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Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are. The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4. The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. TABLE 13-3 Monthly Demand at Soda Galore Month January February March April May June Total Demand Average Monthly Demand Demand Forecast 24,000 cases 32,000 cases 32,000 cases 48,000 cases 60,000 cases 44,000 cases 240,000 cases 40,000 cases TABLE 13-4 Soda Galore Planning Data Current workforce Average monthly output per worker Inventory holding cost Regular wage rate Regular production hours/month/worker Overtime wage rate Hiring cost Subcontracting cost Firing/layoff cost Beginning inventory 8 workers 4,000 cases per month $ 0.30 per case per month $ 20.00 per hour 160 hours $ 30.00 per hour $ 1,000 per worker $ 1.15 per case $ 1,500 per worker 5,000 (all safety stock) Assume that employees negotiate an increase in the regular production wage rate to $24 per hour and $36 per hour for overtime. Assume Soda Galore always plans to hold at least 5,000 cases of safety stock to meet unanticipated customer demand. Also assume that hiring and layoff/firing, if necessary, occur at the beginning of the month. a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.) Level Production Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4.000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 b. Determine the cost of the level production plan. Total cost c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "O" wherever required.) Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Chase Production Plan : Adjust Workforce Size Month Overtime or Demand Regular Production Subcontract Production Jan. Feb. March April May June Total 0 0 0 0 0 0 Overtime or Subcontract Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire lavet Jan. Feb. March April May June Total ( 0 0 0 0 0 0 d. Determine the cost of the chase production plan. Total cost if workforce size adjusted Total cost if overtime production used Total cost if subcontracting used e. After much internal discussion, the company decides to maintain a permanent workforce of 8 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. (Leave no cells blank - be certain to enter "O" wherever required.) Hybrid Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 0 f. Determine the cost of the hybrid production plan. Use the overtime cost. Total cost Suppose you have been given responsibility for developing the six-month aggregate production plan at Soda Galore, a manufacturer of soft drinks. Your company makes three types of soft drinks: regular, diet, and super-caffeinated. Fortunately, all three types are made using the same production process, and the costs related to switching between the three types are so minimal that they can be ignored. Thus, you can treat your problem as an aggregate planning exercise where the planning unit is cases of soft drinks, regardless of what types of drinks they are. The S&OP team has developed a forecast of demand for the first six months of the year as shown in Table 13-3. The S&OP team has also provided you with the cost data shown in Table 13-4. The material cost of a case of soda is the same regardless of whether it is produced in regular time or overtime. TABLE 13-3 Monthly Demand at Soda Galore Month January February March April May June Total Demand Average Monthly Demand Demand Forecast 24,000 cases 32,000 cases 32,000 cases 48,000 cases 60,000 cases 44,000 cases 240,000 cases 40,000 cases TABLE 13-4 Soda Galore Planning Data Current workforce Average monthly output per worker Inventory holding cost Regular wage rate Regular production hours/month/worker Overtime wage rate Hiring cost Subcontracting cost Firing/layoff cost Beginning inventory 8 workers 4,000 cases per month $ 0.30 per case per month $ 20.00 per hour 160 hours $ 30.00 per hour $ 1,000 per worker $ 1.15 per case $ 1,500 per worker 5,000 (all safety stock) Assume that employees negotiate an increase in the regular production wage rate to $24 per hour and $36 per hour for overtime. Assume Soda Galore always plans to hold at least 5,000 cases of safety stock to meet unanticipated customer demand. Also assume that hiring and layoff/firing, if necessary, occur at the beginning of the month. a. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on level production. (Leave no cells blank - be certain to enter "0" wherever required.) Level Production Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4.000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 b. Determine the cost of the level production plan. Total cost c. Using the planning information and the newly negotiated wage rates, develop a six-month production plan based on chase production. For the Overtime or Subcontract Plan, use the lowest monthly demand value to compute the size of the fixed workforce. (Leave no cells blank - be certain to enter "O" wherever required.) Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Chase Production Plan : Adjust Workforce Size Month Overtime or Demand Regular Production Subcontract Production Jan. Feb. March April May June Total 0 0 0 0 0 0 Overtime or Subcontract Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire lavet Jan. Feb. March April May June Total ( 0 0 0 0 0 0 d. Determine the cost of the chase production plan. Total cost if workforce size adjusted Total cost if overtime production used Total cost if subcontracting used e. After much internal discussion, the company decides to maintain a permanent workforce of 8 production workers. Given the same planning information and this new requirement, develop a six-month production plan based on hybrid production. (Leave no cells blank - be certain to enter "O" wherever required.) Hybrid Plan Month Demand Regular Production Overtime or Subcontract Production Ending Inventory Workers Required (4,000 cases/worker) Hire Fire layoff Jan. Feb. March April May June Total 0 0 0 0 0 0 f. Determine the cost of the hybrid production plan. Use the overtime cost. Total cost
