Question 5 (25 marks): Develop two aggregate operations plans as per the instructions below. An Excel file is provided to serve as a template for your analysis.

MPC Inc. manufactures lawn tractors. For the past few years the company has maintained a level production plan, letting inventory and backorders serve as a buffer to deal with month-to-month fluctuations in demand. Its permanent staff of 30 workers is able to produce a monthly output of 900 units, based on an average productivity of 30 units per worker per month. Of late demand patterns have become more erratic, and there has been a steady increase in demand over time. As a result backorders have become a problem for the company.

The plant manager has developed an aggregate production plan for the next six months that is based on a level strategy that only relies on its 30 permanent workers. This plan is provided on the Excel file provided with the assignment. This plan is not acceptable because of the number of backorders that occur, and because it leaves the company with no inventory at the end of the 6 month planning period.

Your task; develop two alternate aggregate production plans that eliminate backorders, and provide an ending inventory level of 100 units by the end of the 6 month planning period. Specifically, the two aggregate plans you develop should;

PLAN I; Use permanent staff and overtime (only).

PLAN II; Use permanent staff, and a combination of part-time workers & overtime.

The plans must include cost analysis;

• Cost per unit for lawn tractors produced by permanent full time workers = $600 per unit.
• Inventory Costs = $25 per unit per month
• Backorder Costs = $200 per unit per month
• Cost per unit for lawn tractors produced using overtime = $800 per unit.
• Cost per unit for lawn tractors produced by part-time workers = $700 per unit, but there is also a one-time hiring cost of $400 for each part time worker hired.

The use of overtime or part-time workers has to adhere to the following constraints;

Overtime

• On a month-to-month basis, no more than 10 permanent staff can be given the opportunity to work overtime.
• Each person that works overtime produces an additional 10 units per month.

Use of part-time workers:

• Part time workers can be hired to work the equivalent of 1/3 a full-time shift, but would only produce at 80% the rate of permanent, full time employees.
• So, on a monthly basis each part-time worker hired produces 1/3 * 30 * 80% = 8 units per month.

• A maximum of 5 part-time workers can work in a particular month, and assume part-time workers would be hired for a minimum period of one month.