Question 3.4 (17 marks), Swing-Up Inc. manufactures overhead garage doors. Its permanent staff of 40 workers is able to produce a monthly output of 1000 units, based on an average productivity of 25 units per worker per month. Of late demand patterns have become more erratic, and there has been a steady increase in demand over time. As a result backorders have become a problem for the company. The plant manager has developed an aggregate production plan for the next six months that is based on a level strategy that only relies on its 40 permanent workers. This plan is provided on the template provided with the exam. This plan is not acceptable because of the number of backorders that occur, and because it leaves the company with no inventory at the end of the 6 month planning period. Your task; develop an alternate aggregate production plan that eliminates backorders, and provides an ending inventory level of 400 units by the end of the 6 month planning period to provide greater assurance of not running out if anything unexpected comes up. Specifically, the aggregate plan you develop should use permanent staff, and a combination of part-time workers & overtime. As indicated in the worksheet for this question, at the start of this planning cycle there are 200 units in inventory. The plan you develop must include cost analysis based on the following costs; + Cost per unit for doors produced by permanent full time workers = $500 per unit. - Inventory Costs = $40 per unit per month Backorder Costs = $200 per unit per month Cost per unit for doors produced using overtime = $600 per unit. Cost per unit for doors produced by part-time workers = $500 per unit, but there is also a one- time hiring cost of $400 for each part time worker hired. Overtime: The use of overtime has to adhere to the following policy; On a month-to-month basis, overtime is only used if demand exceeds the output of regular permanent staff. If overtime is used in a specific month; at least 5 permanent staff must be given the opportunity to work overtime AND no more than 10 permanent staff can be given the opportunity to work overtime each month. . Each person that works overtime can produce an additional 10 units per month. Use of part-time workers: Part time workers can be hired to work the equivalent of 40% a full-time shift, but only produce at 80% the rate of permanent, full time employees. A maximum of 20 part-time workers can work in a particular month, and assume part-time workers must be hired for a minimum period of one month. A B D E F G H K M M N o P Q Given; Permanent workforce Production per month 40 25 per worker 1000 total Initial Inventory Desired @ end of 6th month 200 400 Costs Regular Permanent Overtime Part-time $ 500 per unit $ 600 per unit $ 500 per unit plus $ 400 for each part-time worker hired $ 40 per unit per month $ 200 per unit per month Inventory Backorder Percentage Style 1 Plant Manager's Plan; Permanent only-using inventory to "absorb" uneven demand & allow backorders 2 3 Month 1 2 3 4 5 6 Total 4 Forecast Demand 900 1000 1300 1150 1200 1350 6900 5 Output 6 Regular Permanent 1000 1000 1000 1000 1000 1000 6000 7 7 Overtime Part-time 9 Output - Forecast 100 0 -300 -150 -200 -350 -900 10 Inventory 11 Beginning 200 300 300 0 0 0 12 Ending 300 300 0 0 0 0 13 Average 250 300 150 0 0 0 14 Backorder 0 0 0 150 350 700 15 Costs 16 Output Regular Permanent $ 500 000 $ 500 000 $ 500 000 $ 500 000 $ 500 000 $ 500 000 $ 3 000 000 17 Overtime 18 Part-time 19 Hire Part-time 20 Inventory $ 10 000 $ 12 000 s 6 000 $ $ $ $ 28 000 21 Backorder $ $ $ $ 30 000 $ 70 000 $ 140 000 $ 240 000 22 Total $ 510 000 $ 512 000 $ 506 000 $ 530 000 $ 570 000 $ 640 000 $ 3 268 000 23 24 YOUR PLAN; Use Permanent Staff + Overtime & Part-Time Workers 25 26 Month 1 2 3 4 5 6 Total 27 Forecast Demand 900 1000 1300 1150 1200 1350 6900 28 Output 29 Regular Permanent 30 Overtime 31 Part-time 32 Output - Forecast 33 Inventory 34 Beginning 35 Ending 36 Average 37 Backorder 38 Costs 39 Output Regular Permanent 40 Overtime 41 Part-time 42 Hire Part-time 43 Inventory 44 Backorder 45 Total