3M plans to introduce a new paint to the market. As the production planner, you have assembled the following cost data and demand forecast for the upcoming year:

Cost:

Beginning inventory: 0 barrel, Inventory holding cost = $40 per barrel per quarter, Stockout cost = $150 per barrel, Increasing capacity via hiring employees = $40 per barrel,

Decreasing capacity via terminating employees = $80 per barrel, Subcontracting cost = $60 per barrel, Production cost = $30 per barrel,

Beginning production capacity = 1,800 barrels per quarter

There is no backlog (i.e., any unmet demand is lost and cannot be satisfied using future production). Your job is to develop an aggregate plan for production. Currently, you consider three options:

Option A: A chase strategy with hiring and layoffs

Option B: A level strategy with a full in-house production in which the production rate is set to the average quarter forecast

Option C: A level strategy with constant production of 1,200 barrels per quarter along with subcontracting (if needed).

i. Develop an aggregate plan for each option.

ii. Calculate the total cost (i.e., production, inventory, hiring/layoff, and subcontracting costs) and determine which option Sherwin-Williams should choose.

Answer rating: 100% (QA)

i Aggregate plan for each option Option A Option B Option C ii The total c... View the full answer