A. B. C. D. Level Jan Feb Mar Apr May Jun Total Safety stock Demand 24000 36000

Question

A.

B.

C.

D.

Level Jan Feb Mar Apr May Jun Total Safety stock Demand 24000 36000 32000 40000 24000 84000 240000 0 Prod per worker Begin Inv 7000 16000 20000 28000 28000 44000 Man power 10 4000 10 Total requirement 24000 20000 12000 12000 -4000 40000 Hours/month 240 Regular worker 10 10 10 10 10 10 Act production 40000 40000 40000 40000 40000 40000 Closing inv 16000 20000 28000 28000 44000 0 Hire 2 0 0 0 0 0 Fire 0 0 0 0 0 0 Labor cost 48000 48000 48000 48000 48000 48000 1000 Hiring cost 2000 0 0 0 0 0 1500 Firing cost 0 0 0 0 0 0 0.6 Inventory cost 9600 12000 16800 16800 26400 0 Total cost 371600

Explanation / Answer

Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are.

The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4.

The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime.

TABLE 13-3 Monthly Demand at Soda Galore

TABLE 13-4 Soda Galore Planning Data

Assume that employees negotiate an increase in the regular production wage rate to $20 per hour and $30 per hour for overtime. Also assume that Soda Galore always plans to hold at least 7,000 cases of safety stock to meet unanticipated customer demand. Assume that hiring and layoff/firing, if necessary, occur at the beginning of the month.

a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.)

b. Determine the cost of the level production plan.

c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "0" wherever required.)

d. Determine the cost of the chase production plan.

e. After much internal discussion, the company decides to maintain a permanent workforce of 8 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production.(Leave no cells blank - be certain to enter "0" wherever required.)

  
f. Determine the cost of the hybrid production plan. Use the overtime cost.

Month Demand Forecast January 24,000 cases February 36,000 cases March 32,000 cases April 40,000 cases May 24,000 cases June 84,000 cases Total Demand 240,000 cases Average Monthly Demand 40,000 cases

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