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EPT 432 Production Management

Laboratory Module

A) Graphical Approaches
A manufacturer of roofing supplies has developed monthly forecasts for family of
products. Data for 6 moth period January to June are presented in Table below, The firm
would like to begin development of an aggregate plan.





Average requirement =

Total expected demand
Number of production days

There is a few plan can be made:-

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= 6200 = 50 units / day

EPT 432 Production Management Laboratory Module 1st plan is to maintain a constant workforce through out the whole year. no overtime or idle time. Assume beginning inventory = 0 and planned ending inventory = 0 Solution: (1) Find the production for 50 units/ day Page 2 of 12 . Both plan 1 and 2 have a level production. April through June. 2nd strategy is to maintain a constant workforce at level necessary to meet the lowest demand and to meet all the balance demand and subcontracting.A constant workforce Assume that 50 units are produced per day and that we have a constant workforce. The firm accumulates inventory during the slack period of demand.6 hours per unit $ 300 / unit Labor hours to produce a unit Cost of increasing daily production rate (hiring and training) Cost of decreasing daily production rate $ 600 / unit (layoffs) (i) Plan 1 . 3rd plan is to hire and layoff workers as needed to produce exact monthly requirements – a chase strategy. January through March and depletes it during the higher demand warm season. Table below provides cost information necessary for analyzing these three alternatives: Inventory carrying cost Subcontracting cost per unit Average per rate Overtime per rate $5 per unit / month $10 / unit $5 / hour ($40 / day) $7 / hour (above 8 hours / day) 1. no safety stock. so it’s called level strategies. and no subcontractors.

EPT 432 Production Management Laboratory Module (2) Find the monthly inventory change (3) Ending inventory Page 3 of 12 .

we need 10 men. Page 4 of 12 . To produce 50 units a days.EPT 432 Production Management Laboratory Module Total units of inventory = 1850 units (4) Find the total of man needed to produce 50 units / day 1 man who worker for 8 hours can produce 5 units.

subcontracting) =0 Total cost = $58. All other demand is met by subcontracting. the lowest demand per day month. 7. Solution: Page 5 of 12 . (You can think of this as 7 full time workers and 1 part timer).850 *Note the significant cost of carrying the inventory (ii) Plan 2 – Subcontractors and constant workforce Although constant workforce is maintained.EPT 432 Production Management Laboratory Module (5) Find the total cost for the above figure  Inventory carrying = (1850 units in inventory x $5 per unit) = $9250  Regular time labor = (10 workers x $40 per day x 124 days) = $49600  Other cost (overtime. No inventory holding costs are incurred in plan 2.6 workers are needed. To produce 38 units per day in house. it is set low enough to meet demand only in March. layoffs. hiring. Subcontracting is thus required in every other month.

00 .200 – 4.00 = $ 14.712 units (2) Subcontract units = 6. we must compute how many can be made by the firm and how must be subcontracted: (1) Find the in house and subcontract total production (1) In-House production = 38 units per day x 124 production days = 4.488 units x $10 per unit) Total cost * Note the lower cost of regular labor but the added subcontracting cost Page 6 of 12 = $37.488 units (2) Find the total cost for regular time labor and subcontractor   Regular time labor Subcontracting = (7.880.EPT 432 Production Management Laboratory Module Because 6200 units are required during the aggregate plan period.6 workers x $40 per day x 124 days) = (1.712 = 1.696.576.00 = $52.

EPT 432 Production Management Laboratory Module (iii) Plan 3 – Hiring and Firing This plan involves varying the workforce size by hiring and firing as necessary. hiring. the total cost. and there is no change in production from the previous month. The production rate will equal the demand. including production. December Solution: Below show the calculations and total cost plan 3. Thus. Recall that it costs $600 per unit produced to reduce production from the previous month’s daily level and $300 per unit change to increase the daily rate of production hiring. Page 7 of 12 . 200 * Note the substantial cost associated with changing (both increasing and decreasing) the production levels. and layoffs for plan 3 is $68.

A summary analysis is provided below. Page 8 of 12 .EPT 432 Production Management Laboratory Module (iv) Final step in graphical method The final step in the graphical method is to compare the costs of each proposed plan and to select the approach with the least total cost. We can see that plan 2 has the lowest cost. it is the best of the 3 options.

overtime and subcontracting. Data that relate to production. would like to develop an aggregate plan via the transportation method. demand. Example below shows the supply consists of on hand inventory and units produced by regular time. capacity and cost at its West Virginia Plant are shown in the table below:Sales Period March April Demand Capacity: 800 1000 Regular 700 700 Overtime 50 50 Subcontracting 150 150 Beginning Inventory 100 tires Regular time Overtime Subcontract Carrying cost May 750 700 50 130 Costs $40 per tire $50 per tire $70 per tire $2 per tire per month Page 9 of 12 . Farnsworth Tire Co.EPT 432 Production Management Laboratory Module B) Mathematical Approaches The transportation method of linear programming is not a trial-and-error method like graphing but is rather produces an optimal plan for minimizing costs.

The total cost for the initial solution is $105. However.EPT 432 Production Management Laboratory Module Illustration below showed the structure the transportation table and initial feasible solution. Page 10 of 12 .900. the transportation method is flexible when costs are linear but does not work when costs are non-linear.

The December demand and rate of production are both 1. Inventory holding cost is $20 per unit per month. The cost of hiring additional workers is $5000 per 100 units. Plan a: Vary the workforce level to execute a “chase” strategy by producing the quantity demand in the prior month. projects the firm’s aggregate demand requirements over the next 8 months as follows: January February March April 1400 1600 1800 1800 May June July August 2200 2200 1800 1400 Her operations manager is considering a new plan. Terri Hill. Evaluate the plan.600 units per month. which begins in January with 200 units on hand and ends with zero inventories. The plan is called plan A. Ignore any idle time costs. $1319 on overtime and $1500 on a subcontract. 2. There is to be no beginning or ending inventory in stock and backorders are not permitted. Page 11 of 12 .EPT 432 Production Management Laboratory Module EXERCISE 1. The cost laying off workers is $7500 per 100 units. Haifa Instruments. Inventory carrying cost is $100 per unit per month. The president of Hill Enterprise. Stock out cost of lost sales in $100 per unit. Demand and capacity in units are forecasts as follows: Capacity Source Labor Regular time Overtime Subcontract Demand Month 1 Month 2 Month 3 Month 4 235 20 12 255 255 24 15 294 290 26 15 321 300 24 17 301 The cost of producing each dialysis units is $985 on regular time. Set up a production plan that minimizes cost using the transportation method. develops a 4 months aggregate plan. an Israeli producer of portable kidney dialysis units and other medical products.

EPT 432 Production Management Laboratory Module LAB 2 AGGREGATE PLANNING Lab Result SCHOOL / PROGRAMME OF :___________________________ DATE OF LABORATORY :___________________________ GROUP MEMBERS NAME : (Reminder: Do not accept your group member to sign if his/her contribution is not satisfy) 1)_______________________________signature:__________ 2)_______________________________signature:___________ 3)_______________________________signature:__________ Marks: Page 12 of 12 .