17-LOD proposal - Appendix 1: LOO project proposal 163...

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Appendix 1: LOO project proposal 163 PROJECT PROPOSAL PRODUCTION INVENTORY CONTROL STUDY LUBRICATION OIL DIVISION, SANDPOINT REFINERY Table of Contents 1. Introductory statement 2. Executive summary ofrecommendations 3. Statement of the problem situation 4. Brief description of proposed analysis 5. Resources required and time-table page 1 page 1 page 1 page 2 page 3 1. INTRODUCTORY STATEMENT In the middle of March, Mr Black, Manager of the LOD, approached the Management Science Group at the Company's Headquarters with a request to study the LOD production/inventory operations of packaged goods and make recommendations concerning appropriate stock levels. It is my understanding that this request is a follow-up on remarks in the Company's internal auditors' report about the current level of investments in stocks at the LOD. In particular, the auditors pointed out that the LOO's stock turnover of packaged goods was well below the Company's target of24 times per year, resulting in a level offunds tied up in packaged goods judged as excessive. I arranged for a visit to the LOO's production and warehousing facilities at Sandpoint on March 27 and 28, during which 1 had extensive discussions with Mr Black, Mary C1arke, the stock control clerk, Bill Quick, the data processing supervisor, and all four operations supervisors. I also consulted with the Cost Control Department at Headquarters. The following report outlines my recommendations for a preliminary study, briefly motivates and describes the proposed analysis, and lists the resources required and a time-table for undertaking the study. 2. EXECUTIVE SUMMARY OF RECOMMENDATIONS It is recommended that the Company's Management Science Group undertakes a preliminary study of the production/inventory operations. The study would develop a model for finding optimal stock replenishment sizes as well as the minimum size when it becomes more economical to meet individual customer orders by a separate mixing and filling run. Based on this model. reliable estimates of the potential savings in operating costs can be computed with the aim of establishing whether a full-scale investigation can be justified. The results of the study would be available within 4 weeks and the internal charge to the LOO would amount to $6,400.
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This note was uploaded on 05/23/2010 for the course IE 398 taught by Professor T during the Spring '10 term at Middle East Technical University.

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17-LOD proposal - Appendix 1: LOO project proposal 163...

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