Mgmt 361 - Ch 4 - part II

# Inventory cannot exceed 500 soft constraint avoid

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Inventory cannot exceed 500. Soft constraint: Avoid shortages but if you cannot avoid, keep backordering as small as possible. We will first take care of capacity (with no shortages). Then we will take care of inventory (with back ordering). Adjust. 1 4250 4300 5000 5000 4600 Inventory 0 300 600 0 0 Adjust 1: Excess inventory in P3. Move 100 units from P2 to P5. Adjust. 2 4250 4200 5000 5000 4700 Inventory 0 200 500 -100 0 Adjust. 2 gives a feasible plan. Try this problem with the level strategy. adjust : Move such that inventory cost is minimized while satisfying constraints

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6 Period 1 2 3 4 5 6 Capacity 11200 11200 11200 11200 6000 11200 Demand 5000 6000 8000 9000 9000 11000 Example 6 Do not exceed capacities. No shortages. Basic Plan 5000 6000 8000 9000 9000 11000 Inventory 0 0 0 0 0 0 Basic plan: 3000 over capacity in P5, Adjustment: move 2200 to P4, 800 to P3. Final Plan 5000 6000 8800 11200 6000 11000 Inventory 0 0 800 3000 0 0 We will now calculate costs for the final plan.
Aggregate Planning 7 Additional considerations: 1. Someone has to determine production requirements before aggregating. 2. Someone has to determine capacities. Methodology: 1. Determine aggregate plan, then budget, then adjustments to improve cost. 2. Prepare a plan to minimize total cost using techniques such as linear programming. One can consider additional costs such cost of backordering, cost of adding, or reducing workers. The text book discusses some of these.

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Add a brief explanation of strategies from book 8 One can consider additional costs such cost of backordering, cost of adding or reducing workers. The text book discusses some of these.