Macdonald Refrigeration Limited
PART I 1. Characterize the dominant strategy used for each of Janet’s production plans, and provide a brief summary of the strengths and weaknesses of each.
PRODUCTION PLAN 1: LEVEL STRATEGY
Janet's first plan proposes using a stable workforce and a constant output rate. Inventories would increase during low demand periods and decrease during high demand periods.
* Workers are protected against forecast error * Stable work hours and increased job security lead to happier employees * Employees would not have to work as many overtime hours to fill orders because there would be substantial inventory during heavy demand months * Tasks become easier and workers more…show more content… Strengths: * Inventory is closely managed and kept low * Inventory carrying cost is avoided * Least expensive of the three strategies due to the lack of excess inventory and employee overtime * Adjusting the workforce in response to changing demand eliminates some of the limitations of Production Plan 2 * No burnout from employees working high levels of overtime
Weaknesses: * Employee morale and union relations will suffer as a result of potential layoffs * It is risky to rely on a potential pool of “easily trained applicants” to draw on as orders increase because those applicants might not be readily available * Employees might decrease rate of production as demand decreases to create an impression of need and to preserve jobs 2. Each of Janet’s approaches offers advantages and disadvantages. If cost is the principal criterion, all three plans can be improved. For example, rather than paying overtime wages to permanent employees during the busiest months, Janet could hire “temporary” workers (who will work for at most a few months but earn regular wages and