Marketing Forecast Analysis: Meridian Water Pumps Case Study Solution

This document presents a comprehensive solution to the Meridian Water Pumps case study, evaluating different production planning strategies based on a marketing forecast. The analysis begins with calculating the additional production required over a six-month period, considering current workforce capacity and inventory levels. It then explores the costs associated with three distinct production planning approaches: the initial plan, a chase strategy, and a hybrid strategy. The solution calculates and compares the costs of labor, hiring, firing, and inventory for each strategy, ultimately recommending the chase production planning approach due to its lower overall cost and reduced impact on employee morale and company reputation, as the hybrid approach involves layoffs. The document provides detailed calculations and justifications for each step, making it a valuable resource for understanding production planning and cost analysis in a real-world business context.

Answers of MERIDIAN WATER PUMPS case Study
Marketing Forecast:
Month 1 2 3 4 5
Forecasted Demand 600 750 1000 850 750
1.
Currently each worker produces an average of 25 pumps in any given month.
There are currently 20 workers in the medium-size pump area.
So, Currently Total Production of Pumps in a month=25x20=500 Pumps
The production manager said there were currently 50 units in inventory.
Additional Production requires:
1st Month=600-(500+50) =50 Pumps
2nd Month=750-500=250 Pumps
3rd Month=1000-500=500 Pumps
4th Month=850-500=350 Pumps
5th Month=750-500= 250 Pumps
So, In 5 Months Time total Additional Pumps needs to produce other than Recent
Manpower’s Production Capacity=50 Pumps+250 Pumps+500 Pumps+350
Pumps+250 Pumps=1400 Pumps.Currently each worker produces an average of 25
pumps in any given month. So. Total Mandate Month requires=1400/25=56
Mandate Months of a Manpower

So, In this 5 Months Approximately 60 Mandate Months Need to get incorporated,
which means If we divide 60 Mandate Months by 5 Months then Per month
60/5=12 Mandate Month ,which is equal to 12 Manpower HR need to hire initially.
It means Total production will be:
Each Month: (20+12) *25=800 Pumps
Inventory will be as follows:
1st Month: (800+50) - 600=250
2nd Month: (800+250) - 750=300
3rd Month: (800+300) - 1000= 100
4th Month: (800+100) - 850= 50
5th Month: (800+50) - 750= 100
It takes an average of $100 to get a person hired
Extra Cost will be due to HR processes=$100*12=$1200
It costs about $5 to keep one of these pumps in inventory for a month.
Inventory Cost will be as follows:
1st Month: (250*5) =$1250
2nd Month: (300*5) =$1500
3rd Month: (100*5) =$ 500
4th Month: (50*5) =$250
5th Month: (100*5) =$ 500
Extra Cost will be due to inventory: $1250+$1500+$ 500+$250+$500=$4000

2.
Chase Production Planning:
Companies that use the chase strategy, or demand matching strategy, produce only
enough goods to meet or exactly match the demand for goods. The chase strategy
has several advantages & disadvantages; it keeps inventories low.
As per Chase Production Planning scheduling will be as follows:
1st Month:
Additional Production requires =600-(500+50) =50 Pumps
Here HR will hire (50/25) =2 Worker
Cost due to HR Hiring= 2*$100=$200
Inventory Cost=0
2nd Month:
Additional Production requires =750-(25*22) =200 Pumps
Here HR will Hire (200/25) = 8 Worker
Cost due to HR Hiring= 8*$100=$800
Inventory Cost=0
3rd Month:
Additional Production requires =1000-(25*30) =250 Pumps
Here HR will Hire (250/25) = 10 Worker
Cost due to HR Hiring= 10*$100=$1000
Inventory Cost=0

4th Month:
Excess Production =850-(25*40) =150 Pumps
Cost due to HR=0
Inventory Cost=150*$5=$750
5th Month:
Excess Production =750-(25*40) = 250 Pumps
Cost due to HR=0
Inventory Cost= (250+150) *$5=$2000
Extra Cost will be due to HR processes due to Chase Production Planning
=$200+$800+$1000=$2000
Extra Cost will be due to Inventory due to Chase Production Planning
=$750+$2000=$2750
3.
Hybrid Planning:-
As per Hybrid plan the Production scheduling will be as follows:
1st Month:
Additional Production requires =600-(500+50) =50 Pumps
Here HR will hire (50/25) =2 Worker
Cost due to HR Hiring= 2*$100=$200
Inventory Cost=0

2nd Month:
Additional Production requires =750-(25*22) =200 Pumps
Here HR will Hire (200/25) = 8 Worker
Cost due to HR Hiring= 8*$100=$800
Inventory Cost=0
3rd Month:
Additional Production requires =1000-(25*30) =250 Pumps
Here HR will Hire (250/25) = 10 Worker
Cost due to HR Hiring= 10*$100=$1000
Inventory Cost=0
4th Month:
Lesser Production requires =850-(25*40) =150 Pumps
Here HR will Fire (150/25) =6 Worker
Cost due to HR Firing= 6*$100=$600
Inventory Cost=0
5th Month:
Lesser Production requires =750-(25*34) = 100 Pumps
Here HR will Fire (100/25) =4 Worker
Cost due to HR Firing= 4*$100=$400

Inventory Cost=0
Extra Cost will be due to HR processes due to Hybrid Planning =$200+$800+
$1000+$600+$400=$3000
Extra Cost will be due to Inventory due to Hybrid Planning =0
4.
Based on my Work I would recommend Chase Production Planning.
As We Can see the total Extra Cost requires for three different productions
Schedule are as follows:
Total extra Cost due to First type of Production Planning= $1200+$4000=$5200
Total extra Cost due to Chase Production Planning=$2000 +$2750=$4750
Total extra Cost due to Hybrid Planning=$3000+0=$3000
As from the analysis above First option is moved out due to its high extra cost. Out
of this 2nd and Third option I recommend Chase Production Planning due to this
following Reason.
Reason: Those people that they hire and then quickly lay off tend to not return. As
Elizabeth Conrad, Human Resource Manager can’t blame those workers whom
they fire, since from their perspective it looks like they have no idea how to run our
business. In addition, as those people complain to other people about our treatment
of them, Their reputation is getting to look bad, and that makes it increasingly
difficult to find good people to hire.
The Only Consequences is Production as per Chase production Planning is costlier
by=$4750-$3000=$1750