Question 1. Aggregate Production Plan (30 marks) 1 Digital Tech. is a company that produces webcams used for recording or streaming the video on t! Internet. The company would like to develop an aggregate production plan for the next six monti from January to June. After conducting a comprehensive marketing research, the managers have obtained the following demand forecast for each month: Februar April January y March May June Demand forecast 800 700 900 600 500 540 Number of working days 20 20 20 20 20 20 Besides, after discussing with the finance department, the managers have also summarized the cost information as follows: Inventory holding cost $20/unit/month Marginal cost of stockout $40/unit Marginal cost of subcontracting $100/unit Hiring and training cost $450/worker Layoff cost $600/worker Production hours required 5 hours/unit Straight-time cost (first eight hours per day) $20/hour Overtime cost $25/hour At the beginning of January, there are 200 units of initial inventory, and 15 workers. The following assumptions are made: Inventory and backorder costs are calculated based on the ending inventory at the end of each month. Hiring or layoff costs are incurred when the total number of workers changes. Once scheduled, all workers will produce at their full potential each month. Consider the following three strategies: (1) A level strategy by maintaining a constant workforce of 20 workers for all 6 months; absorb demand variations by inventory and backorders. (2) A constant workforce of 18 workers, use overtime to fulfil extra demands. (3) A constant workforce of 15 workers; use subcontracting to fulfil extra demands. Question: Complete the aggregate plan for each strategy in the following three tables respectively, and find out the strategy with the least total costs. Plan 1: level strategy with inventory and backorder costs incurred Februar Total January March April May June Demand forecast Beginning inventory Production required Production hours required Number of workers Regular hours available Overtime hours planned Actual production Units subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training cost Layoff cost Subcontracting cost Inventory cost Backorder cost 2. Plan 2: constant workforce with overtime Februar Total January y March April May June Demand forecast Beginning inventory Production required Production hours required 3 Number of workers Regular hours available Overtime hours planned Actual production Units subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training cost Layoff cost Subcontracting cost Inventory cost 3 Backorder cost Plan 3: constant workforce with subcontracting Februar Total January y March April May June Demand forecast Beginning inventory Production required Production hours required Number of workers Regular hours available Overtime hours planned Actual production Units 4 subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training 4 cost Layoff cost Subcontracting cost Inventory cost Backorder cost Question 1. Aggregate Production Plan (30 marks) 1 Digital Tech. is a company that produces webcams used for recording or streaming the video on t! Internet. The company would like to develop an aggregate production plan for the next six monti from January to June. After conducting a comprehensive marketing research, the managers have obtained the following demand forecast for each month: Februar April January y March May June Demand forecast 800 700 900 600 500 540 Number of working days 20 20 20 20 20 20 Besides, after discussing with the finance department, the managers have also summarized the cost information as follows: Inventory holding cost $20/unit/month Marginal cost of stockout $40/unit Marginal cost of subcontracting $100/unit Hiring and training cost $450/worker Layoff cost $600/worker Production hours required 5 hours/unit Straight-time cost (first eight hours per day) $20/hour Overtime cost $25/hour At the beginning of January, there are 200 units of initial inventory, and 15 workers. The following assumptions are made: Inventory and backorder costs are calculated based on the ending inventory at the end of each month. Hiring or layoff costs are incurred when the total number of workers changes. Once scheduled, all workers will produce at their full potential each month. Consider the following three strategies: (1) A level strategy by maintaining a constant workforce of 20 workers for all 6 months; absorb demand variations by inventory and backorders. (2) A constant workforce of 18 workers, use overtime to fulfil extra demands. (3) A constant workforce of 15 workers; use subcontracting to fulfil extra demands. Question: Complete the aggregate plan for each strategy in the following three tables respectively, and find out the strategy with the least total costs. Plan 1: level strategy with inventory and backorder costs incurred Februar Total January March April May June Demand forecast Beginning inventory Production required Production hours required Number of workers Regular hours available Overtime hours planned Actual production Units subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training cost Layoff cost Subcontracting cost Inventory cost Backorder cost 2. Plan 2: constant workforce with overtime Februar Total January y March April May June Demand forecast Beginning inventory Production required Production hours required 3 Number of workers Regular hours available Overtime hours planned Actual production Units subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training cost Layoff cost Subcontracting cost Inventory cost 3 Backorder cost Plan 3: constant workforce with subcontracting Februar Total January y March April May June Demand forecast Beginning inventory Production required Production hours required Number of workers Regular hours available Overtime hours planned Actual production Units 4 subcontracted Ending inventory Cost Straight-time cost Overtime cost Hiring and training 4 cost Layoff cost Subcontracting cost Inventory cost Backorder cost
