Operational Management

Case Study
Wilkins, A Zurn Company-Aggregate Production Planning

By
EPGP-11-183
CONTENTS

● Company
● Product
● Inventory
● Production Process
● Employee Policies
● Forecast
● Analysis (PVB)
● Analysis (Fire Valve)
COMPANY

Timeline ● It was a 163,000-square-foot facility

located in California.
● 1971: Got acquired by Zurn industries.
● 1998: Merged with U.S. Industries Bath & USP
Plumbing Products Co.
● 2003: Company name changed to Jacuzzi ● Low-cost producer
Brands. ● Innovative product designs

Wilkins Plant Goal

● The plant housed the manufacturing ● Reduce inventory by 30% in next quarter
operations, an engineering lab, marketing (sales from the Wilkins plant had grown
and sales operations, and offices for 12 20% in the past year).
managers and 33 non-production
employees.
PRODUCT

● They manufactured a full line of high- ● They were make-to-stock (MTS) items.
quality products. ● PVBs were available in two series: the 720
● 60% of the sales came from backflow and the 420 series.
prevention devices.
● Pressure reducing valves contributed to Fire Valves
25% of the sales. However, they were
considered to be a commodity product ● Fire valves were used in
with low margins. commercial buildings to
prevent backflow from the
Pressure Vacuum Breakers (PVBs) building’s fire control system.
● Demand for fire valves was seasonal.
● PVBs were a mature ● They were predominantly ordered during
product family in the new building construction.
backflow prevention line.
INVENTORY

Raw Materials ● Wilkins had limited control over the ability

of independent distributors to locate and
● Raw materials were a significant portion of ship product to another distributor or
assets on the balance sheet. customer location, if needed.
● Raw materials inventory had accumulated
over the past few years, taking up a lot of Inventory Costs
physical space.
● The raw materials cost had increased over ● Holding cost = 20% of inventory cost.
the previous 12 months. The high inventory ● Opportunity cost if production is scheduled
levels in a way benefitted the company. within 2 weeks = 50% of standard cost.
● Opportunity cost for stock out more than 2
Finished Goods weeks = 100% of selling price.

● The finished goods inventory was sent to

the 52 stocking locations throughout the
United States.
PRODUCTION PROCESS

PVB Production Fire Valve Production

● The two testing machines in the PVB cell ● Each fire valve was made-to-order.
had a total peak capacity of 1,365 units per ● The testing machine capacity in the fire
10-hour shift. valve production cell was 80 units per day.
● A maximum of seven employees could be This machine was the bottleneck.
assigned to the PVB cell. ● The cell was in operation for one shift per
● For safety reasons, a minimum of 3 day.
employees were assigned during ● Due to anticipated increase in demand, a
production. new testing equipment was scheduled to
● Six workers in PVB cell, department 104, be operational by the start of fiscal 2006.
produced approximately 600 units in one This was expected to reduce cycle time by
eight-hour shift. 37.5%.
● The machine shop, Department 101,
supplied machine castings to the PVB cell.
EMPLOYMENT POLICIES

● Employee count: 177 ● Temporary workers were sourced through

● Temporary workers: 13 an employment agency at an approximate
● They had a ”no layoff” policy. fixed cost of $580.
● They frequently used temporary workers ● The cost of terminating a full-time
and overtime to meet demand during peak employee was approximately $300.
periods. Whereas the cost of terminating temporary
● The estimated cost of overtime was 150 workers was negligible.
per cent of the standard cost of
production.
● Temporary workers were hired for full-
time employment after a three-month trial
period if both the parties were satisfied.
 FORECAST

PVB Fire Valve

Year Q1 Q2 Q3 Q4 Total Year Q1 Q2 Q3 Q4 Total

1999 1,788 3,748 5,115 3,167 1,79,634 1999 36 43 18 13 1,430

2000 2,097 4,008 5,532 3,123 1,91,880 2000 47 32 34 24 1,781

2001 2,116 3,523 5,921 3,374 1,94,142 2001 21 45 19 38 1,599

2002 2,352 4,092 6,824 3,968 2,24,068 2002 36 38 28 43 1,885

2003 2,721 4,449 7,184 4,531 2,45,505 2003 42 27 25 11 1,365

2004 3,029 5,786 9,452 4,231 2,92,474 2004 22 26 28 29 1,365

Forecasted 2005 4,120 7,480 9,341 5,983 3,50,012 2005 43 51 51 51 2,548 Forecasted

Mean 2,351 4,268 6,671 3,732 2,21,284 Mean 34 35 25 26 1,571

SD 455 808 1,569 594 42,423 SD 11 8 6 13 223
Mean+3SD 3,714 6,690 11,377 5,513 3,48,552 Mean+3SD 66 59 43 65 2,239
Analysis (PVB) - Level capacity strategy is good for PVB

Aggregate Planning Considering Level Capacity Aggregate Planning Considering Demand Chase

PVB Q1 Q2 Q3 Q4 Total PVB Q1 Q2 Q3 Q4 Total

Demand 4,120 7,480 9,341 5,983 3,50,012
Demand 4,120 7,480 9,341 5,983 3,50,012 Production 1653 7480 9341 5983 3,17,941
Start
Production 6,160 6,160 6,160 6,160 3,20,320 32,080 9 9 9
Inventory
Start End Inventory 9 9 9 9
32080 58,600 41,440 87
Inventory
PVB Q1 Q2 Q3 Q4 Total
End Demand 4,120 7,480 9,341 5,983 3,50,012
58,600 41,440 87 2,388
Inventory Production 1653 7480 9341 5983 3,17,941
Average Start Inventory 32080 9 9 9
45,340 50,020 20,763.5 1,237.5
Inventory
End Inventory 9 9 9 9
Holding Average
58,148.5 64,150.6 26,629.18 1,587.09 1,50,515 16044.5 9 9 9
Cost Inventory
Holding Cost 20577.07 11.5425 11.5425 11.5425 20,612
SD 2000700 2000700 2000700 2000700 80,02,800
Std Cost 551192.9 2000700 2000700 1995031 65,47,624
Hiring Cost 2320 2,320 Hiring Cost 4060 4,060
Firing Cost 900 900
Overtime
80,028 80,028 80,028 80,028 3,20,112 Overtime Cost 740259 1671085 24,11,344
Cost
89,84,540
Total Cost 84,75,747 Total
Analysis (Fire Valve) - Demand chase strategy is good for Fire Valve

Aggregate Planning Considering Level Capacity Aggregate Planning Considering Demand Chase

PVB Q1 Q2 Q3 Q4 Total PVB Q1 Q2 Q3 Q4 Total

Demand 43 51 51 51 2,548
Demand 43 51 51 51 2,548 Production 28 51 51 51 2,353
Start
Production 46 46 46 46 2,392 199 4 4 4
Inventory
Start End Inventory 4 4 4 4
199 238 73 108
Inventory
PVB Q1 Q2 Q3 Q4 Total
End Demand 43 51 51 51 2,548
238 173 108 43
Inventory Production 28 51 51 51 2,353
Average Start Inventory 199 4 4 4
219 206 141 76
Inventory
End Inventory 4 4 4 4
Holding Average
1493 14 960 516 4,374 101.5 4 4 4
Cost Inventory
Holding Cost 693.7 27.34 27.34 27.34 776
SD 81,747 81,747 81,747 81,747 326,986
Std Cost 81.746.6 81.746.6 81.746.6 81.746.6 326,986
Hiring Cost - Hiring Cost -
Firing Cost -
Overtime
- Overtime Cost -
Cost
Total Cost 331,361 Total 327,762