ABC Manufacturing is developing their 2017 SOP. The sales plan is already developed, using the forecast obtained from Demand Management and is as follows: (the numbers are in 1000’s)

Jan       Feb      Mar     Apr      May     Jun      Jul       Aug     Sep      Oct      Nov     Dec

300      280      400      500      500      300      200      100      150      250      300      350

Other problem parameters are:

Initial worker level = 300, Initial inventory = 50,000, Required ending inventory = 100,000, Cost per unit = $50, one worker can produce 500 units/month

Hiring cost = $200 per worker, Firing cost = $350 per worker, Inventory holding cost = 1% of item cost/month, Shortage cost = 3% of item cost/month.

1. Develop a Chase plan

2. Develop a Level plan

For each plan, calculate the end of month inventory (or shortage) level, monthly hiring and firing schedule and costs, monthly inventory and shortage costs, and the total cost.

3. By trial and error, come up with a mixed strategy that will have less total cost than any of the above two.