Chapter 13 - Case Study

Dino Powdered Milk, OOD, markets its alternative to fresh milk in Bulgaria. Trying to change
consumer habits to accept powdered milk, the company has decided to introduce a new premium
line that will include several ‘designer’ flavours. Marketing manager Andon Petarev Draganov
predicts an upturn in demand based on the new offerings and the increased public awareness. He
has prepared aggregate forecasts for the next six months, as shown in the following table
(quantities are in number of batches):

Production manager Stoyan Georgiev Draganov (no relation to Andon) has developed the
following information (costs are in thousands of euros).

Among the strategies being considered are the following:

1. Level production supplemented by up to 10 batches a month from overtime.

2. A combination of overtime, inventory, and subcontracting.

3. Using overtime for up to 15 batches a month, along with inventory to handle variations.

Questions:

1. The objective is to choose the plan that has the lowest cost. Which plan would you
recommend?

The recommendation would be; Dino Powdered Milk adding in 15 batches month in overtime
so that the organization would make a better deal for itself because they are going to be able to
 even out their output forecast. Whereas in the first strategy, the output forecast was coming out
to be negative with only 10 tank loads of overtime. By making sure you have a good output
forecast, you are basically ensuring good inventory flow. This in turn equals out to having lesser
costs.

2. Presumably, information about the new line has been shared with supply chain partners.
Explain what information should be shared with various partners, and why sharing it is
important.

The importance of all the information are quite same in level, that almost everything needs to
be shared with supply chain partners. A company should share their relevant forecasts with the
supply partners. They should also inform the various partners their estimated output, how much
materials or equipment they need. They should also know how much product you are expecting
to produce. Your desired output, basically. How much inventory you already have or want to
have is another main deciding factor. And last but not the least, they should have an idea of what
you want to produce. The amount doesn’t have to be exact, it could be an estimated price. But I
believe if they have an idea of the cost, they would be getting a better picture of the budget.
While a lot more information should be shared with the partners, I believe these are the main,
broad subjects that should be shared. Sharing all this information is important because your
supply partners are obviously the ones where you will be getting your materials and other
production stuffs from. In that way, they will have a greater knowledge of what you need.