Aggregate Production

Planning
Chase & Level Strategies
 The big picture approach to planning.
Seeking to find combination of monthly workforce,output and inventory
levels on an aggregate basis
 ABC Company needs to plan workforces and production levels for the six-month
period of January to June to produce the famous ABC game consoles. The following
table shows forecasted demand for the game consoles. At the end of December there
are 200 workers employed. Ending inventory in December is expected to be 500, and
management would like to have 750 game consoles on hand at the end of June. The
cost of holding one game console in inventory for one month is estimated to be 100 TL.
The cost of hiring one worker is expected to be 500 TL, the cost of firing one worker is
expected to be 1,000 TL, and the cost of a worker for one day is 50 TL. In the past, in a
46 working-day period of time, 174 workers produced 8,000 game consoles.

Solve the problem by using Chase, Level, and Hybrid strategies .

 Chase Strategy

Adjusting output rates to match the demand pattern.

Developing a plan with a minimum levels of inventory
STEP 1 :Using Tables to Identify the Question
K = # of items /worker-day = 1
Beginning Inventory 500 8000/(174*46)
Current# of workers for chase 200
End of Inventory 750 & level strategies
Cost of a worker/day 50
Hiring cost/worker 500
Firing cost/worker 1000
Holding cost/unit - 100
month
 Step2 : Calculate Adj Demand and min # of
workers
Monthly
Min # of Cumulativ End of Regular
Adjusted # of # of Number Number # of Units Cumulative
Workers e Adj. Month Labor Cost
Demand Working Workers of Hired of Fired Produced Production
(C) = A/ Demand Inventory
(A) Days (B) (D) Workers Workers B * D * K (E)
(B*K) (F) E - F $C$3 * B
*D
Dec. 200
Jan. 3000 22 137 137 63 3014 3014 3000 14 150700
Feb. 2750 24 115 115 22 2760 5774 5750 24 138000
Mar. 2400 25 96 96 19 2400 8174 8150 24 120000
Apr. 4600 26 177 177 81 4602 12776 12750 26 230100
May 3750 22 171 171 6 3762 16538 16500 38 188100
Jun. 4250 20 213 213 42 4260 20798 20750 48 213000
TOTAL 123 110 174
 Step 3: Cost Evaluation

Monthly Regular Labor

Cost 1039900
Hiring Cost 61500
Firing Cost 110000
Inventory Cost 92400
TOTAL COST 1303800
 Level Strategy ??

Now assume that the goal is to eliminate need for hiring and firing during
planning horizon
In order to avoid shortages, compute the min workforce required for every
month !
 Cum. # of
# of units # of Units End of
Cumulative # of units Cumulative Cumulative
Net produced / Ratio Number Produced Month
Net Demand Working produced / Production Net Demand
Demand worker (A/C) Fired $G$37 * Inventory
(A) Days (B) worker (D) (E)
(B * K ) (B) (D) - (E)
(C)
Dec.
Jan. 3000 3000 22 22 22 137 50 3300 3300 3000 300
Feb. 2750 5750 24 24 46 125 3600 6900 5750 1150
Mar. 2400 8150 25 25 71 115 3750 10650 8150 2500
Apr. 4600 12750 26 26 97 132 3900 14550 12750 1800
May 3750 16500 22 22 119 139 3300 17850 16500 1350
Jun. 4250 20750 20 20 139 150 3000 20850 20750 100
TOTAL 50 7200
Monthly Regular Labor
Cost 1042500
Hiring Cost 0
Firing Cost 50000
Inventory Cost 795000
TOTAL COST 1887500
 When the costs of two plans are close, it is likely that the company would
prefer the constant workforce plan in order to avoid any unaccounted for
costs of making frequent changes in the workforce.