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Constraints
Inventory const 0 0 0 0 0
Shipment and shipement 0 0 0 0 0
forcast const
Production capacity 0 0 0 0 0
Shipment const 2240 4240 4640 3040 5840
Costs
Hiring cost 0 0 0 0 135000
Layoff cost 0 0 0 0 0
Regular time cost 384000 384000 384000 384000 564000
Overtime cost 0 0 0 0 0
Inventory cost 17920 33920 37120 24320 46720
Total cost 6221160
Jun Jul Aug Sep Oct Nov Dec Total
11800 13000 11200 10800 7600 6000 5600 95400
9480 9480 11200 10800 7600 6000 5600 95160
11800 13000 11200 10800 7600 6000 5600 95400
3520 0 0 0 0 0 0 23520
237 237 237 237 190 150 140 2303
2 0 0 0 0 0 0 77
0 0 0 0 47 40 10 97
0 0 43 33 0 0 0 76
0 0 0 0 0 0 0 equal 0
0 0 0 0 0 0 0 equal 0
0 0 0 0 0 0 0 <= 0
3520 0 0 0 0 0 0 >= 0
3600 0 0 0 0 0 0
0 0 0 0 56400 48000 12000
568800 568800 568800 568800 456000 360000 336000
0 0 141900 108900 0 0 0
28160 0 0 0 0 0 0
Equations
It-1 + Pt – St = It
St=SFt
Pt≤40*(Wt+Ot)
It-1 + Pt ≥ St
EXHIBIT 1: Level Production (Inventory but No Over-time, No Lay-o
Month Jan Feb Mar Apr May June
Production Plan
Key Number
Shipment Forecast 4400 4400 6000 8000 6600 11800
Production Plan 8440 8440 8440 8440 8440 8440
Shipments 4400 4400 6000 8000 6600 11800
Inventory 4280 8320 10760 11200 13040 9680
Extraordinary Labor Costs 4040 8320
Number of W orkers 211 211 211 211 211 211
Hirings 51 0 0 0 0 0
Layoffs 0 0 0 0 0 0
Worker Months Overtime 0 0 0 0 0 0
Cost of Alternative 1
Hiring Costs 51 $1,800 $91,800
Layoff Costs 0 $1,200 $-
Inventory Holding Costs 75000 $8 $600,000
Labor Costs
Regular 2532 $2,400 $6,076,800
Overtime 0 $3,300 $-
Total Costs $6,768,600
EXHIBIT 3: Chase Production - Vary W orkforce & Lay-offs but No Over-time, No Inventory
Month Jan Feb Mar Apr May June
Production Plan
Cost of Alternative 3
Hiring Costs 90 $1,800 $162,000
Layoff Costs 110 $1,200 $132,000
Inventory Holding Costs 22080 $8 $176,640
Labour Costs
Regular 2330 $2,400 $5,592,000
Overtime 49 $3,300 $161,700
Total Costs $6,224,340
Cost of Alternative 3
Hiring Costs 90 $1,800 $162,000
Layoff Costs 100 $1,200 $120,000
Inventory Holding Costs 27720 $8 $221,760
Labour Costs
Regular 2370 $2,400 $5,688,000
Overtime 19 $3,300 $62,700
Total Costs $6,254,460
Cost of Alternative 3
Hiring Costs 65 $1,800 $117,000
Layoff Costs 75 $1,200 $90,000
Inventory Holding Costs 17440 $8 $139,520
Labour Costs
Regular 2190 $2,400 $5,256,000
Overtime 199 $3,300 $656,700
Total Costs $6,259,220
Conclusion
Greatest qualitive damage is done when laying off employees but management must also be aware of the efficienc
overtime hours. Option 1 provides the lowest cost but requires 110 layoffs and 49 overtimes months. Option two re
reduces overtime costs for an additional cost of $30,120. Finally, option 3 reduces layoffs to 75 but increases overti
cost to only $34,880 from option 1 and $4,760 from option 2. The danger of this approach is that efficiency and mo
overtime hours. Management to use option 2 as it limits overtime hours. While it may be attractive to reduce layoff
the risk of more overtime.
n Plan - Lowest Cost
July Aug Sep Oct Nov Dec Total
0
13000 11200 10800 7600 6000 5600 95400
10000 11160 10800 7600 6000 5600 95160
13000 11200 10800 7600 6000 5600 95400
40 - - - - - 22080
0
13000 11200 10800 7600 6000 5600 95400
10000 10000 10760 7600 6000 6000 95560
13000 11200 10800 7600 6000 5600 95400
1,240 40 - - - 400 27720
0
13000 11200 10800 7600 6000 5600 95400
12960 11200 10800 7600 6000 6000 95560
13000 11200 10800 7600 6000 5600 95400
- - - - - 400 17440
also be aware of the efficiency and morale issues that arise with higher
ertimes months. Option two reduces the number of layoffs to 100 and also
offs to 75 but increases overtime from 49 to 199 bringing the total increase in
oach is that efficiency and moral may be reduced by such a high number of
y be attractive to reduce layoffs by 25 as found in option 3 ,it would increase