Production Plan and Trade-Offs for the Tiles

Companies need to manage their production process to ensure that costs such as inventory, stock-out costs, and overtime costs are reduced. When planning, various operational factors must be considered by the teams conducting the manufacturing process. For instance, the sales trend, period of the year, stock available, and the capacity that can be produced by the company’s production machines (Saliq 2).

Production Plan for the 18 and 36 Inch Tiles for the Twelve Periods. The production plan to be used in the scenario is option two which utilizes a normal capacity production of 4000 tiles of 18 inches diameter and 600 tiles for the 36 inches diameter. Currently, the company has 2000 tiles of 18 inches and 700 tiles of 36 inches in hand. The tiles in hand can help in starting off the period coupled with the production plan two option (Saliq 4).

Moreover, the Lamson Corporation receives an increase in sales between March and September. As such, a more significant number of the 18 inch and 36 inch tiles would need to be produced in the first half of the season. Meanwhile, the second season will witness a lowering sales volume of the tiles and thus, the number of 18 and 36-inch tiles would decline. Thus, option two would be the right plan for the season. The annual average quantity of 18 inches tiles demanded is 4500 while for the 36 inches is 2000 tiles (Saliq 5). Hence, option 2 can be used as the best production plan as it considers eventualities without incurring overtime costs.

An Estimate of the Total End-Of-Season-End Costs

In the production process, an estimate of $ 240,000 will be spent in the entire season. The total end-of-season costs will increase in the first half of the high demand season, and it will decrease in the last three months as the high demand period is ending. The total end season costs will increase with the increase in demand up to an optimum point where the company can produce tiles that equal the quantity demanded. Then the rates will decline as the high demand for the tiles lowers (Saliq 5).

Trade-Offs For the Tiles Regarding Storage and Stock-Out Costs

In the first half of the high season, the Lamson Corporation is likely to incur a cost of $ 40,000 for every period in the production of the 18 inches diameter tiles since the actual sales estimated in the period will be at least 6,000 tiles. The company will have to produce the deficit of 2,000 tiles at a rate of 20$. The trade-off for the 18 inches diameter tile reduces costs of storage and higher costs of the stock-out costs. On the other hand, the trade-off for the 36 inches diameter tiles have higher storage costs and lower stock-Out costs since the quantity demanded does not exceed the number of sewage pipes produced (Saliq 5).

Work Cited

Saliq, Ashad. Lamson Corporation. Managing Operations. California State University- Fullerton, (2017).1-6.