Aggregate Planning Case Preparation

Read Chapter $13,$ pages $535($start at Sales and Operations Planning$)$ through page $547.$ Pay particular attention to the Roofing Supplier example starting on page $540.$ The chapter covers $3$ aggregrate planning $($AP$)$ strategies for the Roofing Contractor.

For a completed example, review the Solved Problem $13\mathrm{.}1$: Roofing Manufacturer video that uses Excel to setup and solve the solved problem $13\mathrm{.}1.$ The attached Excel file includes the solution and supporting calculations: Problem$\_13\mathrm{.}1\_$Solved.xlsx

Leo's AP Case Information.

Assume your team is advising the Operations Manager at Leo's. Review the following info from Leo's Confectionery and address the questions following the case. Your deliverable is a memo directed to the Operations Manager at Leo's.

Leo's Confectionery has recently experienced explosive demand growth for the Leo's product line. The Marketing$/$Sales department has provided the following demand forecast for the upcoming $6$ months. Leo's is considering three AP strategies to meet the forecasted demand over the six month planning horizon.

The monthly demand forecast is below:

Month Monthly Demand Production days

$115,00022$

$216,20023$

$317,50022$

$418,50022$

$519,50023$

$620,50022$

Cost and Production Info:

Inventory Carrying Cost$-$per unit$/$month $ $0\mathrm{.}50$

Regular Pay$/$hour$--8$ hours daily $$18\mathrm{.}00$

Regular hours$/$day$/$employee $8$

Contract Manufacturing$--$cost$/$hour $$30\mathrm{.}00$

Employee and Contract Manufacturing Productivity$--$units$/$hour $20$

Leo's has no beginning inventory for the first month of the planning horizon.

Leo$$s is considering three aggregate planning strategies:

$1.$ Use a level strategy with constant workforce of $5$ workers to meet average daily demand using only regular work hours of $8$ hours$/$day with $5$ work days$/$week$,$ and no overtime. Note that employee productivity is $20$ units$/$hour$.$ Total daily production for $5$ employees given $8$ hour work day $=20$ units$/$hour$/$employee $*5$ hours $*8$ hours$/$day $=800$ units$/$day$.$

$2.$ Constant workforce is set at $4$ workers. Production will chase forecasted demand using a contract manufacturer to produce monthly forecasted demand in excess of the regular production of the $4$ workers. No overtime allowed.

$3.$ The Operations Manager is concerned about the level of ending inventory in plan $1$ because of the perishable nature of the Leo's product line. Plan $3$ is similar to plan $1$ but restricts the amount of inventory carried to a following month to $1500$ units. Leo's will continue to pay the $5$ workers for a $40-$hour work week regardless of the level of production. Leo's will not use layoffs or reduced hours for the $5$ regular time workers. Contract manufacturing is available on an as$-$needed basis to meet the AP$.$

Leo's AP Case Requirements.

For each AP strategy:

$1.$ Provide a summary which includes regular production units and cost, contract production units and cost, holding cost, and total cost of the aggregate plan.

$2.$ Identify benefits$/$shortcomings of the aggregate plan.

Then recommend one of the three AP alternatives if the objective is to minimize cost over the $6-$month planning horizon. Support your recommendation.

What are other considerations if cost minimization is not the sole objective? Support your answer.