One of the stores of the Grocery Sales Organization (GSO) has asked for your help to try
Question:
One of the stores of the Grocery Sales Organization (GSO) has asked for your help to try to figure out if they should hire more cashiers for the upcoming months or if they will have enough to meet the demand if they allow some overtime. You decide to follow the same approach as developing aggregate production plans but to adapt it to their specific service context. In this context, keeping inventory is of course impossible. Furthermore, the GSO wants to maximize its clients' satisfaction. For this reason, all aggregate plans must aim to satisfy the entire forecasted demand for each period (i.e. no shortages allowed).
You start by meeting with the executive team to discuss the various management policies that will influence the aggregate plan. You learn that:
They currently have 15 employees trained as cashiers.
Each cashier will work 160 hours during the 4-week period.
A cashier's salary for a 4-week period is $3 000.
These are full-time employees who must be paid their full salary each period. For example, if the demand translates to 200 hours of work, you would need 2 employees and the total salary paid would be $7 000.
A maximum of 10 new employees may be hired for the entire planning horizon.
The cost of hiring a new employee is estimated at $2 000.
The cost to lay off an employee is estimated at $2 500.
Overtime is paid $25 per hour.
During a 4-week period, the maximum overtime allowed is 20 hours/employee.
It takes an average of 5 minutes to serve a client.
You then met with the directors to establish demand forecasts for the upcoming 4-week periods:
Week 1: 32,000 clients
Week 2: 34,000 clients
Week 3: 38,000 clients
Week 4: 30,000 clients
Week 5: 30,000 clients
a) Use a pure chase strategy with no overtime to develop the first aggregate plan. For each period, indicate how many employees to hire and lay off. Calculate the total cost for this plan.
b) Use a stable workforce strategy with overtime to develop the second aggregate plan. You may only hire or lay off employees for period 1. Indicate how many employees to hire or lay off at period 1 and, for each period, how much overtime is needed. Calculate the total cost for this plan.
Finally, you would like to propose the implementation of a flexible team of employees who could help out during peak demand (i.e. sort of like a subcontractor). These employees already work at the GSO doing other jobs but they could come help out as a cashier for a few hours without causing hiring and lay off costs. It would be a little more costly than overtime hours. Your estimates for this flexible team are a maximum of 160 hours per period at a rate of $28 per hour. However, you think that they will take more time to serve each client. Your first estimate is 7 minutes/client.
c) Use a mixed strategy to develop the third aggregate plan. This time, the total workforce stays constant throughout the 5 periods. Overtime is allowed, but must respect the capacity (20hrs/employee). Indicate how many employees to hire or lay off at period 1. For each period, specify how much overtime is needed per team as well as how many hours are needed from the flexible team. Calculate the total cost for this plan.
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson