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BREAKOUT EXERCISE 2:

PERFECT PIZZA COMPANY CAPACITY

PLAN
The Perfect Pizza Company has a demand forecast for the next 12 months that is shown in Table 1.

The current workforce of 100 staff can produce 1500 cases of pizzas per month.

(a) Prepare a production plan that keeps the output level. How much warehouse space would the company
need for this plan?
(b) Prepare an ‘ideal’ demand chase plan assuming production rates were unlimited
(c) What implications would this have for staffing levels, assuming that the maximum amount of overtime
would result in production levels of only 10 per cent greater than normal working hours? Prepare a
demand chase plan under this scenario.
(d) Based upon your analysis identify the challenges that the operation may face following your chosen plan
and highlight whether the company could sublet their freezer capacity.

Table 1 Pizza demand forecast

Month Demand (cases per month)
January 600
February 800
March 1000
April 1500
May 2000
June 1700
July 1200
August 1100

The task
September 900
October 2500
November 3200
December 900
Total Demand: 17400
(a) Prepare a production plan that keeps the output level. How much warehouse space
would the company need for this plan?
Month Demand (cases) Cumulative Prod rate Cumulative Inventory level
demand (cases) (cases/month) production at with level
1500 production
cases/month (cases)
January
February
March
April
May
June
July
August
September
October
November
December

Question a) – Analysis
• The assumption is that you can store the pizzas i.e. they are frozen and there is no capacity constraint.
• With a constant production rate of 1500 cases of pizzas per month a production plan that keeps the
output level would look like the table below.
• The maximum amount of warehouse space needed is the highest inventory during the 12-month period.
• Please remember that with a level capacity plan you may well run out of stock and run into deficit.
 b) Prepare an ‘ideal’ demand chase plan assuming production rates were unlimited

Month Demand (cases) Cumulative Prod rate Cumulative Inventory level

demand (cases) (cases/month) production (cases)
January
February
March
April
May
June
July
August
September
October
November
December

Question b) – Analysis
• If production rates are unlimited, then an ‘ideal’ pure chase demand production plan could match
demand by changing production levels. Numerous changes in production rate (which itself would incur
costs), will enable production to meet demand and to keep inventory levels low.
 (c) What implications would this have for staffing levels, assuming that the maximum
amount of overtime would result in production levels of only 10 per cent greater than
normal working hours? Prepare a demand chase plan under this scenario.
Month Demand (cases) Cumulative Prod rate Cumulative Inventory level
demand (cases) (cases/month) production (cases)
January
February
March
April
May
June
July
August
September
October
November
December

Question c) – Analysis
• However, if the maximum amount of overtime limits production levels of only 10 per cent greater than
normal working hours, then the maximum production level is 1650 (16.5 per worker).
(d) Based upon your analysis identify the challenges that the operation may face
following your chosen plan and highlight whether the company could sublet their freezer
capacity.

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