1 Question Operations Managment

Answer the question below based on the case study

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CASE STUDY – Covolo Diving Gear, Part 2

June 15^th, 2013– It had been two weeks since their contentious semi-annual planning meeting, and the senior staff for Covolo Diving Gear were getting ready to start their first monthly S&OP meeting.  Gina Covolo, CEO, got the ball rolling:

“I know it’s been a busy two weeks for all of you, and I appreciate you working extra time to get ready for this meeting.  Production is already set for the next two months, so we’re going to start by planning for this September through the following August.  I’ve had Patricia from marketing develop a sales forecast for these twelve months, and I’ve also had David from manufacturing estimate manufacturing costs and labor requirements, as well as capacity in the plant.  Mary from HR was also good enough to come up with some estimates of how much it costs to hire and train new workers, as well as the cost of laying off folks.  Finally, Jack from purchasing was able to get the accounting folks to estimate the cost of holding a gauge set in inventory for a month.  So let’s see what we’ve got.”Mary passed out the following information to all of the attendees:

Manufacturing costs per gauge set:  $74.50

Holding cost:  $8 per gauge set, per month

Average labor hours required per gauge set:  0.25 hours

Labor hours available per employee, per month: 160

Plant capacity:  35,000 gauge sets per month

Cost to hire and train a new employee:  $1,250

Cost to lay off an employee:  $500

Beginning and ending workforce: 50

Beginning inventory :10,000

1

1.      Develop a level production plan for Covolo Diving Gear.  What are the advantages and disadvantages of this plan?  Could Covolo implement a pure chase plan, given the current capacity?  Why or why not?  If sales continue to grow, what are the implications for production capacity at Covolo?