31. Case: Aggregate Planning at Green Mills Bob Thomas, director of operations at Green Mills Inc., had recently been put in charge of developing an aggregate plan for the coming year. This assignment was the result of a recent Green Mills board meeting where Tim Stanley, chief executive ofcer, had presented his idea of expanding operations to Chile. Specically, this backward vertical integration initiative could signicantly reduce Green Mills's raw materials costs. For two reasons, the key to this initiative was timing. First, the next year's planning cycle was at hand, and second, Thomas did not wish for Green Mills's competitors to hear about his proposal until it was too late for them to act. The board meeting concluded with the CEO tasking Thomas with developing a feasibility analysis and reporting back his ndings to the board at the next meeting. BACKGROUND Green Mills Inc. operated several lumber mills throughout the Northwestern United States that produced a variety of wood products. The management was considering the possibility of a backward vertical integration strategy through the purchase of forestlands. This initiative was due, in part, to the escalating costs for raw wood. Green Mills procured raw softwoods locally at $400 per thousand board feet. However, there existed an opportunity to purchase forestlands in Chile with an estimated production cost of $150 per thousand board feet. The cost for transporting lumber from Chile averaged $50 per thousand board feet. The maximum available shipping capacity was 1,500,000 board feet per month. The lead-time for harvesting and shipping raw wood 'om Chile to Green Mills was one month. The operations manager was interested in developing a minimum total cost aggregate plan for producing raw lumber from Chile in the amounts needed by Green Mills. Specically, the manager wanted to contrast the costs associated with a chase plan, a level plan and a mixed aggregate plan.1 Monthly demand projections were developed using a time series forecasting system that combined the expected monthly orders of each of the company's ve mills. The demand forecast (thousands of board feet) for the next 12 months is reported in Exhibit 1. In Chile, one worker could harvest 50,000 board feet of raw lumber per month based on a 160hoursper-month work schedule. The forest property under consideration currently had 20 employees and a maximum inventory capacity of 3,000,000 board feet per month. In the lumber industry, workers were hired on a monthly basis. This means that undertime was paid. Overtime was limited to 25 per cent of the regular-time hours worked. Exhibit 2 summarizes the production costs. Backordering was not permitted due to the competitive nature of the