ABC Inc. is a manufacturer of sensible shoes for aging baby-boomers. The company is having great success. Although demand is seasonal, it is expected to increase steadily over the next few years. The company is purchasing a new facility to accommodate the increase in demand. However, the facility will not open until 13 months from now. The current facility can only accommodate a maximum of 15 workers. Using the information below, help ABC Inc. manage this transition year by deriving a production plan that will meet demand at the lowest cost. With the limited workforce size, use of overtime and subcontracting are options to consider.

Month	Forecast (in pairs)
May	3,000
June	3,000
July	2,200
August	2,200
Sept	4,000
Oct	4,000
Nov	2,200
Dec	3,000

Beginning inventory: 0

Beginning workforce: 8 workers

Employee productivity : 100 pairs / worker / month

Regular time capacity: maximum of 15 workers

Overtime capacity: half of regular time production

Subcontracting capacity: 1,000 pairs

Regular production cost: $36 / pair

Overtime production cost: $54 / pair

Subcontracting cost: $70 / pair

Inventory carrying cost: $10 / pair / month

Backorder cost: $100 / pair / month

Hiring / firing cost = $1,500 /worker

a) Develop an aggregate plan based on a level production strategy.

b) Develop an aggregate plan based on a chase production strategy.

c) Use Solver tool on Excel to find the optimal aggregate plan.

Report each aggregate plan in tabular format as given above. Provide the total cost of each production plan based on the inventory carrying cost, regular production cost , overtime production cost, subcontracting cost and hiring / firing cost.

d) How does the optimal solution change if you are to remove the maximum 15 workers capacity constraint? Will any cost savings be achieved? Fully justify your response.