Operations Management: An Integrated Approach, 5th Edition

AGGREGATE PLANS FOR COMPANIES WITH TANGIBLE PRODUCTS

Now let's develop a couple of aggregate plans so we can evaluate their effectiveness.

TABLE 13-4 Data for Sophisticated Skates

EXAMPLE 13.4 Plan A: Level Aggregate Plan Using Inventories and Back Orders

Sophisticated Skates produces a variety of inline roller skates. Management wants you to develop an aggregate plan that covers the next seven months. Develop an aggregate plan using a level production strategy (stable workforce throughout the plan, inventories, and back orders).

• Before You Begin: Be sure that you understand the data provided in Table 13-4. The labor costs are given as the hourly wage cost of one employee. If you are working regular time, you are paid $15.00 per hour. For overtime, you receive $22.50 per hour. Employees are hired or fired at the beginning of the plan. For level plans you can adjust your workforce at the beginning of the plan, and then it remains constant throughout the plan. The hiring and firing costs are per person. The inventory holding cost is assessed to the ending inventory for each period. In this case, there is a $5 holding cost per unit per period. The shortage or back-order cost is given as $7.50 per unit per period. The material cost used to build each unit is $30.00. In terms of capacity, the company currently has 18 employees. There is a beginning inventory of 2500 units. Every unit ...