NATIONAL MANUFACTURING COMPANY

(A Game on production planning and Control)

The National Manufacturing Company (NMC) assembles electronic equipment. The demand for the
equipment in the last four years is given in Table 1.

Month 1996 1997 1998 1999

January 1401 1328 1696 2005
February 898 954 1510 1607
March 404 648 972 1056
April 967 1101 1192 1524
May 1081 1381 1681 1780
June 1601 1621 1696 2305
July 1332 1556 1780 1985
August 1047 1162 1578 1695
September 692 941 1128 1357
October 1121 1360 1780 1981
November 1321 1809 1916 2285
December 1729 1905 2521 2836

Table -1 Demand for equipment for the last four years.

The demand is captive i.e. whenever a month's demand is not met, the unsatisfied demand is
required to be met from the production of the subsequent month. For every unit that cannot be shipped
because of insufficient inventory, NMC bears an additional cost of Rs 20 on each item.

A decision to change the production level for the following month should be made by the end of the
month. The cost of changing the production level depends on the direction (increase or decrease) and the
magnitude as shown in Table 2 and Table 3. For example, if the production in May is 2000 units and if a
decision is taken to increase the production by 200 is taken at the end of May, the production changeover
cost is Rs 2400. If, on the other hand, no change in production is desired, then the production remains at
2000 for June. Maximum allowable production in a month is 3500. The production in December 1999 is
1000 units. If production in January 2000 is different, there is an increased cost.

The company decides to maintain a production of 2000 units in January 2001. The cost incurred in
December 2000 will also include the cost of changing production from December 2000 to January 2001.

There will be shutdowns in March and September. If production level is different in April is
different from that in February, then the company incurs workforce changeover cost. Similarly, there is
change only between August and October production levels.

The cost of handling equipment in inventory is Re 1 per month. Opening inventory in January 2000
is 1500 units and expected inventory in December 2000 is 2500 units. This is due to a Government
regulation that stipulates a stock of one month demand at the end of each calendar year. The auditors charge
a penalty of Rs 20 per unit for every unit short of 2500 at the end of the year. Because of this NMC paid a
heavy penalty last year.
Increasing the level of production Cost of changing
between two successive months by production level
100 or less 1000
101 - 200 2400
201 - 300 4200
301 - 400 6400
401 - 500 9000
in general (b-99) - b 8b + (b*b)/50

Table 2 -Cost of increasing work force

Decreasing the level of production Cost of changing

between two successive months by production level
100 or less 500
101-200 1200
201-300 2100
301-400 3200
401-500 4500
(a-99) to a 4a + (a*a)/100

Table 3 - Cost of decreasing work force.