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Operations Management: An Integrated Approach, 5th Edition by Nada R. Sanders, R. Dan Reid

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AGGREGATE PLANS FOR SERVICE COMPANIES WITH NONTANGIBLE PRODUCTS

In the previous examples, your company used inventory buildup as a way of leveling the aggregate plan. When your company's product is nontangible—for example, if your company offers a service as do banks, healthcare providers, and hair stylists— inventory is no longer a viable option. We use the problem data shown in Table 13-7 to develop a level aggregate plan.

TABLE 13-7 Data for Plans C, D, and E

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EXAMPLE 13.6 Plan C: Level Aggregate Plan with No Back Orders, No Tangible Product

With this plan, your company maintains a level workforce with no back orders. Any demand not satisfied is lost to a competing service provider, so the company must meet all demand.

Before You Begin: Remember that level aggregate plans use inventories and back orders to handle demand fluctuations. In this problem, you do not have a tangible product, so you cannot use inventories. The problem also stipulates that no back orders are allowed to occur. You need to determine the workforce size needed to satisfy demand during the peak period. Since this is a level plan, you must maintain this size workforce throughout the entire plan. Level aggregate plans for companies without a tangible product that require 100 percent customer service will always set the staff level to meet peak demand.

Solution:

Step 1 Choose the kind of aggregate plan

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