GLOBAL SUPPLY CHAIN MANAGEMENT

Q2. FINE FRUIT CAKE COMPANY
A. Monthly and annual capacity for fine country fruit cake company.
1. Calculations
.
a. In calculating the monthly and annual capacity, the following assumptions have been made:
• The Company works for five days each week
• There are four weeks in each month
• The opening stock of 100 cakes of each size on 1st of January is not considered while making the calculations

b. From the question, we know that all production is done in batches of 10 kg of only one size of cakes at a time. Therefore we can either have a batch of ten cakes of 1kg each or 5 cakes of 2 kg each.
If we assume that the company can produce an average of 2 batches each of …show more content…

Hence it is unlikely that reduced storage space is a cause for the company having to sell stock at reduced price.
Another possible reason for the Company having to sell stock at reduced prices is that some cakes may have been nearing the end of the 3-month storage period, and would need to be sold while they still retained the required flavor and texture. As an example, for the month of June, there was an opening stock of 620 kg. A further 800 kg of cakes are produced, giving a total stock of 1420 kg. Based on a First-In First-Out rotation of stock, the most recently produced cakes (800 kg) will be retained, while some of the previously carried over stock (400 out of 620 kg) will be sold; resulting in a net stock of 1020 kg. Of this, 800 kg will be ‘fresh’, having an age of 0-1 month since production.
The last three rows of Table 3 summarize the ‘age’ of the cakes in months. From the table we can note that the highest net stock levels were in the months of August, September and October, and in these months the amount of stocks with age of 2-3 months since production were 20kg, 220 kg and 20 kg respectively. By selling stock at reduced prices in the