Joel, director of Green Engines, a manufacturer of lawn mowers and dead leaf blowers / vacuums. He must prepare an overall production plan according to the demand forecasts for engines (see table below)

month forecast

jan 500 feb 300 march 200 april 1500 may 2500 june 3500 July 4500 aug 2500 sept 500 oct 300 nov 300 dec 2500

# of employees: 9

production per day: 9 units per employee

regular cost of production: $50 per unit

cost of subcontracting: $75 per unit

hiring cost: $3000 per employee

cost of thanks: $6000 per employee

cost of storage: $1 per unit per month (the monthly inventory cost is calculated based on the final monthly inventory)

initial stocks: 300 units

security stocks: 10% of the demand

suppose that:

- the employees work every day of the year (365)

- blockages or shortages are not allowed

- the monthly inventory cost is calculated based on the final inventory of the month

QUESTION:

a. Develop a synchronous production strategy that meets each month's forecast and safety stock, varying only the level of labor on variable-term contracts. Calculate the total cost of your synchronous plan

b. Compare the costs to a production level plan that uses inventory and subcontracting to absorb fluctuations. Calculate the cost of your plan

Note: since employees work every day of the year, the amount to be produced each month will vary from month to month. For example, February has 28 days while January has 31. Therefore, you should use leveled production per day as the basis for calculating production per month. In the examples presented in the lecture notes, it is assumed that employees work the same number of days per month, and therefore produce the same amount per month.

Joel, director of Green Engines, a manufacturer of lawn mowers and dead leaf blowers / vacuums. He must prepare an overall production plan according to the demand forecasts for engines (see table below)

month	forecast
jan	500
feb	300
march	200
april	1500
may	2500
june	3500
July	4500
aug	2500
sept	500
oct	300
nov	300
dec	2500

# of employees: 9

production per day: 9 units per employee

regular cost of production: $50 per unit

cost of subcontracting: $75 per unit

hiring cost: $3000 per employee

cost of thanks: $6000 per employee

cost of storage: $1 per unit per month (the monthly inventory cost is calculated based on the final monthly inventory)

initial stocks: 300 units

security stocks: 10% of the demand

suppose that:

- the employees work every day of the year (365)

- blockages or shortages are not allowed

- the monthly inventory cost is calculated based on the final inventory of the month

QUESTION:

a. Develop a synchronous production strategy that meets each month's forecast and safety stock, varying only the level of labor on variable-term contracts. Calculate the total cost of your synchronous plan

b. Compare the costs to a production level plan that uses inventory and subcontracting to absorb fluctuations. Calculate the cost of your plan

Note: since employees work every day of the year, the amount to be produced each month will vary from month to month. For example, February has 28 days while January has 31. Therefore, you should use leveled production per day as the basis for calculating production per month. In the examples presented in the lecture notes, it is assumed that employees work the same number of days per month, and therefore produce the same amount per month.

c. which of these two plans would you recommend and why?