An air conditioner manufacturer wants to construct aggregate planning for the next year. The demand for air conditioning has a seasonal pattern as seen in the table below.
|
Month |
Jan. |
Feb. |
Mar. |
Apr. |
May |
Jun. |
Jul. |
Aug. |
Sep. |
Oct. |
Nov. |
Dec. |
|
Forecast (unit) |
600 |
400 |
400 |
1600 |
2400 |
3200 |
4000 |
2400 |
1200 |
400 |
400 |
600 |
The company has gathered the following cost data:
|
Beginning workforce |
6 workers |
|
Initial inventory |
0 |
|
Ending inventory |
0 |
|
Subcontracting capacity |
unlimited |
|
Overtime capacity |
1500 units/month |
|
Production rate per worker |
120 units/month |
|
Regular wage rate |
$12 per unit |
|
Overtime wage rate |
$20 per unit |
|
Subcontracting cost |
$25 per unit |
|
Hiring cost |
$150 per worker |
|
Firing cost |
$280 per worker |
|
Holding cost |
$3 per unit/month |
|
Backordering cost |
$15 per unit/month |
Calculate the total cost of each aggregate planning strategy below. Which strategy would you recommend?
Plan A – Chase demand
Plan B – Level production with overtime and subcontracting, as needed,
Plan C – Level production with backorders as needed
Plan D – Optimum strategy
