.130 2.030 4.890 3.810 3.430
2015 68.03 5.410 1.770 6.540 2.190 4.910 4.040 3.700
2016 73.29 5.750 1.820 6.900 2.330 4.930 4.230 3.940

LeongTY 532677396.xlsx/Model
Trends
2007 2.781 1.337 3.793 1.118 4.797 2.524 1.880
2008 3.052 1.381 4.076 1.229 4.809 2.681 2.069
2009 3.322 1.426 4.358 1.339 4.821 2.836 2.256
2010 3.627 1.476 4.678 1.463 4.834 3.012 2.469
2011 3.920 1.524 4.984 1.582 4.847 3.180 2.672
2012 4.243 1.577 5.322 1.714 4.861 3.367 2.897
2013 4.580 1.632 5.675 1.851 4.876 3.561 3.131
2014 5.014 1.704 6.129 2.028 4.894 3.811 3.432
2015 5.405 1.768 6.538 2.187 4.911 4.036 3.704
2016 5.748 1.825 6.897 2.327 4.926 4.234 3.943

Comments
1. Performance ratios projection thus derived above may not be acceptable.
2. They may be revised and set as performance targets (in cells D42:J51).

LeongTY 532677396.xlsx/Model
Documentation
Unit cost of equipment D4:J4 <Input>
Equipment order leadtime D5:J5 <Input>

Actual: Aggregate demand C9:C18 <Input>

Equipment holding D9:J18 <Input>
Projected: Aggregate demand C19:C28 <Input>

Grinder Machine | Projected: Requirement D19 =$C19/D42

Actual: Performance ratio D32 =$C9/D9
Projected: Performance ratio D42:J51 <Input>, copied from D54:J63 and adjusted.

Projected (time-based): Performance ratio D54 =TREND(D$32:D$41,$B$32:$B$41,$B42)

Projected (vol-based): Performance ratio D54 =TREND(D$32:D$41,$C$32:$C$41,$C42)

Notes
1. Performance ratio projection may be assumed to be function of time or volume.
2. FORECAST may be used in place of TREND.
3. The values from TREND are then adjusted in a negotiated process and recorded as planned
performance targets.
Aggregate Demand (ton)

RefLine
Productivity (ton/qty)

80 This Year 16
2007 0 Aggr
75 15 egat
2007 1E+10 e
70 14 Dem
and
65 13
Colu
60 12 mn
O
55 11 Grin
der
50 10 Mac
hing
45 9 (ton
/uni
40 8 t)
35 7 Grad
er
30 6 Mac
hine
25 5 (ton
/uni
20 4 t)
Siev
15 3 e
Mac
10 2 hine
(ton
5 1 /uni
t)
0 0
1997
1998
1999
2000
2001
2002
2003

2005

2007
2008
2009
2010
2011
2012

2014

2016
2017
1996

2004

2006

2013

2015

LeongTY 532677396.xlsx/Model
 month actual sales est
1/31/2014 $ 10,349.00 sales is y
2/28/2014 $ 11,023.00 month is x
3/31/2014 $ 11,705.00 yellow is historical data
3/31/2015 $ 11,987.00
3/31/2016 $ 12,044.00
3/31/2017 $ 12,256.00
3/31/2018 $ 12,984.00
3/31/2019 $ 13,450.00
3/31/2020 $ 13,875.00
3/31/2021 $ 14,560.00
3/31/2022 Err:502
3/31/2023 Err:502
3/31/2024 Err:502
3/31/2025 Err:502
3/31/2026 Err:502
3/31/2027 Err:502
 tax rate 7.50%
Menu items units price qty sales tax line total
veg 2.99 30 6.7275 89.7
lemon 3.99 40 11.97 159.6
apple 1.89 15 2.12625 28.35
total 277.65
 menu unit price total
menu order food and beverage 277.65
RENTAL 249.95
paper cups and plates $110.87
service 18% of f&b $49.98
total $688.45
 1 2 3 4 5 6 7 8
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
11 11
12 12
9 10 11 12