The sales department of a manufacturing company projects the following aggregate demand

Jan	1500
Feb	1700
Mar	1900
Apr	1900
May	2300
Jun	2300
Jul	1900
Aug	1500

You have been hired as a consultant to help develop a manufacturing plan which will minimize cost (and maximize profit).  It is expected that the year will begin with 200 units on hand.  Stock out cost of lost sales is $100 per unit.  Inventory holding cost is $20 per unit per month.  You may ignore idle time costs.

You consider the following options:

Plan A: In any given month vary the workforce to produce the quantity required in the prior month (this would be considered a chase strategy).  Both the December demand and build were 1600 units.  The cost of hiring additional workers is $5,000 per 100 units.  The cost of laying off workers is $7,500 per 100 units.

Plan B: Produce at 1,500 per month, which will meet minimum demand and use subcontracting at a price premium of $75 per unit to make up any production shortfall.  Once again, both the December demand and build were 1600 units.

Plan C: Keep a stable workforce by maintaining a constant production rate equal to the average monthly demand and allow varying inventory levels.  Once again, both the December demand and build were 1600 units. The cost of hiring additional workers is $5,000 per 100 units. 

Evaluate these plans and provide a report to management with specific recommendations.  After your evaluation of each plan, look at an additional plan which is a combination of the plans you evaluated or a slight variation in one of the plans that will further reduce the overall cost to the company for this demand period.  (For instance, you can set a constant production build rate at 1895 units and see how this would affect your analysis table and total cost.) Make sure to include this plan in your recommendations as well.

 

You may add more information in your analysis if needed, but the following tables and columns are required: 

1. Known data table (month and demand)

2. Plan A analysis table

    Columns: months from January to August;

    Rows: project demand, initial inventory, production build, subcontract-if any, available for sale, actual demand, stockout-if any, ending inventory, change in production, regular labour cost, subcontract cost, stockout cost, inventory holding cost, hiring cost, layoff cost, total cost of plan A.

3. Plan B analysis table 

    Requires same info as in Plan A

4. Plan C analysis table 

    Requires same info as in Plan A

5. Plan D recommendation plan analysis table 

    Requires same info as in Plan A

6. Comparison table (MOST IMPORTANT TABLE)

Answer rating: 100% (QA)

To evaluate the three proposed manufacturing plans Plan A Plan B and Plan C and provide recommendations we need to analyze each plan and compare their ... View the full answer