Chapter 13
Chapter 13
Chapter 13
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6549 CHQ<strong>13</strong> UG 3/27/02 6:44 PM Page 56<br />
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<strong>13</strong><br />
CHAPTER<br />
DISCUSSION QUESTIONS<br />
Discussion questions 1 through <strong>13</strong> appear in the text.<br />
14. Define aggregate planning.<br />
15. Explain what the term aggregate in “aggregate planning” means.<br />
Aggregate Planning<br />
16. List the strategic objectives of aggregate planning. Which one of these is most often addressed by the<br />
quantitative techniques of aggregate planning? Which one of these is generally the most important?<br />
17. Define chase strategy.<br />
18. What is level scheduling strategy? What is the basic philosophy underlying it?<br />
19. Define mixed strategy. Why would a firm use a mixed strategy instead of a simple pure strategy?<br />
CRITICAL THINKING EXERCISE<br />
For the last several years you, the production manager responsible for scheduling, have been working<br />
toward a low cost level aggregate production plan for Vaughan Enterprises. Vaughan Enterprises is<br />
an assembler of printed circuit boards primarily for the cell phone industry. After this morning’s staff<br />
meeting, your boss and the major stock holder, Mr. Ben Vaughan, informed you that the company<br />
will be moving immediately to a Just-In-Time (JIT) system – from suppliers and to Vaughan Enterprises’<br />
customers. In the discussion, Mr. Vaughan reminded you that this is the trend in the entire<br />
industry and for Vaughan Enterprises to remain competitive, the effort must be successful. What are<br />
your concerns about the change?<br />
PROBLEMS<br />
Problems <strong>13</strong>.1 through <strong>13</strong>.19 appear in the text.<br />
<strong>13</strong>.20 Lon Min has developed a specialized airtight vacuum bag to extend the freshness of seafood shipped<br />
to restaurants. He has put together the following demand cost data:<br />
Forecast Regular Over- Sub-<br />
Quarter (Units) Time time contract<br />
1 500 400 80 100<br />
2 750 400 80 100<br />
3 900 800 160 100<br />
4 450 400 80 100<br />
Initial inventory 250 units<br />
Regular time cost $1.00/unit<br />
Overtime cost $1.50/unit<br />
Sub-contracting cost $2.00/unit<br />
Carrying cost $0.20/unit/quarter<br />
Backorder cost $0.50/unit/quarter<br />
Q-56 Heizer/Render/Operations Management
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(a) Find the optimal plan using the transportation method.<br />
(b) What is the cost of the plan?<br />
(c) Does any regular time capacity go unused? If so, how much in which periods?<br />
(d) What is the extent of backordering in units and dollars?<br />
<strong>13</strong>.21 Tampa’s Soda Pop Inc. has a new fruit drink for which it has high hopes. Don Hammond, the production<br />
planner, has assembled the following cost data and demand forecast.<br />
Quarter Forecast<br />
1 1800<br />
2 1100<br />
3 1600<br />
4 900<br />
Previous quarter’s output <strong>13</strong>00 cases<br />
Beginning inventory 0 cases<br />
Stockout cost $150 per case<br />
Inventory holding cost $40 per case at end of quarter<br />
Hiring employees $40 per case<br />
Terminating employees $80 per case<br />
Subcontracting cost $60 per case<br />
Unit cost on regular time $30 per case<br />
Overtime cost $15 extra per case<br />
Capacity on regular time 1800 cases per quarter<br />
Don’s job is to develop an aggregate plan. The three initial options are:<br />
(a) Plan A: A chase strategy that hires and fires personnel as necessary to meet the forecast.<br />
(b) Plan B: A level strategy.<br />
(c) Plan C: A level strategy that produces 1,200 cases per quarter and meets the forecasted<br />
demand with inventory and subcontracting.<br />
(d) Which strategy is the lowest cost plan?<br />
(e) If you are Don’s boss, the VP for Operations, which plan do you implement and why?<br />
<strong>13</strong>.22 Bell Computer Corp. needs an aggregate plan for July through December for its DVD production.<br />
The company has developed the following data:<br />
Holding cost<br />
Costs<br />
$8/DVD/month<br />
Subcontracting $80/DVD<br />
Regular-time labor $12/hour<br />
Overtime labor $18/hour for hours above<br />
8 hours/worker/day<br />
Hiring cost $40/DVD<br />
Layoff cost $80/DVD<br />
Stockout cost none<br />
Other Data<br />
Current workforce (June) 8 people<br />
Labor hours/DVD 4 hours<br />
Workdays/month 20 days<br />
Beginning inventory 250 DVDs<br />
Ending inventory 0 DVDs<br />
Demand Forecast<br />
July 400<br />
Aug. 500<br />
Sept. 550<br />
Oct. 700<br />
Nov. 800<br />
Dec. 700<br />
What will each of the two following strategies cost?<br />
(a) Plan A: Vary the work force so that production meets the forecasted demand. Bell had eight<br />
employees on staff in June.<br />
(b) Plan B: Vary overtime only and use a constant workforce of ten.<br />
(c) Which plan is best and why?<br />
Heizer/Render/Operations Management Q-57
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<strong>13</strong>.23 Barr Health and Beauty Products has developed a new shampoo and you need to develop its aggregate<br />
schedule. The cost accounting department has supplied you the costs relevant to the aggregate<br />
plan and the marketing department has provided a 4 quarter forecast. All are shown below.<br />
Quarter Forecast<br />
Costs<br />
1<br />
2<br />
3<br />
4<br />
1400<br />
1200<br />
1500<br />
<strong>13</strong>00<br />
Previous quarter’s output<br />
Beginning inventory<br />
Stockout cost<br />
Inventory holding cost<br />
1500 units<br />
0 units<br />
$50 per unit<br />
$10 per unit for every unit<br />
held at the end of the quarter<br />
Hiring workers $40 per unit<br />
Firing workers $80 per unit<br />
Unit cost $30 per unit<br />
Overtime $15 extra per unit<br />
Subcontracting not available<br />
Your job is to develop an aggregate plan for the next four quarters.<br />
(a) First, you try a chase plan by hiring and firing as necessary to hold costs down.<br />
(b) Then you try a plan that holds employment steady.<br />
(c) Which is the most economical plan for Barr Health and Beauty Products?<br />
Q-58 Heizer/Render/Operations Management