(A.) SBS, a company that manufactures several models of skateboards, are about t

Question

(A.)

SBS, a company that manufactures several models of skateboards, are about to prepare an aggregate plan that will cover six months. Their forecasted demand for the following six months is as follows:

Forecast 200 200 300 400 500 200

Month 1 2 3 4 5 6

In addition, the production costs for SBS are summarized in the table below:
Regular time cost Overtime cost Inventory cost Backorder cost
$2 per skateboard $3 per skateboard $2 per skateboard/mo $5 per skateboard/mo

SBS wants to develop a level workforce plan that allows a steady rate of regular-time output, mainly using inventory to absorb uneven demand, but also allowing for backordering. In this plan, they do not want to use overtime. They currently have 15 workers, each producing up to 20 skateboards per month. In addition, they currently have zero inventory and want to finish with zero inventory and zero backlogs. Note that SBS wants a more realistic calculation of their inventory cost that assumes that their inventory for a given month is equal to the average between their starting and ending inventories for that month. Also, SBS does not want to hire or fire any of their current laborers. Prepare an aggregate plan and determine its cost based on the above information.

(B.)

While reviewing the plan developed in Part A, the SBS management has learned that one worker has submitted her resignation. Rather than replacing the person, they have asked you to modify your plan by staying with the smaller workforce and use overtime to make up for the lost output. Develop a plan and compare it to the previous one.

Explanation / Answer

A) Level output rate without overtime = 15*20 = 300 units period 1 2 3 4 5 6 Total forecast 200 200 300 400 500 200 1800 output regular 300 300 300 300 300 300 1800 overtime output-forecast 100 100 0 -100 -200 100 0 inventory: beginning 0 100 200 200 100 0 ending 100 200 200 100 0 0 average 50 150 200 150 50 0 backlog 0 0 0 0 100 0 100 COSTS: output regular 600 600 600 600 600 600 3600 overtime inventory 100 300 400 300 100 0 1200 backorder 500 0 500 TOTAL COST 700 900 1000 900 1200 600 5300 B) The output possible with 14 workers is 280 units, the shortfall to be produced in overtime: The plan and cost will be as under: period 1 2 3 4 5 6 Total forecast 200 200 300 400 500 200 1800 output regular 280 280 280 280 280 280 1680 overtime 0 0 40 40 40 0 120 output-forecast 80 80 20 -80 -180 80 0 inventory: beginning 0 80 160 180 100 0 ending 80 160 180 100 0 0 average 40 120 170 140 50 0 backlog 0 0 0 0 80 0 80 COSTS: output regular 560 560 560 560 560 560 3360 overtime 120 120 120 360 inventory 80 240 340 280 100 0 1040 backorder 400 0 400 TOTAL COST 640 800 1020 960 1180 560 5160 The total cost has come down by $140, by producing under overtime at extra cost of $1 per unit, but at the same time reducing inventory cost @ $2 per unit, during the months when level production is higher than the demand. with 20 units on overtime for all six months: Pl try out other possibilities. period 1 2 3 4 5 6 Total forecast 200 200 300 400 500 200 1800 output regular 280 280 280 280 280 280 1680 overtime 20 20 20 20 20 20 120 output-forecast 100 100 0 -100 -200 100 0 inventory: beginning 0 100 200 200 100 0 ending 100 200 200 100 0 0 average 50 150 200 150 50 0 backlog 0 0 0 0 100 0 100 COSTS: output regular 560 560 560 560 560 560 3360 overtime 60 60 60 60 60 60 360 inventory 100 300 400 300 100 0 1200 backorder 500 0 500 TOTAL COST 720 920 1020 920 1220 620 5420

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