Aggregate Planning

# Aggregate Planning - Aggregate Planning Intermediate range...

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1 Aggregate Planning Intermediate range planning Production, workforce, inventory “Chase” and “level” strategies

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Example 1 Materials \$5/unit Holding cost \$1/unit per mo. Marginal cost of stockout \$1.25/unit per mo. Hiring and training cost \$200/worker Layoff cost \$250/worker Labor hours required . 0.15 hrs/unit Straight time labor cost \$8/hour Beginning inventory 250 units Productive hours/worker/day 7.25 Paid straight hrs/day 8 Suppose we have the following unit demand and cost information: Demand/mo Jan Feb Mar Apr May Jun 4500 5500 7000 10000 8000 6000
Determine Straight Labor Costs & Output Jan Feb Mar Apr May Jun Days/mo 22 19 21 21 22 20 Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145 Units/worker 1063.33 918.33 1015 1015 1063.33 966.67 \$/worker \$1,408 1,216 1,344 1,344 1,408 1,280 Paid straight hrs/day Labor hours/unit Given the demand and cost information below, what are the aggregate hours/worker/month, units/worker, and dollars/worker? 7.25x22 159.5/0.15 = 1063.33 22x8hrsx\$8=\$1408

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Chase Strategy: hiring & firing to meet demand Jan Days/mo 22 Hrs/worker/mo 159.5 Units/worker 1,063.33 \$/worker \$1,408 Demand 4,500 Beg. inv. 250 Net req. 4,250 Req. workers 3.997 Hired Fired 3 Workforce 4 Ending inventory 0 Assume our current workforce is 7 workers. First, calculate net requirements for production, or 4500-250=4250 units Then, calculate number of workers needed to produce the net requirements, or 4250/1063.33=3.997 or 4 workers Finally, determine the number of workers to hire/fire. In this case we only need 4 workers, we have 7, so 3 can be fired.
Jan Feb Mar Apr May Jun Days/mo 22 19 21 20 Hrs/worker/mo 159.5 137.75 152.25 145 Units/worker 1,063 918 1,015 967 \$/worker \$1,408 1,216 1,344 1,408 1,280 Apr Demand 4,500 5,500 7,000 10,000 8,000 6,000 Beg. inv. 250 Net req. 4,250 Req. workers 3.997 5.989 6.897 9.852 7.524 6.207 Hired 2 1 3 Fired 3 2 1 Workforce 4 6 7 10 8 7 Ending inventory 0 0 0 0 0 0 Below are the complete calculations for the remaining months in the six month planning horizon.

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Jan Feb Mar Apr May Jun Demand 4,500 5,500 7,000 10,000 8,000 6,000 Beg. inv. 250 Net req. 4,250 Req. workers 3.997 5.989 6.897 9.852 7.524 6.207 Hired 2 1 3 Fired 3 2 1 Workforce 4 6 7 10 8 7 Ending inventory 0 0 0 0 0 0 Apr Costs Material \$21,250.00 \$27,500.00 \$35,000.00 \$50,000.00 \$40,000.00 \$30,000.00 203,750.00 Labor 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 53,958.62 Hiring cost 400.00 200.00 600.00 1,200.00 Firing cost 750.00 500.00 250.00 1,500.00 \$260,408.62
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## This note was uploaded on 05/21/2011 for the course ISOM 111 taught by Professor Hu,inchi during the Spring '10 term at HKUST.

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Aggregate Planning - Aggregate Planning Intermediate range...

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