You are the manager and have to make the production decisions for the next six months. You
Question:
You are the manager and have to make the production decisions for the next six months. You do this by entering values into the blue-shaded cells. In rows 5 through 6 you indicate how many units need to be produced. In rows 13 and 14 you enter the number of workers that you hire or lay off. Hiring and firing happens at the beginning of each month. Row 16 is the number of interns that are used. The interns are hired on a month-by-month basis. If you want two in both months 1 and 2, you have to enter "2" C16 and D16.
Think of this as a game or big puzzle. There are some rules:
Inventory: You have unlimited storage space. Each unit stored incurs an inventory holding cost (Cell K6). You can have backorders, which would be a negative inventory. However, backorders incur a per-unit cost (Cell K7).
Interns: You can use interns. You make that decision on a month-by-month basis and there is no hiring or firing cost. You must have at least 2 workers for every intern; if you wanted to use 5 interns you have to have at least 10 regular workers.
Overtime: Each worker can only work 14 hours of OT per month.
Begin by just playing around. You might think "I have demand for 3500 in Month 1, I'll put 3500 in C5." Try this. Now go down to the area labeled "CHECK AREA" starting in row 18. You will see that with the starting workforce of 7 workers, you had 980 hours available and C21 has a big red negative 770 hours. You don't have enough labor to produce 3500. Even if you used all of the OT available (the 98 in cell C23) you wouldn't have enough. Even with maximum interns, you won't have enough. You need to hire. Each worker can give you 280 units (140 hours times 2 items per hour.) Hire some workers (in cell C13) then increase production in cell C5 Then double-check to be sure you haven't broken a rule. Experiment with different options. And study the graphs below each plan to see if they look like level, chase, or something else as you make decisions.
Now
You need to create three plans:
A “pure” level plan. With a level plan you make exactly the same number of items each month. RT, OT, and Interns will all have the same values each month. You can make hiring/layoff decisions only in month one.
A “pure” chase plan. This is a little less restrictive. Here overall production and demand have to be equal, or as near equal as possible. (You can’t use a fractional worker or fractional part of an hour to get an exact match.)
A plan you devise yourself. You must identify your goal with this plan. Do that in cell D3 in the Comparison Table worksheet. Example: To maximize held inventory.
What to turn in:
Your completed spreadsheet.
pros and cons for each plan and a recommendation or conclusion.
Managerial Economics and Business Strategy
ISBN: 978-0071267441
7th Edition
Authors: Michael R. baye