You manage a consulting firm down the street from Consuelo Chua, Inc., and to get your foot in the door, you have told Ms. Chua that you can do a better job at aggregate planning than her current staff. She said, "Fine. You do that, and you have a one year contract." You now have to make good on your boast using the data in Problem. You decide to hire 5 workers in August and 5 more in October. Your results?
Problem - Consuelo Chua, Inc., is a disk drive manufacturer in need of an aggregate plan for July through December. The company has gathered the following data:
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Costs
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Holding cost
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$8/disk/month
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Subcontracting
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$80/disk
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Regular-time labor
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$12/hour
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Overtime labor
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$18/hour for hours above 8 hours/worker/day
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Hiring cost
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$40/worker
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Layoff cost
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$80/worker
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Demand*
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July
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400
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Aug.
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500
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Sept.
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550
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Oct.
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700
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Nov.
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800
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Dec.
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700
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* No costs are incurred for unmet demand, but unmet demand (backorders) must be handled in the following period. If half or more of a worker is needed, round up.
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Other Data
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Current workforce (June)
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8 people
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Labor-hours/disk
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4 hours
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Workdays/month
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20 days
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Beginning inventory
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150 disks**
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No requirement for ending inventory
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0 disks
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What will each of the two following strategies cost?
a) Vary the workforce so that production meets demand. Chua had eight workers on board in June.
b) Vary overtime only and use a constant workforce of eight.