Ken Mack, plant manager for the Apix Polybob Company, was having a heated

discussion with Jack Gould, the production and inventory control manager. Ken
was getting tired of frantic calls from Jim Uphouse, the marketing manager,
concerning late orders for their Polybob (polybobs are a fictitious product)
customers and was once again after Jack to solve the problem. Some of the
discussion points follow:

JACK: “Look, Ken, I’m not sure what more we can do. I’ve reexamined the
EOQ (economic order quantity lot size) values and all the reorder points for all
our inventory for all our Polybob models, including all component levels and
purchased items. I’ve implemented strict inventory control procedures to ensure
our accuracy levels to at least 80%, and I’ve worked with the production people
to make sure we are maximizing both labor efficiency and utilization of our
equipment. The real problem is with those salespeople. We no sooner have a
production run nicely going, and they change the order or add a new one. If
they’d only leave us alone for a while and let us catch up with our current late
order bank, we’d be okay. As it is, everyone is getting tired of order changes,
expediting, and making everything into a crisis. Even our suppliers are losing
patience with us. They tend to disbelieve any order we give them until we call
them up for a crisis shipment.”
KEN: “I find it hard to believe that you really have the EOQ and reorder point
values right. If they were, we shouldn’t have all these part shortages all the time
while our overall inventory is going up in value. I also don’t see any way we
can shut off the orders coming in. I can imagine the explosion from Jim if I even
suggested such a thing. He’ll certainly remind me that our mission statement
clearly points out that our number-one priority is customer service, and refusing
orders and order changes certainly doesn’t fit as good customer service.”
JACK: “Then maybe the approach is to deal with Frank Adams (the chief
financial officer). He’s the one who is always screaming that we have too much
inventory, too much expediting cost, too much premium freight costs from
suppliers, and poor efficiency. I’ve tried to have him authorize more overtime to
relieve some of the late order conditions, but all he’ll say is that we must be
making the wrong models. He continually points to the fact that the production
hours we are paying for currently are more than enough to make our orders
shipped at standard, and that condition has held for over a year. He just won’t
budge on that point. Maybe you can convince him.”
KEN: “I’m not sure that’s the answer either. I think he has a point, and he
certainly has the numbers to back him up. I’d have a real rough time explaining
what we were doing to Ron Marrison (the CEO). There’s got to be a better
answer. I’ve heard about a systems approach called material requirements
planning or something like that. Why don’t you look into that? Take a
representative model and see if that approach could help us deal with what
appears to be an impossible situation. I’m sure something would work. I know
other factories have similar production conditions yet don’t seem to have all our
problems.”

Following is the information about Polybob model A that Ken suggested as a

representative model to use for the analysis:

110The following are the master schedule production lots for Model A:
 Complete 50 units, week 3

 Complete 50 units, week 5

 Complete 60 units, week 7

 Complete 60 units, week 9

 Complete 50 units, week 11

Upon seeing this information, Jack stated, “Look at how regular our production
schedule is for this model. The reorder points will more than cover
requirements, and none have lead times that make it tough to respond. This
analysis should show that all the work I did on EOQ and reorder points was
right, and the real problem lies with those sales and finance people who don’t
understand our production needs.”

Assignment
1. What are the key issues brought about in the conversation? What are the
key symptoms, and what are the underlying problems? Be specific in your
answers.
2. Use the product information to develop an MRP approach to the
problems. Would MRP solve the problems? If so, show specifically how
MRP would avoid the problems discussed by Ken and Jack.
3. Do any conditions bother you about the ability of MRP to deal with the
problems? What specifically are those conditions?
4. Suppose it was discovered that only 250 of component E were in stock
instead of the 300 listed on the inventory record. What problems would
this cause (if any), and what are some of the ways that these problems
could be addressed? How would (if at all) MRP help you when other
methods might not?
5. Suppose that the design engineer advises that he has a new design for
component F. It won’t be ready until sometime after week 2, but he wants
 you to give a date for the first supplier shipment to come in, and you
should be ready to tell the supplier how many to ship. Since the change is
transparent to the customer, the design engineer advises you to go ahead
and use up any existing material of the model. How will MRP help you to
deal with this issue?
6. Can you think of any other “what if” questions that might be more easily
addressed by a systematic approach such as MRP?