Farquhar Industries is a medium-size producer of metal products. They have two separate production lines according to the requirements of the manufacturing process. Due to this differentiation, both lines are studied separately.
Based on the demand forecast, we will follow the Aggregate Planning methodology for planning production in an intermediate term, one year. We consider this model adequate, because demand presents variations of +/- 20% in the job shop and more than +/- 30% in the line flow.
Our objective is meet the demand forecast at the minimum cost without damaging the labor relationship with employees.
Demand requirements for job shop or manual operations are stated in terms of hours. In…show more content… In addition, we only have an overproduction of 260 hours in the whole year (1%). The production plan suggested would be very flexible, because if demand rises, our workers can always do overtime work and if it suits, we can always postpone the dismissals. On the other hand, if demand decreases, we can cut the overtime hours scheduled, or postpone hiring new employees.
Line Flow´s production is measure in units produced. Contrasting with manual units, these high volume units can be inventoried with a cost of 1,5€/unit/month. At the beginning of the year Farquhar has a stock of 2.000 units. We will reduce it quickly for saving inventory maintenance costs, remaining a residual inventory of 640 units (10% of the monthly top production) to avoid shortages in case of breakdowns.