3. Aggregate planning.
Joy Manufacturing problem. Use Joy Manufacturing file spreadsheet for this option.
Joy Manufacturing is considering three approaches to aggregate planning: level production strategy, chase strategy, and constrained chase strategy. The level production volume is set at 4000 units per month. The chase strategy will involve matching demand with production required to meet the demand on a month by month basis. The constrained chase strategy will work like the chase strategy except it has limits of a maximum of 125% of normal production and a minimum of 75% of normal production. Costs per unit are listed below.
Production cost 50
Inventory holding cost 2
Cost of lost sales 75
Overtime cost 30
Under time cost 10
Rate of production change cost 5
Monthly demand
January 2600
February 3000
March 3300
April 3900
May 4400
June 4900
July 5400
August 5600
September 5100
October 4500
November 4000
December 3300
Total 50000
They are starting the year with an inventory of 3000 units (ending from previous period) and would like to have 1000 units at the end of the year.
Students will need to input the data above in the appropriate cells on the spreadsheet and then develop plans for the Chase and Constrained Chase options, in other words, the yellow cells.
A spreadsheet is provided for your use in the Lesson page. The yellow-filled cells are those with missing items; the remaining cells are calculated by "formula."
Remember finding the optimal solution for each option will require trial and error effort.