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Monarch I

In: Business and Management

Submitted By paperplane
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Pages 7
II. BOM Explosion Report Analysis At level 0 of the Bill of Materials, there are 3 items corresponding to the 3 finished products offered by Monarch, which are Economy, Standard, and Delux with item ID 1, 2, and 3 respectively. Looking at the explosion report for those 3 items, we observe that Monarch currently keeps a fairly high inventory level for all three items. The inventory level for the Economy and Standard item accounts for roughly 3 to 4 week demand, but the inventory level for the Delux model is high enough to satisfy the demand of almost 7 weeks, suggesting that the firm is currently keeping too much on hand inventory, and thereby creating a significantly amount of holding costs. From the item master file, we know that the annual demands are 150000, 100000, and 50000 corresponding to Economy, Standard, and Delux Model. Thus, the inventory level of the Economy and Standard is around 8.5% of the annual demand whereas the inventory level of the Delux model accounts for roughly 14% of the annual demand. For a product with the lowest annual demand in its product line, keeping a high inventory level will create unnecessary carrying cost that could be avoided. In fact, according to the BOM explosion report, the holding costs for all three products are considerably higher than their setup costs. The Economy item incur $270 in setup cost and $4296.63 in holding cost. Similarly, the setup cost and holding cost for the Standard and Delux models are $360, $3213.03 and $480, $6239.47, respectively. We notice that there is an imbalance between the holding costs and sets up cost for the 3 item at level 0 of the BOM, suggesting that the total costs are not optimal and changes could be made to reduce the total setup and holding costs. At level 1 of the BOM, we first look at 4 attachments A, B, C, D with ID 11, 12, 13, 14. Each attachment is a collection of...

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