Invisnotusedtoabsorbdemandfluctuations alevelstrategy

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Unformatted text preview: T and IT absorb fluctuations? Should SC be used on fluctuating orders so that a stable WF can be maintained? Should prices or other factors be changed to influence D? AGGREGATE PLANNING AGGREGATE PLANNING STRATEGIES CHASE STRATEGY LEVEL STRATEGY MIXED STRATEGY STRATEGIES STRATEGIES A chase strategy Changing the prod. or WF level to match D in each period. Inv. is not used to absorb demand fluctuations. A level strategy Maintaining a constant prod. rate and WF level for the duration of the plan. Inv. is built up during periods of less than average demand Delivery LT may be allowed to grow during periods of high D. A mixed strategy Inv. Level WF Level Prod. rate EXAMPLE 1 : CHASE AND LEVEL EXAMPLE 1 : CHASE AND LEVEL STRATEGIES What quantity should we produce monthly based on the forecasted Demand? Months January February March April May June Total Forecasted Demand 1100 1500 1800 1600 900 1100 8000 Capacity: 27 employees @ 21 days/month @ 8 hrs/day COSTS • Relevant costs: – Raw materials (RM) – Inventory (Inv.) – Backlogs (BL) – Sub-contracting (SC) – Hiring (H) – Firing (F) – Regular cost (RT) – Over Time cost (OT) • Production (hours) • Inventory: – Beginning Inventory (BI) – Safety Stock (SS) $100/unit $12/unit/month $20/unit/month $45/unit $200 $250 $12/hr (8 hrs/day) $18/hr 3hrs/unit 400 units 25% of Demand QUANTITY TO PRODUCE? Months Months BI D SS Q Prod. FI Jan. Feb. Mar. Apr. May Jun. 400 275 375 450 400 225 1100 1500 1800 1600 900 1100 275 375 450 400 225 275 975 1600 1875 1550 725 1150 275 375 450 400 225 275 Total 8000 7875 CHASE STRATEGY CHASE STRATEGY Months Jan. Feb. Mar. Apr. May Jun Demand 1100 1500 1800 1600 900 1100 Req. Prod. 975 1600 1875 1550 725 1150 Hrs of Req. Prod. 2925 4800 5625 4650 2175 345...
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