Determining changeover cost and holding cost of finished goods for the EPQ inventory model in two brick production plants in the USA.

Abstract

The following report deals with the total changeover and holding costs of General Shale in two of its production plants, which are in Rome in Georgia and in Spring City in Tennessee. The company has cost statements, but these should be taken under the hat to find out if these values and the 10% holding cost rule of the company correspond to reality. First of all, the report deals with the company per se in order to get an overview of the facts. Then the problem was explained in detail and a research question was formulated. The approach to the problem is then explained as well as theoretical terms and models are explained to provide an understanding and the necessary basic knowledge for further chapters. In order to be able to deep dive into the matter, many data records had to be collected first. Therefore, all the cost factors that have an impact in the changeover process and the inventory holding were first brought together, what allowed to gain an overview of all, even the smallest, cost components. As a result, the current situation could be determined, recorded in numbers and, consequently, analyzed in detail. In several steps, scenarios were developed comparing the costs assumed so far with the cost estimated by this project. It could be concluded that the costs General Shale assumed so far for Changeover Cost calculations are underestimated and for the Holding Cost are overestimated. In addition, a perfect production scenario was simulated, which allowed to identify that there is still room for improvement in the production scheduling. Finally, recommendations were made for future production planning, inventory management, as well as how to further optimize production quantity by allowing to save costs at the same time.