Campaigns and seasonality´s effect on batch size

Sammanfattning: 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%.