It is clear that Royal Mint wants to establish itself as a low cost producer through economies of scales i.e. Mass Production at a reduced cost.
Companies plan and forecast the demand according to the future needs of the market. Forecasting demand assists in decision making with respect to investment in plant and machinery, market planning and future sales. Some of the popular forecasting methods include
In this Case, Royal Mint Estimates the demand on Time series basis. In the UK, the Treasury contracts with Royal Mint on an annual basis for the likely requirements for coin in 12 months. The Mint meets every three months with executives from the UK clearing banks to discuss their currency requirements in the shorter term. These estimates are then updated at weekly planning meetings and the demand is forecasted and Royal Mint follows a Just in time work schedule. Based on these estimates, the raw material is procured and safety stock is maintained.
Agile manufacturing is the ability to accomplish rapid changeover between the manufacture of different assemblies. Rapid changeover is further defined as the ability to move from the assembly of one product to the assembly of a similar product with a minimum of change in tooling and software. Rapid changeover enables the production of small lot sizes, allowing for just-in-time' production.
Inventory Control - Safety Stock
Inventory control is a planned approach of determining what to order, when to order and how to order and how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales. Safety stock is an important measure to be calculated regarding inventory. This ensures efficient purchasing, storing, consumption and accounting for materials. This also ensures that there is no shortage of product and there is adequate supply of product to customers. This improves delivery time and increases the reliability measure of a company.
Inventory Control must be established to avoid huge accumulation of inventory. The Order level and Order quantity must be estimated prior to avoid shortages and reduce the customer lead time. These estimations in practical aspects are not accurate to the core. The estimations might be either higher or in some cases below the exact demand.
To avoid this discrepancy, Safety stock is determined. In order to ensure that additional stock is maintained to meet the customer demand, the Safety stock level can be calculated as per the following formula.
Safety stock = (Maximum Lead time - Normal Lead time) * Consumption rate
Q2.Explain the criteria which the Mint will need to take into account when it designs new
The criteria which