Consider the following modifications to the Good and Rich Candy Company example from class. How would the aggregate planning strategy change in each case provided? Data from class lecture include:
Spring: forecasted demand=80,000
Summer: forecasted demand=50,000
Fall: forecasted demand=120,000
Winter: forecasted demand=150,000
Hiring cost = $100 / worker
Firing cost = $500 / worker
Regular Production Cost = $2 / pound
Inventory carrying cost = $0.50 / pound / quarter
Production per employee = 1,000 pounds / quarter
Beginning work force = 100 workers
Beginning inventory = 0
Cost of level production strategy = $870,000
Cost of chase demand strategy = $835,000
a) Inventory carrying cost is reduced to $0.25 per lb. per quarter. Consider both level production and chase demand strategies. Which planning strategy is best?
b) Inventory carrying costs remain at $0.25 per lb. per quarter. Sales promotions are successful in shifting demand of 25,000 lbs. of candy from Fall to Summer and 20,000 lbs. from Winter to Spring. Which planning strategy is best?