Overtime and idle time cost subcontracting cost costs

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Overtime and Idle Time Cost Subcontracting Cost Costs Minimized Inventory Holding Cost Hiring/ Firing Cost Use When Inventory is Impossible or Expensive For High Skilled Labor Intensive Operations Examples Law Firms, Accounting Service
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Extreme Aggregate Planning Strategy- Variable Output and Variable Capacity Demand Output Capacity Chase Strategy (Ideal. Case) Cost Increase Hiring & Firing Cost/ Idle Capacity Cost Costs Minimized Inventory Holding Cost/ Subcontracting Cost Overtime and Idle Time Cost Use Inventory is Impossible or Expensive Low Skilled Labor Operations There is a match between Labor Availability and the Need for Labor Examples Entertainment Center (Disney World), Farm Workers
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Reactive Alternatives Aggressive Alternatives Adjust Work-Force Level Complementary Products Overtime and Undertime Promotional Campaign Vacation Schedule Creative Pricing Anticipation Inventory Subcontractors Backlogs, Back Orders and Stockouts
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Planning Strategies Chase Strategy : Adjust production rates or staff levels to match demand requirements over planning horizon Hires and layoffs Overtime Extra shifts or subcontracting Not anticipation inventory or undertime Level Strategy : Maintains a constant production rate or workforce level over the planning horizon Anticipation inventory Undertime Sometimes overtime and backlogs Mixed Strategy : The best strategy may be a mixed strategy of anticipation inventory buildup during slack periods, only minor workforce level changes and overtime
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Aggregate Planning Strategies Aggregate Planning Strategies TABLE 14.1 PLANNING STRATEGIES FOR AGGREGATE PLANS Possible Alternatives Possible Alternatives Strategy during Slack Season during Peak Season 4. Level #2: constant Layoffs, building antici- Hiring, depleting antici- output rate pation inventory, pation inventory, over- undertime, vacations time, subcontracting, backorders, stockouts 1. Chase #1: vary workforce Layoffs Hiring level to match demand 2. Chase #2: vary output Layoffs, undertime, Hiring, overtime, rate to match demand vacations subcontracting 3. Level #1: constant No layoffs, building No hiring, depleting workforce level anticipation inventory, anticipation inventory, undertime, vacations overtime, subcontracting, backorders, stockouts
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Strategies Importance of APP A game plan for top management to control the firm To clearly define production tasks— provide agreement between operations/marketing/finance/engineering functions Provide required information for long range capacity planning
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Strategies Importance of APP (II) Planning techniques: 1. Optimization 2. Heuristics methods 3. Computer simulation models
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Calculation Examples on your Supplementary 1. Example – p.13-11 to 13-13.
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