OPERATIONS PLANNING

THIS FILE CONTAINS TH

PROBLEMS OF CHAPTER
SOLUTION IS IN A

CLICK HERE TO PROCEED TO SOLUTIONS

HIS FILE CONTAINS THE SOLUTIONS OF THE EXERCISE
OBLEMS OF CHAPTER 15- OPERATIONS PLANNING. EACH
SOLUTION IS IN A SEPARATE WORKSHEET

SOLUTIONS
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PROBLEM 1 What-if ??

GIVEN DATA Change the number of shifts and see the effect
Change the number of days
FAN TYPE APRIL MAY JUNE M/C HRS/UNIT
Basic 140 160 160 9.50
improved 110 150 150 12.00
Advanced 120 120 140 18.50

(a) An appropriate aggregate unit for planning would be total number of machine hours.

(b) The capacity required are as follows:

FAN TYPE APRIL MAY JUNE M/C HRS/UNIT M/C HRS (APR) M/C HRS (MAY) M/C HRS (JUN)
Basic 140 160 160 9.50 1330 1520 1520
improved 110 150 150 12.00 1320 1800 1800
Advanced 120 120 140 18.50 2220 2220 2590
4870 5540 5910

(c ) Let us assume number of working days in April,May and June = 25

Shift duration = 8 hours
Number of shifts per day = 2
Machine hours available per machine per month 400
April May June
Number of machines required 13 14 15
Hence number of machines r required 15
What-if ??

see the effect

 PREVIOUS SOLUTION NEXT SOLUTION

PROBLEM 2

Number of
220
workers

Working hours 8

WORKING CAPACITY CURRENT

MONTH PROJECTED DEMAND FOR NEXT SIX MONTHS
(a) DAYS (MAN HRS) DEMAND
Month 1 24 42,240 33,792 45,619
Month 2 22 38,720 30,976 41,818
Month 3 25 44,000 35,200 47,520
Month 4 19 33,440 26,752 36,115
Month 5 21 36,960 29,568 39,917
Month 6 23 40,480 32,384 43,718
TOTAL
CAPACITY = 235,840 MAN HOURS

(b)
i CASE 1 TWO HOUR OVERTIME FOR NEXT SIX MONTHS

CUMULATIVE
WORKING EXISTING CAPACITY TOTAL CAPACITY-
MONTH DEMAND INVENTORY
DAYS CAPACITY THRU' OT CAPACITY DEMAND
(HRS)
Month 7 24 42,240 10,560 52,800 45,619 7,181 7,181
Month 8 22 38,720 9,680 48,400 41,818 6,582 13,763
Month 9 25 44,000 11,000 55,000 47,520 7,480 21,243
Month 10 19 33,440 8,360 41,800 36,115 5,685 26,928
Month 11 21 36,960 9,240 46,200 39,917 6,283 33,211
Month 12 23 40,480 10,120 50,600 43,718 6,882 40,093

ii CASE 2 ONE HOUR OVERTIME FOR NEXT SIX MONTHS

 CUMULATIVE
WORKING EXISTING CAPACITY TOTAL CAPACITY-
MONTH DEMAND INVENTORY
DAYS CAPACITY THRU' OT CAPACITY DEMAND
(HRS)
Month 7 24 42,240 5,280 47,520 45,619 1,901 1,901
Month 8 22 38,720 4,840 43,560 41,818 1,742 3,643
Month 9 25 44,000 5,500 49,500 47,520 1,980 5,623
Month 10 19 33,440 4,180 37,620 36,115 1,505 7,128
Month 11 21 36,960 4,620 41,580 39,917 1,663 8,791
Month 12 23 40,480 5,060 45,540 43,718 1,822 10,613

iii CASE 3 TWO HOURS OT FOR FIRST THREE MONTHS, TWO HOUR UNDERTIME THEREAFTER

CAPACITY CUMULATIVE
WORKING EXISTING TOTAL CAPACITY-
MONTH CHANGE DEMAND INVENTORY
DAYS CAPACITY CAPACITY DEMAND
THRU' OT/UT (HRS)
Month 7 24 42,240 10,560 52,800 45,619 7,181 7,181
Month 8 22 38,720 9,680 48,400 41,818 6,582 13,763
Month 9 25 44,000 11,000 55,000 47,520 7,480 21,243
Month 10 19 33,440 (8,360) 25,080 36,115 (11,035) 10,208
Month 11 21 36,960 (9,240) 27,720 39,917 (12,197) (1,989)
Month 12 23 40,480 (10,120) 30,360 43,718 (13,358) (15,347)

Since the demand is met with lesser endng inventory in Case 2,

that is the option which should be adopted by the management
Shortage
 PREVIOUS SOLUTION NEXT SOLUTION

PROBLEM 3
What-if ??

OT cost 4 per hour Change the cost structure on the left to assess t
UT cost 2 per hour impact of them on the alternatives
Inventory
10
carrying cost per hour per month
Shortage cost 20 per hour per month

i CASE 1 TWO HOUR OVERTIME FOR NEXT SIX MONTHS

Inventory/
Opening Closing OT/UT
Months Shortage OT/UT cost Total cost
Inventory inventory hours
cost
7 0 7180.8 35,904 10,560 42,240 78,144
8 7180.8 13763.2 104,720 9,680 38,720 143,440
9 13763.2 21243.2 175,032 11,000 44,000 219,032
10 21243.2 26928 240,856 8,360 33,440 274,296
11 26928 33211.2 300,696 9,240 36,960 337,656
12 33211.2 40092.8 366,520 10,120 40,480 407,000

ii CASE 2 ONE HOUR OVERTIME FOR NEXT SIX MONTHS

Inventory/
Opening Closing OT/UT
Months Shortage OT/UT cost Total cost
Inventory inventory hours
cost
7 0 1900.8 9,504 5,280 21,120 30,624
8 1900.8 3643.2 27,720 4,840 19,360 47,080
9 3643.2 5623.2 46,332 5,500 22,000 68,332
10 5623.2 7128 63,756 4,180 16,720 80,476
11 7128 8791.2 79,596 4,620 18,480 98,076
 12 8791.2 10612.8 97,020 5,060 20,240 117,260

iii CASE 3 TWO HOURS OT FOR FIRST THREE MONTHS, TWO HOUR UNDERTIME THEREAFTER

Inventory/
Opening Closing OT/UT
Months Shortage OT/UT cost Total cost
Inventory inventory hours
cost
7 0 7180.8 35,904 10,560 42,240 78,144
8 7180.8 13763.2 104,720 9,680 38,720 143,440
9 13763.2 21243.2 175,032 11,000 44,000 219,032
10 21243.2 10208 157,256 (8,360) 16,720 173,976
11 10208 -1988.8 80,872 (9,240) 18,480 99,352
12 0 -15347.2 230,208 (10,120) 20,240 250,448 Shortage

The cost is least in Case 2. In Case 1 excess inventory has resulted in

huge carrying costs whereas in Case 3, shortages have accounted for high
costs.
 What-if ??

ure on the left to assess the

alternatives
PREVIOUS SOLUTION NEXT SOLUTION

PROBLEM 4

Demand during weeks

Std time
Number
TYPE OF SERVICE (mins)
1 2 3 4 of
OFFERED per
workers
worker
STANDARD 2000 2200 2800 2500 1 20
EXTENDED 1700 1600 1300 1000 1 30
CUSTOM-MADE 500 600 200 400 3 25

DEMAND(HRS.) 2142 2283 1833 1833

The required capacity is shown in the Demand Row above

 PREVIOUS SOLUTION NEXT SOLUTION

PROBLEM 5

Number of Employees 29
Work schedule 10 hrs a day
Work week 6 days

AVLAIBLE
ADDL. CAPACITY
DEMAND (HRS) CAPACITY
(HRS)
(HRS)
2142 1740 402
2283 1740 543
1833 1740 93
1833 1740 93

Number of
Man hours
Employees
AVERAGE ADDL. CAPACITY 283 5
Additional Capacity for
Week 1 402 7
Week 2 543 10
Week 3 93 2
Week 4 93 2

(a) Current capacity is 1740 hours per week

(b) No,the current capacity is inadequate;additional capacity is shown above

Alternatives
(c )
1. To maintain flexible workforce through hire/fire
2. To recruit average number of workers (5) and manage
additional requirement through hiring temporary workers
3. To recruit 10 workers (peak load requirement) and
investigate methods for increasing demand in other weeks

(d) Number of workers to be recruited depends on the alternative mentioned above

 PREVIOUS SOLUTION NEXT SOLUTION
What-if ??

Change the cost structure on the le

PROBLEM 6 of them on the alternatives; Change
working days and working hours per
impact on the solution
Cost of Shortage 5 per hour
Cost of excess capacity 1 per hour

NO. OF CAPACITY SUPPLY - Opening Closing

DEMAND( DEMAND( WORKING WORKING NO. OF AVAILABL DEMAND Inventory Inventory
MONTH UNITS) HRS.) DAYS HOURS/ DAY WORKERS E(HRS.) (HRS.) (hrs) (hrs)
April 160 16,000 23 8 90 16,560 560 0 560
May 150 15,000 22 8 90 15,840 840 560 1400
June 140 14,000 21 8 90 15,120 1120 1400 2520
July 160 16,000 24 8 90 17,280 1280 2520 3800
August 120 12,000 22 8 90 15,840 3840 3800 7640
September 150 15,000 22 8 90 15,840 840 7640 8480
October 160 16,000 19 8 90 13,680 -2320 8480 6160
November 180 18,000 23 8 90 16,560 -1440 6160 4720
December 160 16,000 21 8 90 15,120 -880 4720 3840
January 180 18,000 23 8 90 16,560 -1440 3840 2400
February 190 19,000 20 8 90 14,400 -4600 2400 -2200
March 150 15,000 24 8 90 17,280 2280 0 2280

TOTAL 190,000 190,080

AVERAGE 15,833 15,840

(a) Capacity required for the planning horizon is 190000 hours

Capacity available for the planning horizon is 190080 hours
Hence there is adequate capacity to meet the demand

(b) Yes, shortages arise if period-by-period analysis is done.The analysis is shown in Column
I

(c ) Cost of shortages Rs. 11,000

(d) Cost of Excess capacity Rs. 86,460

(e) Total cost of the plan is Rs. 97,460
The APP Strategy employed here is Level Strategy with constant work-force and carrying
inventory as and when necessary
 What-if ??

e cost structure on the left to assess the impact

n the alternatives; Change the number of workers,
ays and working hours per day also to assess the
the solution

COST
840
2,380
4,480
6,960
13,360
16,540
13,480
10,160
8,120
5,520
12,200 Shortage cost = 11,000; Inventory carrying cost =1,200
3,420

97,460
 PREVIOUS SOLUTION

PROBLEM 7

Capacity
Basic Office wear Trendy reqd. (hrs)
Time reqd. (hrs) 2 4 8
Period 1 5,000 2,000 1,500 30,000 (a) The transportation proble
Period 2 4,500 1,800 1,900 31,400 (b) The cost of the plan coud
Period 3 5,500 2,200 2,000 35,800 (c) Change the value of sub-
Period 4 5,200 2,100 1,750 32,800 The cost of the plan sligh
Period 5 5,500 1,600 1,800 31,800
Period 6 5,000 1,900 1,500 29,600

Sub-contracting Premium 20%

Extent of OT allowed 20%

Period 1** Period 2 Period 3 Period 4 Period 5 Period 6

Period 1 Regular 90.00 91.80 93.60 95.40 97.20 99.00
Period 1 OT 110.00 112.20 114.40 116.60 118.80 121.00
Period 1 SC* 111.00 113.22 114.40 116.60 118.80 121.00
Period 2 Regular 99,999.00 90.00 91.80 93.60 95.40 97.20
Period 2 OT 99,999.00 110.00 112.20 114.40 116.60 118.80
Period 2 SC 99,999.00 111.00 113.22 114.40 116.60 118.80
Period 3 Regular 99,999.00 99,999.00 90.00 91.80 93.60 95.40
Period 3 OT 99,999.00 99,999.00 110.00 112.20 114.40 116.60
Period 3 SC 99,999.00 99,999.00 111.00 113.22 114.40 116.60
Period 4 Regular 99,999.00 99,999.00 99,999.00 90.00 91.80 93.60
Period 4 OT 99,999.00 99,999.00 99,999.00 110.00 112.20 114.40
Period 4 SC 99,999.00 99,999.00 99,999.00 111.00 113.22 114.40
Period 5 Regular 99,999.00 99,999.00 99,999.00 99,999.00 90.00 91.80
Period 5 OT 99,999.00 99,999.00 99,999.00 99,999.00 110.00 112.20
Period 5 SC 99,999.00 99,999.00 99,999.00 99,999.00 111.00 113.22
Period 6 Regular 99,999.00 99,999.00 99,999.00 99,999.00 99,999.00 90.00
Period 6 OT 99,999.00 99,999.00 99,999.00 99,999.00 99,999.00 110.00
Period 6 SC 99,999.00 99,999.00 99,999.00 99,999.00 99,999.00 111.00
Demand 30,000 31,400 35,800 32,800 31,800 29,600

* Since Sub-contracting involves a fixed cost of Rs. 3000, we assume a typical order quantity of 1000 units and
convert the fixed cost into Rs. 3 per unit of item sub-contracted. This assumption is required to solve the
transportation problem. We also assume a capacity constraint for sub-contracting to be 5000.
We impute an artifically high cost (Rs. 99999.00) to infeasible cells
** We assume each period to be a month and therefore assume a 2% inventory carrying cost per month

Solution to the problem

Period 1 Regular
Period 1 OT
Period 1 SC*
Period 2 Regular
Period 2 OT
Period 2 SC
Period 3 Regular
Period 3 OT
Period 3 SC
Period 4 Regular
Period 4 OT
Period 4 SC
Period 5 Regular
Period 5 OT
Period 5 SC
Period 6 Regular
Period 6 OT
Period 6 SC
Demand - - - - - -

Cost of the plan

 NEXT SOLUTION

he transportation problem is set up. See tables below

he cost of the plan coud be obtained by running the solver.
hange the value of sub-contracting premium & run solver again.
he cost of the plan slightly increases.

Supply
20,000
4,000
99,999
20,000
4,000
99,999
20,000
4,000
99,999
20,000
4,000
99,999
20,000
4,000
99,999
20,000
4,000
99,999

ity of 1000 units and

d to solve the
00.

ost per month

-
-
-
-
-
 -
-
-
-
-
-
-
-
-
-
-
-
-

Cost of the plan -

We have used the Solver of Excel to

generate the solution to this
problem. For details click on J66
and select Solver from Data
menu.
PREVIOUS SOLUTION

PROBLEM 8

Existing Scenario at Vacuum Cleaner manufacturing Plant

(A) (B) C= (D)/(B) (D) (E) (D) +(E) - (C)

Demand No. of Production/ Current Opening Supply -
Period (in units) workers worker Production Inventory Demand
Qtr. 1 6,700 480 50 24,000 2,700 20,000
Qtr. 2 28,000 480 50 24,000 20,000 16,000
Qtr. 3 49,000 480 50 24,000 16,000 (9,000)
Qtr. 4 30,000 480 50 24,000 (9,000) (15,000)

In the current scenario, there is a shortage of 15,000 units for meeting demand itself. Ending inventory of 2,5
Therefore alternative planning methods need to be tried out as suggested in the problem.

Plan 1: Evaluation

(A) (B) C= (D)/(B) (D) (E) (D) +(E) - (C)

Demand No. of Production/ Regular Opening Supply -
Period (in units) workers worker Production Inventory Demand OT
Qtr. 1 6,700 480 50 24,000 2,700 20,000 750
Qtr. 2 28,000 520 50 26,000 21,450 19,450 750
Qtr. 3 49,000 620 50 31,000 22,200 4,200 750
Qtr. 4 30,000 480 50 24,000 6,950 950 750
105,000 3,000

Regular Production Cost

OT Production Cost
Cost of sub-contract
Cost of inventory
Cost of Hiring
Cost of Firing

Total cost of Plan 1

Cost per unit of vacuum cleaner

Plan 2: Evaluation

(A) (B) C= (D)/(B) (D) (E) (D) +(E) - (C)

Demand No. of Production/ Regular Opening Supply -
Period (in units) workers worker Production Inventory Demand OT
Qtr. 1 6,700 570 50 28,500 2,700 24,500
Qtr. 2 28,000 570 50 28,500 24,500 25,000
Qtr. 3 49,000 570 50 28,500 25,000 4,500
Qtr. 4 30,000 570 50 28,500 4,500 3,000
114,000 -
 Regular Production Cost
OT Production Cost
Cost of sub-contract
Cost of inventory
Cost of Hiring
Cost of Firing

Total cost of Plan 2

Cost per unit of vacuum cleaner

Plan 3: Inventory Vs Variable work force

(A) (B) C= (D)/(B) (D) (E) (D) +(E) - (C)

Demand No. of Production/ Regular Opening Supply -
Period (in units) workers worker Production Inventory Demand OT
Qtr. 1 6,700 480 50 24,000 2,700 20,000
Qtr. 2 28,000 480 50 24,000 20,000 16,000
Qtr. 3 49,000 660 50 33,000 16,000 -
Qtr. 4 30,000 660 50 33,000 - 3,000
114,000 -

Regular Production Cost

Inventory carrying costs are high in this case. OT Production Cost
Therefore minimising inventory and adjusting Cost of sub-contract
workforce levels may be a cost effective strategy. Cost of inventory
Cost of Hiring
Cost of Firing

Total cost of Plan 3

Cost per unit of vacuum cleaner
 NEXT SOLUTION

Plant

Closing
inventory
20,000
16,000
(9,000)
(15,000)

Ending inventory of 2,500 is also required

lem.

Closing Average Hiring Firing

SC inventory Inventory
700 21,450 12,075 0 0
2,000 22,200 21,825 40 0
2,000 6,950 14,575 100 0
1,000 2,700 4,825 0 140
5,700 53,300 140 140

per unit Total

7,300 766,500,000
8,000 24,000,000
10,000 57,000,000
1,000 53,300,000
9,000 1,260,000
6,000 840,000

902,900,000
vacuum cleaner 7,941.07

Closing Average
Hiring Firing
SC inventory Inventory
24,500 13,600 90 0
25,000 24,750 0 0
4,500 14,750 0 0
3,000 3,750 0 0
- 56,850 90 0
 per unit Total
7,300 832,200,000
8,000 -
10,000 -
1,000 56,850,000
9,000 810,000
6,000 -

889,860,000
vacuum cleaner 7,805.79

Closing Average
Hiring Firing
SC inventory Inventory
20,000 11,350 0 0
16,000 18,000 0 0
- 8,000 180 0
3,000 1,500 0 0
- 38,850 180 0

per unit Total

7,300 832,200,000
8,000 -
10,000 -
1,000 38,850,000
9,000 1,620,000
6,000 -

872,670,000
vacuum cleaner 7,655.00
PREVIOUS SOLUTION

PROBLEM 9

Option 1: Level strategy: Maintain production level and employ inventory related alternatives for APP

(A) (B) (C) = 10*(B) (H) = (G)-(C)

Demand (in No. of Opening Supply - Closing Average

Month units) employees Production Inventory Demand inventory inventory
1 500 143 1,430 - 930 930 465
2 800 143 1,430 930 1,560 1,560 1,245
3 1,000 143 1,430 1,560 1,990 1,990 1,775
4 1,400 143 1,430 1,990 2,020 2,020 2,005
5 2,000 143 1,430 2,020 1,450 1,450 1,735
6 1,800 143 1,430 1,450 1,080 1,080 1,265
7 1,350 143 1,430 1,080 1,160 1,160 1,120
8 1,100 143 1,430 1,160 1,490 1,490 1,325
9 900 143 1,430 1,490 2,020 2,020 1,755
10 2,400 143 1,430 2,020 1,050 1,050 1,535
11 2,900 143 1,430 1,050 (420) (420) 525
12 1,000 143 1,430 (420) 10 10 5

Average Demand during the period 1,429 Cost of hiring 13 more workers
Average number of workers required 143 Cost of inventory carrying
Total cost of the plan

Option 2: Chase strategy: Maintain no inventory, hire & fire employees

Demand (in No. of Number Number

Month units) employees Production Hired Fired
1 500 50 500 - 80
2 800 80 800 30 -
3 1,000 100 1,000 20 -
4 1,400 140 1,400 40 - This pure policy of hiring
5 2,000 200 2,000 60 - infeasible. Hiring 150 wor
6 1,800 180 1,800 - 20 utopian ideas. Therefore
7 1,350 135 1,350 - 45
8 1,100 110 1,100 - 25
9 900 90 900 - 20
10 2,400 240 2,400 150 -
11 2,900 290 2,900 50 -
12 1,000 100 1,000 - 190

Total number of people hired 350 Cost of hiring workers

Total number of people fired 380 Cost of firing workers
Total cost of the plan
 Option 3: Mixed strategy: Maintain current workers, hire/fire to meet additional demand

(A) (B) (C) = 10*(B) (H) = (G)-(C)

Demand (in No. of Opening Supply - Closing Average
Month units) employees Production Inventory Demand inventory inventory
1 500 130 1,300 - 800 800 400
2 800 130 1,300 800 1,300 1,300 1,050
3 1,000 130 1,300 1,300 1,600 1,600 1,450
4 1,400 130 1,300 1,600 1,500 1,500 1,550
5 2,000 130 1,300 1,500 800 800 1,150
6 1,800 130 1,300 800 300 300 550
7 1,350 130 1,300 300 250 250 275
8 1,100 130 1,300 250 450 450 350
9 900 130 1,300 450 850 850 650
10 2,400 155 1,550 850 - - 425
11 2,900 290 2,900 - - - -
12 1,000 100 1,000 - - - -

Number of employees to be hired 160 Cost of hiring workers

Number of employees to be fired 190 Cost of firing workers
Cost of inventory carrying
Total cost of the plan

Option 4: Mixed strategy: Maintain some balance between hire/fire and carrying inventory

(A) (B) (C) = 10*(B) (H) = (G)-(C)

Demand (in No. of Opening Supply - Closing Average
Month units) employees Production Inventory Demand inventory inventory
1 500 130 1,300 - 800 800 400
2 800 130 1,300 800 1,300 1,300 1,050
3 1,000 130 1,300 1,300 1,600 1,600 1,450
4 1,400 130 1,300 1,600 1,500 1,500 1,550
5 2,000 130 1,300 1,500 800 800 1,150
6 1,800 130 1,300 800 300 300 550
7 1,350 165 1,650 300 600 600 450
8 1,100 165 1,650 600 1,150 1,150 875
9 900 165 1,650 1,150 1,900 1,900 1,525
10 2,400 165 1,650 1,900 1,150 1,150 1,525
11 2,900 165 1,650 1,150 (100) (100) 575
12 1,000 165 1,650 (100) 550 550 275

Number of employees to be hired 35 Cost of hiring workers

Number of employees to be fired - Cost of firing workers
Cost of inventory carrying
Total cost of the plan
 alternatives for APP

Cost
58,125
155,625
221,875
250,625
216,875
158,125
140,000
165,625
219,375
191,875
170,625
625

104,000
1,949,375
2,053,375

oyees

This pure policy of hiring and firing is not only costly but also
nfeasible. Hiring 150 workers and firing 190 workers are
topian ideas. Therefore this policy is simply unviable.

2,800,000
760,000
3,560,000
ional demand

Inventory
Cost
50,000
131,250
181,250
193,750 This policy of hiring and firing is not marginally better
143,750 than the previous one. This is because of the surge in
68,750 the demand towards the end of the planing period.
34,375
43,750
81,250
53,125
-
-

1,280,000
380,000
981,250
2,641,250

rying inventory

Inventory
Cost
50,000
131,250
181,250
193,750 This policy of level production for 6 months is the
143,750 least cost. It also has several advantages as fewer
68,750 workers are hired and fired from the manufacturing
56,250 plant.
109,375
190,625
190,625
96,875
34,375

280,000
-
1,446,875
1,726,875