Q1.Evaluate the various configurations of operating and closed plantsthat will meet weekly demand. Determine which configuration minimizesthe total costs.
Thereare three possible plans:
Plan1(plant 1 and plant 2) = production cost of plant 1 and plant 2+ nonoperating cost+ distribution cost
Totalcost= [(27,000x 2.80)] + (7,000 x 3.52) + 14,000] + [(20,000x 2.78) + (5,000 x 3.48) +12,000] + 7,500 + Distribution cost
Totalcost= $ 196,180+ distribution cost
Plan2(Plant 1 and 3) = production cost of plant 1 and plant 3 + nonoperating cost+ distribution cost
Totalcost = [(20,000x 2.80)] + (5,000 x 3.48) + 12,000] + [(25,000x 2.72) + (6,000 x 3.42) +15,000] + 6,000 + Distribution Cost
Totalcost = 196,180 + distribution cost
Plan3(plant 2 and 3) = production cost of plant 2 and plant 3 +non-operating cost + distribution cost
Totalcost = [(20,000x 2.78)] + (5,000 x 3.48) + 12,000] + [(25,000x 2.72) + (6,000 x 3.42) +15,000] + 6,000 + Distribution Cost
Totalcost = 194,520+ distribution cost
Therefore,the second plan is the most favourable plan (plant 1 and plant 3) asit minimizes cost. The closing plant should be the plant 2.
Q2.Discuss the implications of closing a plant.
Closingof a plant has different implications. Some are benefits, challenges,and intended outcomes.
Ashousing market declines, Andrew–Carter correspondingly experiencelow demand (Heizer,1997).This means it has also to reduce its production to avoid surplushence the need to close one plant. Closing the plant means that thecompany will have lower inventory holding cost lower fixed operatingcost, and increased workers utilization.
Nevertheless,the Andrew-Carter Company is also likely to face some challenges. Forinstance, the company is likely to face negative reputation from itsreputable clients (Heizerand Render,2004).Some clients regard plant closure as a sign of failure. Secondly, thecompany will meet the cost of termination and rehiring. Furthermore,the company will also have to deal with issues of backorder, lostsales workforce arrangement, and adjusting output rates.
Finally,the company will face unintended outcomes that are likely to havenegative outcomes. For instance, the work attitudes may change.Employees may face anxiety and distrust, low job satisfaction, jobinsecurity, low motivation and loyalty. Besides, they may havebehaviour reactions (Pearson,n.d).For example, they may resist changing, loss the key knowledge, andincreasing the rate of absenteeism.
Heizer,J. H. (1997). Production& operations management: Strategic & tactical decisions.Toronto: Prentice-Hall of Canada.
Heizer,J. H., & Render, B. (2004). Principlesof operations management.Upper Saddle River, N.J: Pearson/Prentice Hall.
Pearson.(n.d.). . Retrieved August 3, 2015, fromhttp://wps.prenhall.com/bp_balakrishnan_mdms_2/49/12587/3222509.cw/content/index.html