In order to satisfy the production requirement, the company can vary its capacity by hiring or laying off workers and running overtime production. The following assumptions are made.
business
Description
Question 2. Aggregate
Production Plan (20 marks)
In order to satisfy the
production requirement, the company can vary its capacity by hiring or laying
off workers and running overtime production. The following assumptions are
made.
·
Inventory and backorder costs are calculated using ending
inventory/backorder of each month.
·
Hiring or layoff costs are incurred when the number of
workers changes.
·
The number of workers in each month should be an integer. Once scheduled, all workers will produce
at their full potential each month.
·
The ending inventory requirement of June stated in Cell “B11”
of the sheet “Aggregate” must be satisfied.
·
Consider the following three different strategies.
(a)
A chase strategy by varying the number of workers. That is, use the
minimum number of workers in each month to make the ending inventory of each
month non-negative. No overtime production.
(b)
A level strategy to meet the overall production requirement. That is, use
a constant number of workers for these 6 months; demand variations are absorbed
by inventory and backorders. Hiring and layoff only
happens at the beginning of January. No overtime production.
(c)
Stable workforce with overtime so that there is no backorder in all months. That is, set a constant number of
workers for these 6 months; do overtime production if necessary; no backorder is allowed at the end of each month. Hiring
and layoff only happens at the beginning of January.
Develop three plans using
the above three strategies, respectively. Your plans should be cost-
effective among the plans that satisfy the requirements. (For example,
using one thousand workers can satisfy some of the above requirements, but it
is obviously not cost-effective, i.e., minimizing the cost.)
|
Initial number of workers |
12 |
|||
|
Productivity |
2 |
units per worker hour |
||
|
Regular hours per month |
200 |
hours |
||
|
Regular time salary |
14 |
$ per hour |
||
|
Overtime salary |
19 |
$ per hour |
||
|
Inventory holding cost |
2 |
$ per unit per month |
||
|
Backorder cost |
11 |
$ per unit per month |
||
|
Hiring workers |
4500 |
$ per worker |
||
|
Laying off workers |
5000 |
$ per worker |
||
|
Beginning Inventory of
January |
300 |
units |
||
|
Required Ending Inventory
of June |
700 |
units (at least these
many units) |
||
|
|
|
|
||
