The Three Jays Corporation: Production Planning Case Study Report

This case study analyzes The Three Jays Corporation's production planning system, identifying issues with its Economic Order Quantity (EOQ) policy and providing recommendations for improvement. The report evaluates the current costs, suggests adjustments to EOQ calculations, and proposes new production quantities for the last week of June. It also compares the results with those of the team members, explaining the differences in methodologies and inputs. Furthermore, it recommends adopting a periodic approximation model for EOQ and Reorder Point (ROP) calculations, along with actionable steps for the company to take, such as training employees and redesigning production lines. The analysis aims to optimize production processes and financial strategies, offering a detailed overview of the company's challenges and proposed solutions.

Running head: THE THREE JAYS CASE STUDY 1
THE THREE JAYS CASE STUDY
Name
Institution

THE THREE JAYS CASE STUDY 2
Table of Contents
Executive Summary.............................................................................................................3
Introduction..........................................................................................................................4
The formal production planning system..............................................................................4
Recommendations on how to avoid such a scenario in the future.......................................5
Assessment of current production costs...............................................................................5
The difference in results.......................................................................................................6
Recommended actions to improve the production process..................................................6
Conclusion...........................................................................................................................7

THE THREE JAYS CASE STUDY 3
Executive Summary
This report evaluates the formal production system used by The three Jays Corporation
and presents the findings of what went wrong with the planning system. The report analyses the
situation and proposes possible courses that should be put in place to avoid a repeat of the
scenario in the future. The report further analyses the case to determine whether or not the firm
should continue using EOQ and recommends the steps that the company should take in
continuing to improve the production process.

THE THREE JAYS CASE STUDY 4
THE THREE JAYS CASE STUDY
Introduction
The three jay’s cooperation situated itself strategically to benefit from the exponentially
increasing demand for organic foods. The company, which is a subsidiary of FJ & J, has
experienced rampant growth in the past, and the proprietor, Jana Fremont, thinks there is a need
to free up some capital for use in running a campaign that she feels will serve to sustain the
growth. Jana Fremont's decision must be based on facts and data that will analyze the current
situation of the company and compare it against the possible options in terms of revenue usage,
demand satisfaction, and profit margins.
The formal production planning system
The first production planning system was set up and designated to predict the production
volumes using the Economic Order Quantity(EOQ) policy. The reorder level had been set to an
equivalent of three weeks' demand. Initially, this approach was effective and productive, but as
time went by, it veered off and started giving false values (Marshall & Davis, 2017). Majorly
because the inputs should have been changed with time, but the production team did not factor
the variations of demand over time. EOQ policy works very well for most companies as long as
they have the right inputs to the model. As a result of failure to change the inputs to the model,
the company began incurring unnecessary costs in unplanned orders forcing the production team
to change tactics. The EOQ would give lower values for the demand; therefore, the production
team would produce less than the actual demand, and the company would run out of supplies
without having recovered revenue to place an order. Consequently, material handling costs went
up, and production costs increased. A lot of capital gets held up by inventory or for inventory
(Hammond, 2017). As a result, there is a need to review the production planning methodology.

THE THREE JAYS CASE STUDY 5
Recommendations on how to avoid such a scenario in the future
The company is experiencing voluminous growth; as such, it should employ effective
demand forecasting methods and use the forecast values as a baseline for approximating the
production volumes. Such an approach would help the planning team order enough for demand-
oriented production without unnecessarily holding up capital.
The three Jays must also be very keen to change the inputs of their production planning
models every time they are placing a new order. The model must always use the most recent
demand/ market data in planning to avoid any unnecessary constraints (Sana, 2010).
Last but not least, the production planning team must strictly follow all production
planning procedures and protocols (Pal, 2016). In the scenario presented in the case study, two
planners Josh and Jake, found the EOQ policy not effective and improvised on their own. In the
long run, their new approach seems to have been adopted; their move partially contributed to the
dilemma that the company found itself in.
Assessment of current production costs
The ongoing production costs are not correct; there are extra costs incurred in production
through the payment of part-time workers as full-time staff. The cost involved in compensating
for labor provided by part-time workers can be reduced by the use of a few permanent staff.
There is minimal carrying cost, although the prices of cleaning and changeover are also very
high. Some of the expenses should be eliminated from the calculation of EOQ, while others
should be retained (Taleizadeh, Soleymanfar, & Govindan, 2018). Since The Three Jays already
pay FJ & J as a full-time employee, the costs incurred through the services offered by FJ and J
which include cleaning costs, changeover costs and order processing costs should not be

THE THREE JAYS CASE STUDY 6
included in the calculation of economic order quantity (TALEEIZADEH, Najafi, & AKHAVAN,
2010). Elimination of these costs will change EOQ calculations, as shown in the excel file. The
results of eliminating these costs from the EOQ will also vary the cost of production and the
overall running costs, as shown in the attached excel file. Logically the company compensates
for the same expenditure twice, resulting is over-approximation (Varyani, Jalilvand-Nejad, &
Fattahi, 2014).
The production quantities for the last week of June should be as follows: strawberry-
1001, raspberry- 828, Peach 245, Blueberry-265, Apple/Mint -198. See calculations in excel file.
Difference in results
My results are different from the results obtained by other members of the team mainly
because of the model used in calculating the production rates and the EOQ and ROP; some used
the EOQ model while I used the periodic approximation model (Sarkar & Mahapatra, 2017).
Another cause of the difference is the inputs to the models. Besides, everyone used their
formulation to predict the demand. The costs and demand values were not the same for everyone.
The periodic approximation method should be fully adopted for the EOQ and ROP calculations.
The regular approximation is effective and much more accurate because it makes use of the most
recent data, which yields more relevant and precise results (Sarkar & Mahapatra, 2017).
Recommended actions to improve the production process.
The company should train its employees to do the work that is done by FJ & J.
considering the amount of time FJ & J spend to do the job yet they are paid like full-time
employees if the same payment were given to a full-time employee his/her services would be
used elsewhere whenever there are no cleaning tasks ongoing or changeover tasks. The company

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should stop restricting itself to the values calculated through the ordering models but instead use
them to decide the minimum production and demand volumes. The company should also make
use of adjustable production lines; rather than have a changeover production line, the company
can have one that is adjustable to reduce the cost and time incurred in setting up for production
per batch.
Conclusion
The three Jays should actualize the periodic approximation model fully since it yields
better results. The company should also redesign the production lines in an adjustable format.
The Three Jays should keenly examine its financial strategy to eliminate any aspects of double
compensation, and over approximations, that affect the output values of the EOQ computation
models.

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References
Hammond, J. (2017). Operations Management Reading: Managing Inventory. Harvard Business
Review.
Marshall, P. W., & Davis, M. (2017). HBS Brief Case: Three Jays Corporation. Harvard
Business Review.
Pal, M. (2016). A periodic review inventory model with dependent stock demand, permissible
delay in payment, and price discount on backorders. Yugoslav Journal of Operations
Research.
Sana, S. S. (2010). An economic production lot size model in an imperfect production system.
European Journal of Operational Research, 158-170.
Sarkar, B. (2012). An EOQ model with delay in payments and time-varying deterioration rate.
Mathematical and Computer Modelling, 367-377.
Sarkar, B., & Mahapatra, A. S. (2017). Periodic review fuzzy inventory model with variable lead
time and fuzzy demand. International Transactions in Operational Research, 1197-1227.
TALEEIZADEH, A., Najafi, A., & AKHAVAN, N. S. (2010). Economic production quantity
model with scrapped items and limited production capacity.
Taleizadeh, A. A., Soleymanfar, V. R., & Govindan, K. (2018). Sustainable economic
production quantity models for inventory systems with shortage. Journal of Cleaner
Production, 1011-1020.

THE THREE JAYS CASE STUDY 9
Varyani, A., Jalilvand-Nejad, A., & Fattahi, P. (2014). Determining the optimum production
quantity in a three-echelon production system with stochastic demand. The International
Journal of Advanced Manufacturing Technology, 119-133.