A#2,
Part 2 The Lowe’s project
The last item on the weekly
management and staff meeting agenda was to consider a proposal for a special
manufacturing and sales promotion program.
The manufacturing would last for about a month, and the sales portion
would last some 6 weeks.
Lowe’s Home Improvement Centers has
approached LUML about a joint effort to have a special on two of LUML’s LED
fixtures: the L901 and the L923 (the “L”
indicates an LED fixture and bulb). The production
would run from about June 15 to July 15.
The retails sales would be about June 15 to the end of July.
Due to the expected volume LUML
would suspend normal production operations (e.g., would accept orders from
other customers but would not begin production until after the Lowe’s
production ended). LUML would produce
the L901’s and L923’s continuously for a 30-day period. Lowe’s
will handle the advertising, and other promotion.
By judicious inventory management
LUML management believes that they will be able to support the normal customer
base PLUS establish a tie-in with the giant Lowe’s.There is consensus that if Lowe’s
is satisfied with the joint program Lowe’s may decide to continue the
relationship.
There was a brief discussion on the
decision of this magnitude. And the
importance of assessing whether LUML could support the production. Mrs. Susan Tyler (Operations Chief) said that
she recalled during her coursework while in school that there were quantitative
techniques that could help in their planning.
Something about numerical programming or similar.
The CEO found this to be an
interesting general discussion, but somewhat lacking in hard numbers. She commented that she needed some hard
numbers and analysis to help decision making on this major project. In the interest of time she halted the
discussion.
The CEO asked if it would be
possible to do a quick analysis of the issues.
[Of course, that was really a rhetorical question. As you might expect, the answer from the
Comptroller was “sure we can do an analysis for you”.] The CEO said that she would send over some
more specific questions after the meeting.
Susan Tyler said that she would send over some information on the Lowe’s
project that operations had been working on.
The meeting adjourned.
As a senior analyst for the company
you are to play a key role in doing the analysis and drafting the reply to the
CEO of the results. When you come in to
work the next day you find the following on your desk.
|
[Your name]
Please handle ASAP.
Here are the questions from the CEO on the Lowe’s project.
Please prepare a written memo to reply. Mrs. Ennis is a “data freak” and so likes
to look at the backup numbers and analysis.
Be sure to include the basic work that was done. Simple calculations might be in the
narrative; more complex might need to be in an attachment. But whenever you can put the info in the
basic memo.
Thanks,
Tom
Tom Perkins
|
|
May 29, 2019
Tom,
Ref the weekly briefing and the discussion on number programming (or
whatever) as a decision aid. Very
interesting. Not too often that we go
off on a pretty academic discussion.
Nor is it very often that we get an opportunity like this to tie in
with a major national chain like Lowe’s.
Here are the things that jumped into my mind as the topic was being
discussed; and then after I got back to my office. I’d like a memo with the answers per our
schedule.
Thank you.
Elise
(grading weight)
#2-1. (100) What is this math
programming or whatever we were talking about? Can I have two examples of its use?
#2-2. (100) How might math
programming help us in making a better analysis?
#2-3. (100) Susan said that
she would send over some work that operations had been doing. What is the result of your analysis? I suppose that for starts we would assume
that we want to maximize our profits.
[We can look at other objectives later on.]
So how many units do we
produce each day (by type and total)?
What is the projected number
of units for the 30-day production run (by type and total)?
What is the projected profit
each day?
What is the projected total
profit for the 30-day production run?
#2-4. (100) From what I recall we are likely to
run into shortages or “constraints”.
If we do have some constraints, please offer at least two suggestions
for each constraint on how to overcome the constraint. {Note:
you do not need to resolve the problem with the constraint adjusted. But at least indicate generally how the
solution might be changed.]
#2-5. (100) We already have some concerns. Tim Apple is the lead for the L901 fixture. When I met him in the hallway yesterday, he
told me that he would like to produce all of the L901’s that he can. What would be the impact of doing so?
#2-6. (100) From what you said earlier, the
supply chain extends well before us and well after us. Given that, can we really hope to achieve
an optimal position? (Explain).
#2-7. (25) As we add more
variables (say more fixture models) what happens to the ability to use
graphic solutions?
#2-8. (25) As we add more variables (say more
fixture models) what happens to the ability to use math programming
solutions?
#2-9. (50) Any other comments that you think I
should know. This might be
assumptions. [Aside: do not ignore
this question. If you have none, then
None is the proper answer, right?]
|
-=-=
|
Date: May 29, 2019
To: Tom Dollar
From: Susan Tyler
/s/ Susan
Subject: Lowe’s
project information
PURPOSE. At the
last staff meeting we discussed the possible Lowe’s production/sales
project. The purpose is to provide you
the work that Operations has done so far.
Here is the information on the Home Depot project that we had pulled
together that I promised I would send over. BTW I looked up some of my old
class notes and the name is really “mathematical programming”.
-=-=-
** Need to produce a mixture of the two fixtures (L901 and
L923).
** Key steps for either fixture are assembly, inspection,
and storage. Using our present
production methods those steps are done in that sequence.
** Believe that Elise would like to make the most profit
on this deal that we can.
** Marketing says that Lowe’s will accept any quantity of
each fixture since Lowe’s anticipates being able to sell all that we can
produce. But we do need to produce
SOME of BOTH fixtures.
** There will be no returns to us. Lowe’s will take care of clearing out any
remaining units after the sales period.
** For each L901 fixture we need 4 hours of assembly; 3 cu
ft of storage until shipped; and 2 hours of inspection.
** For each L923 fixture we need 3 cu ft of storage; 1
hour of inspection; and 10 hours of assembly.
** Each day we currently have 39 cu ft of storage; 22
hours of inspections; and 100 hours of assembly.
**We estimate that L901 will cost $540 to produce. L923 is $850.
** L923 should sell to Lowe’s for $900; L901 $600.
** For the purposes of this analysis consider that
overhead and other items (e.g., taxes, depreciation, other miscellaneous
costs) are included in the production cost.
So that is really a “loaded” rate.
|
=-=-=-
Your job as senior analysis is to …….
Prepare a memo to the CEO with the answers to her
questions. One key reason that we do
this type of analysis is to help manage better, solve problems, and the
like. So, interpreting the information
in relation to the business situation is important.
Regardless of the format,
#1 the answer
to each question needs to be easily identifiable. The CEO is probably not going to remember the
details of each question that she asked.
And she is unlikely to “go looking” for the answer somewhere in a
document.
#2 Each answer needs to have
the answer plus supporting rationale.
That does not mean that each answer needs to be pages long! In many cases the answer itself and the
rationale can easily be only be a couple of sentences.
#3. As the old saying goes, sometimes a
picture/figure can be worth a thousand words.
On the other hand, a picture with no explanation might not be much of a
help.
#4 This is also an
academic work so please include references.
Recall that APA standard convention is in-text citation and then a
reference list at the end. In any case,
we do NOT want to use only a URL nor a WIKI-type source unless it is the only
remaining option (you need to justify!).
#5 Reminder that
graph paper is available in the notes section.
Comments
Post a Comment