A warehouse has to meet the demand for a product shown below. Each unit of stock remaining at the end of a month has a notional holding cost of 20. If there are shortages, 20 % of orders are lost with a cost of 200 a unit, and the rest are met by late deliveries with a cost of 50 a unit. A production department sends the product to the warehouse. Designed capacity of this department is 400 units a month, but utilization seldom exceeds 80 %. Every time the production rate is changed it costs 15 000.

How would you set about designing an aggregate plan for the product?

In preparing your answers you can use a spreadsheet software.

Month Aggregate demand 310 280 260 300 360 250 160 100