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Campaigns and seasonality´s effect on batch size

Rundqwist, Linda and Skog, Karolina (2014) MIO920
Production Management
Abstract
Background The Nordic headquarter at Campbell Soup has been commissioned by the management to
review their inventories and to asses’ optimal inventory levels under the prerequisite to
still achieve agreed customer service levels and not get higher total costs. The capital tied
is believed to be too high, therefore Campbell Soup wants to lower their inventory levels.
Purpose The purpose of this study is to do an extensive research resulting in long term suggestions
on feasible batch sizes which are affected by campaigns and seasonality. The outcome of
the study will be suggestions on how to lower the capital tied, while adhering to agreed
customer service levels and looking at the total costs.
Method Ten bouillons within the group... (More)
Background The Nordic headquarter at Campbell Soup has been commissioned by the management to
review their inventories and to asses’ optimal inventory levels under the prerequisite to
still achieve agreed customer service levels and not get higher total costs. The capital tied
is believed to be too high, therefore Campbell Soup wants to lower their inventory levels.
Purpose The purpose of this study is to do an extensive research resulting in long term suggestions
on feasible batch sizes which are affected by campaigns and seasonality. The outcome of
the study will be suggestions on how to lower the capital tied, while adhering to agreed
customer service levels and looking at the total costs.
Method Ten bouillons within the group Bong Dry Bouillon produced at the production line 102
were investigated. The data for the study was collected by interviews, direct observations
and by collecting quantitative and qualitative data. The methodical view used was the
analytical view.
Analysis The theories presented in the thesis were used to construct two models of the production
and inventory of finished products of one year. The first one, called Current Situation
Model, was based on real data and was used as a validation tool for the second model
called Cost Analysis Model. In the Cost Analysis Model a distribution function was used to
simulate a random stochastic demand and the Current Situation Model was used to
validate if the chosen distribution function was good enough. Different scenarios were
analyzed with the Cost Analysis Model to investigate the batch sizes sensitivity to different
changes. With the Cost Analysis Model a batch size for each investigated product could be
determined, which fulfills the case fill rate and has the lowest total varying cost.
Conclusion Campbell Soup Nordic has very low inventory costs in comparison to the setup costs and
manufacturing costs. It means it is more profitable for Campbell Soup Nordic, with regards
to the summation of the varying costs depending on volume, to produce in larger batches
for the products with high turn-over. The products with low turn-over should on the other
hand be produced in smaller batches. If Campbell Soup Nordic wants to fulfill the gold
standard of the service level in case fill rate they should continue with a safety time of two
weeks. They should do this since a shorter safety time gives more lost sales which leads to
not being able to fulfill the gold standard of a case fill rate of 99%. (Less)
Please use this url to cite or link to this publication:
author
Rundqwist, Linda and Skog, Karolina
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
keywords
Batch size, campaign, case fill rate, gamma-distribution, holding cost, manufacturing cost, seasonality, setup cost and simulation model.
other publication id
14/5484
language
English
id
4456408
date added to LUP
2014-06-02 14:50:20
date last changed
2014-06-02 14:50:20
@misc{4456408,
  abstract     = {{Background The Nordic headquarter at Campbell Soup has been commissioned by the management to
review their inventories and to asses’ optimal inventory levels under the prerequisite to
still achieve agreed customer service levels and not get higher total costs. The capital tied
is believed to be too high, therefore Campbell Soup wants to lower their inventory levels.
Purpose The purpose of this study is to do an extensive research resulting in long term suggestions
on feasible batch sizes which are affected by campaigns and seasonality. The outcome of
the study will be suggestions on how to lower the capital tied, while adhering to agreed
customer service levels and looking at the total costs.
Method Ten bouillons within the group Bong Dry Bouillon produced at the production line 102
were investigated. The data for the study was collected by interviews, direct observations
and by collecting quantitative and qualitative data. The methodical view used was the
analytical view.
Analysis The theories presented in the thesis were used to construct two models of the production
and inventory of finished products of one year. The first one, called Current Situation
Model, was based on real data and was used as a validation tool for the second model
called Cost Analysis Model. In the Cost Analysis Model a distribution function was used to
simulate a random stochastic demand and the Current Situation Model was used to
validate if the chosen distribution function was good enough. Different scenarios were
analyzed with the Cost Analysis Model to investigate the batch sizes sensitivity to different
changes. With the Cost Analysis Model a batch size for each investigated product could be
determined, which fulfills the case fill rate and has the lowest total varying cost.
Conclusion Campbell Soup Nordic has very low inventory costs in comparison to the setup costs and
manufacturing costs. It means it is more profitable for Campbell Soup Nordic, with regards
to the summation of the varying costs depending on volume, to produce in larger batches
for the products with high turn-over. The products with low turn-over should on the other
hand be produced in smaller batches. If Campbell Soup Nordic wants to fulfill the gold
standard of the service level in case fill rate they should continue with a safety time of two
weeks. They should do this since a shorter safety time gives more lost sales which leads to
not being able to fulfill the gold standard of a case fill rate of 99%.}},
  author       = {{Rundqwist, Linda and Skog, Karolina}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Campaigns and seasonality´s effect on batch size}},
  year         = {{2014}},
}