Aggregate planning

Victoria Secret Industries, a company that produces children dress, hires temporaries to help
produce its product demand. There are three temporary of staff and 12 full time employees.
The temporary staff can be hired when needed and can be used as needed whereas the full
time employees must be paid whether they are needed or not. Each full time employee can
produce 214 units/month while part time employee can produce 174 units/month. Each full
time employee is paid $2400 per month and the temporary staffs is paid $1800 per month.
The demand for four consequence months was given in Table Q1.
Table Q1

Month Jan Feb Mac Apr

Demand 3260 2860 3160 3060

Beginning inventory in Jan is 407 units. The dress cost is $30/units to produce and the
holding cost is $1 per month in average.

a. Develop an aggregate plan that uses the 12 full time employees each month and a
minimum number of temporary employees. Calculate the total cost for the plan.
b. The industry has decided to stop employed temporary staff and will outsource
subcontracting to overcome any excess demand faces. The subcontracting cost is
$37 per unit. Determine the total cost for the plan.
c. Evaluate the difference between plan a) and b).
a. 12 full time employee and minimum temporary employee

Period January February March April Total

Forecasted
Demand (D) 3260 2860 3160 3060 12340
Output
(O) - Current 2568 2568 2568 2568 10272
(O) - Hire 522 348 522 522 1914
Overtime 0 0 0 0
Subcontracted
Hire (workers) 3 2 3 3
Full time
12 12 12 12
(workers)
Total 3090 2916 3090 3090 12186
(O) - (D) -170 56 -70 30
Inventory
Begin 407 237 293 223
End 237 293 223 253
Average 322 265 258 238 1083
Backlog 0 0 30 0 0
Costs
Output
Current 77040 77040 77040 77040 308160
Hire 15660 10440 15660 15660 57420
OT
Backorders
0 0 0 0 0
Subcontract
Hire 0 0 0 0 0
Full time 0 0 0 0 0
Inventory
(RM 1/unit) 322 265 258 238 1083
TOTAL 385380
b. 12 full time employee and subcontracting

Period January February March April Total

Forecasted
Demand (D) 3260 2860 3160 3060 12340
Output
(O) - Current 2568 2568 2568 2568 10272
(O) -
692 292 592 492 2068
Subcontract
Overtime 0 0 0 0
Subcontracted
Hire (workers) 0 0 0 0
Full time
12 12 12 12
(workers)
Total 3260 2860 3160 3060 12340
(O) - (D) 0 0 0 0
Inventory
Begin 407 237 293 223
End 407 237 293 223
Average 407 237 293 223 1160
Backlog 0 0 30 0 0
Costs
Output
Current 77040 77040 77040 77040 308160
Hire 25604 10804 21904 18204 76516
OT
Backorders
0 0 0 0 0
Subcontract
Hire 0 0 0 0 0
Full time 0 0 0 0 0
Inventory
(RM 1/unit) 407 237 293 223 1160
TOTAL 385836
 c. difference between plan a) and b)

In plan a, the maximum employee were 12 full time employees and maximum 3 temporary
employees. The total cost was .
While in plan b, the maximum employee was 12 full time employees while the rest demand
were covered by subcontracting employees. The total cost increases a bit which
was .
The total increases of cost because the price per unit increases from to per unit.

Plan A Differences Plan B

12 full time employee and Type of employee 12 full time employees and
maximum 3 temporary subcontracting
employees
Total cost
per unit for full time Price per unit per unit for full time
employee and temporary employee and per unit
employee for subcontracting