Concept explainers
a)
To evaluate: Plan C for the given information
Introduction: The aggregate plan is the output of sales and operations planning. The major concern of aggregate planning is the production time and quantity for the intermediate future. Aggregate planning would encompass a time prospect of approximately 3 to 18 months.
b)
To determine: Evaluate plan D for the given information
Introduction: The aggregate plan is the output of sales and operations planning. The major concern of aggregate planning is the production time and quantity for the intermediate future. Aggregate planning would encompass a time prospect of approximately 3 to 18 months.
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Principles of Operations Management: Sustainability and Supply Chain Management, Student Value Edition (10th Edition)
- Develop a chase aggregate plan for Draper using apermanent workforce of 12 employees supplemented by overtime.All demand must be met each period.(a) Show what would happen if this plan were implemented.(b) Calculate the costs associated with this plan.(c) Evaluate the plan in terms of cost, customer service,operations, and human resources.arrow_forwardGiven the projected demands for the next six months, prepare an aggregate plan that uses inventory, regular time and overtime, and backorders. The plan must wind up with no units in ending inventory in Period 6. Regular time capacity is 160 units per month. There are 10 units backlogged from before. Overtime cost is $30 per unit, backorder cost is $20 per unit, inventory holding cost is $5 per unit, regular time cost of $20 per unit, and beginning inventory is zero. Month Forecast 1 180 2 170 3 140 4 150 5 130 6 150 a. Prepare an aggregate plan with inventory and backlog allowed. Overtime and subcontracting are not allowed.b. Prepare an aggregate plan if the management decided to switch to…arrow_forwardSoutheast Soda Pop, Inc., has a new fruit drink forwhich it has high hopes. John Mitten thai, the production planner,has assembled the fo llowing cost data and demand forecast: John's job is to develop an aggregate plan. The three initialoptions he wants to evaluate are:• Plan A: a strategy that hires and fires personnel as necessaryto meet the forecast.• Plan B: a level strategy.• Plan C: a level strategy that produces 1,200 cases per quarterand meets the fo recast demand with inventory and subcontracting.a) Which strategy is the lowest-cost plan?b) If you are John's boss, the VP for operations, which p lan doyou implement and why?arrow_forward
- Mavis and John have joined forces to start M&J Food Products, a processor of packaged shredded lettuce for institutional use. John has years of food processing experience, and Mavis has extensive commercial food preparation experience. The process will consist of opening crates of lettuce and then sorting, washing, slicing, preserving, and finally packaging the prepared lettuce. Together, with help from vendors, they think they can adequately estimate demand, fixed costs, revenues, and variable cost per 5-pound bag of lettuce. They think a largely manual process will have monthly fixed cost of $50,000and a variable cost of $2.50 per bag. They expect to sell 75,000 bags of lettuce per month. They expect to sell the shredded lettuce for $3.25 per 5-pound bag. John and Mavis has been contacted by a vendor to consider a more mechanized process. This new process will have monthly fixed cost of $125,000 per month with a variable cost of $1.75 per bag. Based on the above scenario: Should…arrow_forwardSpectrum Hair Salon is considering expanding itsbusiness, as it is experiencing a large growth. Th e question iswhether it should expand with a bigger facility than needed,hoping that demand will catch up, or with a small facility,knowing that it will need to reconsider expanding in three years.Th e management at Spectrum has estimated the followingchances for demand:• Th e likelihood of demand being high is 0.70.• Th e likelihood of demand being low is 0.30.Estimated profi ts for each alternative are as follows:• Large expansion has an estimated profi tability of either$100,000 or $70,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $50,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at this point, the profi tability is expected tobe $90,000. If it does not expand further, the profi tability isexpected to be $60,000.Draw a…arrow_forwardSpectrum Hair Salon is considering expanding itsbusiness, as it is experiencing a large growth. Th e question iswhether it should expand with a bigger facility than needed,hoping that demand will catch up, or with a small facility,knowing that it will need to reconsider expanding in three years.Th e management at Spectrum has estimated the followingchances for demand:• Th e likelihood of demand being high is 0.70.• Th e likelihood of demand being low is 0.30.Estimated profi ts for each alternative are as follows:• Large expansion has an estimated profi tability of either$100,000 or $70,000, depending on whether demand turnsout to be high or low.• Small expansion has a profi tability of $50,000, assuming thatdemand is low.• Small expansion with an occurrence of high demand wouldrequire considering whether to expand further. If thebusiness expands at this point, the profi tability is expected tobe $90,000. If it does not expand further, the profi tability isexpected to be $60,000.arrow_forward
- Jose Martinez of El Paso had developed a polished stainless-steel tortilla machine that makes it a “showpiece” for display in Mexican restaurants. He needs to develop a 5-month aggregate plan. His forecast of capacity and demand follows: Month 1 2 3 4 5 Demand 150 160 130 200 210 Regular capacity 150 150 150 150 150 Overtime capacity 20 20 10 10 10 Subcontracting: 100 units available over the 5-month period (NOT 100 units each month) Beginning inventory: 0 units Ending inventory required at the last month (i.e. month 5): 20 units. Costs Regular-time cost per unit $100 Overtime cost per unit $125 Subcontracting cost per unit $135 Inventory holding cost per unit per month $3 Assume that backorders are not permitted. a) Find an aggregate production plan using the intuitive lowest cost approach. (i.e. Develop an aggregate plan using the transportation method). b) State the corresponding…arrow_forwardA. When the required labor skill is high, it is generally best to pursue which aggregate planning strategy? a. Hybrid - combination of level and chase b. Chase c. Level d. Low job discretion B. If labor turnover is high, it is generally best to pursue which aggregate planning strategy? a. Chase b. Low job discretion c. Hybrid - combination of level and chase d. Levelarrow_forward3) Gang Aft Agley, a manufacturing company, faces the aggregate planning problem shown in the table below. Cost of regular production is $5 per unit, the cost of producing the same unit on overtime is $7, the cost of subcontracting is $8 per unit, and the cost of carrying a unit in inventory from one month to the next is $2. January February March April May Forecast 500 750 1200 650 300 Beginning Inventory 100 Regular Time Overtime Subcontracting Ending Inventory The labor contract at the plant prohibits both overtime and subcontracting output to exceed 300 units in any five month window. The plant capacity is 500 units per month produced using two shifts, regardless of the number of days in a month. By policy, management wants to avoid stockouts. Formulate the aggregate plan using linear programming and solve it using Solver.arrow_forward
- How does aggregate planning in service differ fromaggregate planning in manufacturing?arrow_forwardWhat are major limitations of using the tra nspo rtation method for aggregate planning?arrow_forwardFrom Chapter 13: Aggregate Plan Q2) Eagle Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters. Quarter Demand Previous quarter's output 1500 units 1 1400 Beginning inventory 200 units 2 1000 Stockout cost $50 per unit 3 1500 Inventory holding cost $8 per unit at end of quarter 4 1300 Hiring workers $5 per unit Laying off workers $10 per unit Unit cost $30 per unit Overtime $10 extra per unit Which of the following production plans is better: Plan A—chase demand by hiring and layoffs; or Plan B—produce at a constant rate of 1200 and obtain the remainder from overtime? Finish the calculation. Plan A: Eagle Fabrication Solution Demand Regular Time Capacity Regular Time Production Hire Fire Initial Inventory Period 1 1,400 1200 Period 2 1,000…arrow_forward
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,MarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational Publishing