krm8_ism_ch14 - 14 Chapter Sales and Operations Planning...

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14 Sales and Operations Planning DISCUSSION QUESTIONS 1. Over the past several years, many corporations have experienced reductions in the workforce of sufficient size to receive attention in the media. Restructuring charges reflected in the annual reports to stockholders are often in the order of magnitude of $100,000 per employee. If business is expected to recover within a year, the company would usually be better off to keep these employees on the payroll, perhaps shifting some of them to sales, or loan others for community volunteer work. It is difficult to estimate the monetary value of the following costs associated with layoffs: q Decreased morale and loyalty of employees not fired q Employee stress, mortgage defaults, failed marriages, suicides q Customers may question the ability to perform, creating a chilling effect on sales q Suppliers may become suspicious of firm’s financial strength, demand cash q Loss of experience, skill and knowledge inventories q Loss of goodwill in community, future cooperation in zoning q Loss of redevelopment incentives q Loss of reputation as an employer, future difficulty in hiring a qualified workforce 2. Responses will vary depending on which firms are used as examples. Some industries, such as the U.S. auto industry, have a long history and tradition of workforce furlough and recall to match production with demand. Generations of employees are accustomed to this cycle, and fairly smoothly transition between working in the plant during good times and finding other temporary careers when business is slow. Other industries, such as utilities, have a history of stable employment, but are now faced with competition, restructuring, and dealing with employees who hired on for life and now feel betrayed. Stable employment requires stable markets, management loyalty to the workforce, long product lifecycles, financial strength, skilled workforces, and competition that also needs stable workforces. 3. As automobile sales increased, management was reluctant to recall furloughed workers. Instead, the existing workforce was required to work more and more overtime on assembly lines running at a faster and faster pace. Recalled workers might have been less skilled, or it might have been more profitable to work a small force long hours than to work a large force short hours. However, overtime is not an effective long-term technique for increasing output. Workers become too tired. Workforce size and overtime are controllable variables in production planning. GM workers went on strike because of stress associated with the production planning strategy calling for long-term use of overtime. They preferred to recall furloughed workers, even though it meant they would take home less pay as individuals. PROBLEMS
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krm8_ism_ch14 - 14 Chapter Sales and Operations Planning...

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