CASE STUDY Smartphone Production at QuickTronics Rudy Hartono, general manager at QuickTronics, a con- tract manufacturer for consumer electronics, was headed TABLE 8-13 to the annual planning meeting. He had the demand fore- cast for the next 12 months and the goal of the meeting was to develop an aggregate plan. Historically, Rudy had Month Demand Forecast for Smartphones (in '000s) Demand 8,000 10,000 11,000 11,000 11,000 12,000 13,000 14,000 15,000 17,000 19,000 19,000 maintained a steady workforce of 667 teams in the plants and built inventory in the first half of the year for use in the second half. While this approach made workforce management easy. it led to a large buildup of inventory. As Rudy walked into the meeting, he wondered whether January February March April was better to hire and fire workers as needed in order to reduce the amount of inventory held. M ay June July August QuickTronics Production Planning QuickTronics set up a large assembly factory in Batam, Indonesia, that focused on the assembly of smartphones. The Indonesian government had offered incentives lead- October ing many manufacturers to locate their factories in Batam. Many component suppliers were located close tuo the QuickTronics plant and sent small batches to the tory on a regular basis. Assembled phones were stored in demand in this market, each unit delayed in this manner a warehouse from where they were shipped in response cost 100,000 Rupiah in discounts offered to customers to to customer orders from Asia, Europe, and America. The keep them happy. The company had a policy of ensuring supply chain team at Qu customers to develop a monthly forecast of demand, as year started out without any unfilled orders. The material shown in Table 8-13. Demand for smartphones peaked cost for each phone was 500,000 Rupiah. in the fourth quarter of the year December ickTronics had worked with its that there were no stockouts in December so the new The factory ended December with 667 assembly Smartphone assembly was handled by teams of 10 teams and a million phones in inventory. The produc tion plan at the factory attempted to meet demand in workers each. Each team had the capacity to assemble 125 phones per hour. The capacity of each factory was Table 8-13 at the lowest possible cost while ensuring determined by the number of assembly teams deployed. that the factory ended December of the coming year Each factory operated for 20 days a month, 8 hours a with the same labor and inventory as the previous day. Assembly workers were paid 4,000 Rupiah/hour December. during regular time. They could be asked to work up to an additional 10 hours per month as overtime. Overtime Questions as paid at the rate of 6,000 Rupiah/hour. If QuickTron- ics chose to layoff workers, each layoff cost the companymaintains a workforce of 667 throughout the year? How 800,000 Rupiah and each hiring cost 400,000 Rupiah. Itmuch should the factory produce each month? What is the cost 50,000 Rupiah to carry a phone in inventory frommaximum inventory under this plan? one month to the next. Quicktronics could also choose to 2. How much can Rudy reduce cost by if he gives himself the delay a customer order by stocking out in a given month flexibility of hiring and firing teams as desired? H and filling the stockout from next month's production h should the factory produce each month? What is the Given the importance of keeping up with customer 1. What is the annual cost of the current plan where Rudy maximum inventory under this plan