Reconsider the Skycell data in Exercise 1. Assume that the plant has 1,250 employees and a no-layoff policy. Overtime is limited to at most 20 hours per employee per month. Also assume no subcontracting option. Skycell has a team of 50 people who are willing to work as seasonal employees. The cost of bringing them on is €800 per employee, and the layoff cost is €1,200 per employee.
a. What is the optimal production, hiring, and layoff schedule?
b. How does the optimal schedule change if the seasonal pool grows from 50 to 100?
c. Relative to having 1,250 permanent and 50 seasonal employees, will Skycell gain significantly if it carries only 1,100 permanent employees but has 200 seasonal employees?
d. Consider the case in which Skycell has 1,250 permanent employees and 50 seasonal employees. Does Skycell gain more by eliminating its no-layoff policy for its permanent employees or by increasing the seasonal employee pool from 50 to 100? Assume that permanent employees can be hired or laid off at the same cost as the seasonal employees.

Data From Exercise 1

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.

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 per hour and a 50 percent premium for overtime. The plant currently employs 1,250 workers. Component costs for each cell phone total €20. Given the rapid decline in component and finished product prices, carrying inventory from one month to the next incurs a cost of €3 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.

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Jan. 1,000 Feb. 1,100 March 1,000 April 1,200 May 1,500 Jun 1,600 July 1,600 August 900 Sept. 1,100 Oct. 800 Nov. 1,400 Dec. 1,700