Company has to satisfy all the monthly demands and minimize the total cost by using information below:
Question:
Company has to satisfy all the monthly demands and minimize the total cost by using information below:
Forecasted demand for Company X over 7 months is given below:
Month | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
Demand | 6,000 | 14,000 | 16,000 | 24,000 | 46,000 | 18,000 | 16,000 |
Working hours = 25 hours/week
Beginning inventory = 3,000 units
Beginning workforce = 15 workers
Production rate = 5 products/working hour
Hiring cost = $2,500 per worker
Firing cost = $2,500 per worker
Inventory carrying cost = $2 per unit per month
Regular production cost = $12 per unit
Overtime production cost = $25 per unit
Subcontract production cost = $40 per unit
Apply Aggregate Production Planning (APP) to provide production plans by filling forms in different scenarios and calculate total cost for these scenarios as belows:
- The company wants to maintain a constant rate of production by fixing regular production of 14,000 units/month and using overtime + subcontract production to deal with high demand. The overtime production capacity is set at half of regular production rate.
- Using chase strategy by hiring and firing workers to match with the demand and avoid using overtime + subcontract as much as possible.
- Assume the company’s layoff cost is increased from $2,500/worker to $7,000/worker. How the total cost will be changed in compared to question b? Which senarior the company should choose? Why?
Statistics The Art and Science of Learning from Data
ISBN: 978-0321997838
4th edition
Authors: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg