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    Aggregate Problem2

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    Sai Dheerendra Pal
    A manager is developing an aggregate production plan to address seasonal demand over the next 9 months. [Plan A] hires 2 additional temporary workers through period 5 to increase output and reduce costs from inventory and backlog. [Plan B] hires 1 permanent worker and allows limited subcontracting. [Plan C] relies solely on the existing workforce and limited subcontracting. The manager must determine which of these 3 plans has the lowest total cost.

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    Aggregate Problem2

    Uploaded by

    Sai Dheerendra Pal
    949 views1 page
    A manager is developing an aggregate production plan to address seasonal demand over the next 9 months. [Plan A] hires 2 additional temporary workers through period 5 to increase output and reduce costs from inventory and backlog. [Plan B] hires 1 permanent worker and allows limited subcontracting. [Plan C] relies solely on the existing workforce and limited subcontracting. The manager must determine which of these 3 plans has the lowest total cost.

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    A manager is developing an aggregate production plan to address seasonal demand over the next 9 months. [Plan A] hires 2 additional temporary workers through period 5 to increase output and reduce costs from inventory and backlog. [Plan B] hires 1 permanent worker and allows limited subcontracting. [Plan C] relies solely on the existing workforce and limited subcontracting. The manager must determine which of these 3 plans has the lowest total cost.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    949 views1 page

    Aggregate Problem2

    Uploaded by

    Sai Dheerendra Pal
    A manager is developing an aggregate production plan to address seasonal demand over the next 9 months. [Plan A] hires 2 additional temporary workers through period 5 to increase output and reduce costs from inventory and backlog. [Plan B] hires 1 permanent worker and allows limited subcontracting. [Plan C] relies solely on the existing workforce and limited subcontracting. The manager must determine which of these 3 plans has the lowest total cost.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Aggregate Planning Problem

    A manager is attempting to put together an aggregate plan for the coming nine months. She has obtained a forecast of expected demand for the planning horizon. The plan must deal with highly seasonal demand, demand is relatively high in periods 3 and 4 and again in period 8, as can be seen from the following forecast: Table 1: Monthly Demand Forecast

    Period Forecast

    1 190

    2 230

    3 260

    4 280

    5 210

    6 170

    7 160

    8 260

    9 180

    The department now has 20 full-time employees, each of whom can produce 10 units of output per period at a cost of $6 per unit. Inventory carrying cost is $5 per unit per period, and backlog cost is $10 per unit per period. The manager is considering a plan that would involve hiring two people to start working in period 1, one on a temporary basis who would work only through period 5. This would cost $500 in addition to unit production costs. a. What is the rationale for this plan? b. Determine the total cost of the plan, including production, inventory, and back-order costs. Prepare two additional aggregate plans. Call the one developed above as plan A. For plan B, hire one worker at a cost of $200. Make up any shortfall using sub-contracting at $8 per unit, with a maximum of 20 units per period (i.e; use sub-contracting to reduce back-order when the forecast exceeds regular output). Note that the ending inventory in period 9 should be zero. An additional constraint is that back orders cannot exceed 80 units in any period. For plan C, assume no workers are hired (so regular output is 200 units per period instead of 210 as in plan B). Use subcontracting as needed, but no more than 20 units per period. Compute the total cost of each plan. Which plan has the lowest cost?

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