Skycell, a major European cell phone manufacturer, is making production plans for the coming year. Skycell has worked with its customers (the service providers) to come up with forecasts of monthly requirements (in thousands of phones) as shown in Table 8-10. Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on the production line. The plant operates for 20 days a month, eight hours each day. One person can assemble a phone every 10 minutes. Workers are paid 20 euros per hour a 50 percent premium for overtime. The plant currently employs 1,250 workers. Component costs for each cell phone total 20 euros. Given the rapid decline in component and finished-product prices, carrying inventory from one month to the next incurs a cost of 3 euros per phone per month. Skycell currently has a no-layoff policy in place. Overtime is limited to a maximum of 20 hours per month per employee. Assume that Skycell has a starting inventory of 50,000 units and wants to end the year with the same level of inventory. a) Assume that there are no backlogs, no subcontracting and no new hires. With minimizing cost as the objective, formulate an aggregate planning optimization model for Skycell. b) Use Excel Solver to find the optimal solution. Submit your Excel file. c) Report the optimal solution and the minimum cost. d) Management is interested in knowing if it would be worthwhile to negotiate an increase of allowed overtime per employee per month from 20 hours to 40 hours. Make a copy of your model from part a), then modify it. e) Complete parts b and c using your model from part d. f) Should management negotiate an increase of allowed overtime per employee per month up to 40 hours? What is the difference in cost? How much less/more overtime is used?

Month Demand

Jan 1000

feb 1100

march 1000

april 1200

may 1500

june 1600

july 1600

august 900

sep 1100

otc 800

nov 1400

dec 1700