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Business, Coursework

Aggregate Planning

Aggregate Planning

Problem 2

Listing out the available data:

Cost data  
Regular-time labor cost per hour  $   10.00
Overtime labor cost per hour  $   15.00
Subcontracting cost per unit (labor only)  $   84.00
Holding price per unit per period  $   20.00
Backorder price per unit per period  $   10.00
Hiring cost per employee  $ 600.00
Firing cost per employee  $ 450.00
Capacity data
Beginning workforce 210
Beginning Inventory 400
Labor standard per unit 6
Regular time available per period 160
Overtime available per period 32
Subcontracting maximum per period 1000
Subcontracting minimum per period 500
Demand data
Period 1 6000
Period 2 4800
Period 3 7840
Period 4 5200
Period 5 6560
Period 6 3600
Total Number of periods 6

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To develop the aggregate plan:

Choose the kind of aggregate plan. We will use a level plan.

Calculate the aggregate production rate. Since backorders are not allowed, the period with the highest production rate will determine the aggregate production rate for use in this plan.

Calculate the workforce size given the aggregate production rate.

The plan is shown below.

Level Aggregate Plan, using inventories but no backorders
Detailed plan computations Period
  1 2 3 4 5 6 Total
Demand (units) 5600 4800 7840 5200 6560 3600
Cumulative demand (units) 5600 10400 18240 23440 30000 33600
Cumulative demand/periods 5600 5200 6080 5860 6000 5600
Period production (units) 6080 6080 6080 6080 6080 6080 36480
Cumulative production (units) 6080 12160 18240 24320 30400 36480
Cum.Dem. Minus Cum.Prod. -480 -1760 0 -880 -400 -2880
Ending Inventory (units) 480 1760 0 880 400 2880 6400
Backorders (units) 0 0 0 0 0 0 0
Compute Level Production Rate and Workforce Needed
Production Rate (units) 6080
Units per Employee per Period 26.67
Employees Needed 228
Number to Hire 18
Number to Fire 0
Cost Calculations for Plan B
Regular-time labor cost $   2,188,800
Overtime labor cost $                  –
Inventory holding cost $         64,000
Backorder cost $                  –
Hiring cost $         10,800
Firing cost $                  –
Total Cost $   2,263,600

Table 2: Plan 1 – Level Aggregate Plan

  • From the above table, Aggregate Production Rate is 6,080
  • The workforce required to produce the aggregate production rate (6,080)

Since the production rate per employee during regular time is 20.666 units per period, this plan requires 228 employees. Therefore, an additional 18 employees are needed.

  • If this plan were implemented, there would be an increase in holding costs in the future as the program creates a high inventory level after the first three periods.

From Table 2, the various costs are:

Regular-time labor cost = $2,188,800

Inventory holding cost = $64,000

Hiring cost = $10,800

Total Cost = $2,263,600

To Evaluate the plan in terms of cost, customer service, operations, and human resources. Develop a second table for comparison.

Level Aggregate Plan, using inventories and back orders
Detailed plan computations Period
  1 2 3 4 5 6 Total
Demand (units) 5600 4800 7840 5200 6560 3600
Cumulative demand (units) 5600 10400 18240 23440 30000 33600
Cumulative demand/periods 5600 5200 6080 5860 6000 5600
Period production (units) 5600 5600 5600 5600 5600 5600 33600
Cumulative production (units) 5600 11200 16800 22400 28000 33600
Cum.Dem. Minus Cum.Prod. 0 -800 1440 1040 2000 0
Ending Inventory (units) 0 800 0 0 0 0 800
Backorders (units) 0 0 1440 1040 2000 0 4480
Compute Level Production Rate and Workforce Needed
Production Rate (units) 5600
Units per Employee per Period 26.67
Employees Needed 210
Number to Hire 0
Number to Fire 0
Cost Calculations for Plan B
Regular-time labor cost $   2,016,000
Overtime labor cost $                  –
Inventory holding cost $         8,000
Backorder cost  $         89,600
Hiring cost $                 –
Firing cost $                  –
Total Cost $   2,113,600

Table 3. Plan 2 – Aggregate Level Plan

Comparing the two plans:

  1. There is a decrease in total cost for the second plan compared to the first plan, $2,113,600 compared to $2,263,600.
  2. The production plan units for the second plan have also reduced from 36,480 units to 33,600 units. This would signify an increased
  3. The unit cost for the twomethodss compares as follows:

Unit cost for plan 1=2,263,600/36,480=62.05
Unit cost for plan 2=2,113,600/33,600=62.90

The unit cost for plan 1 is lower, with a better customer service score as there are nobackorderss.

Aggregate Planning Worksheet For Attached Tables

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References

Reid, R. D., & Sanders, N. R. (2016). Operations Management, Binder Ready Version: An Integrated Approach. John Wiley & Sons.

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Question 

[u08a2] Unit 8 Assignment 2 Aggregate Planning

Complete problem two on page 511 of your textbook. For help completing this problem, see the Solved Problems on pages 504–510.

Aggregate Planning

Aggregate Planning

When completed, submit your answers as an attachment in the assignment area. Be sure to include your work with the answer.

Resources

Aggregate Planning Scoring Guide

  • Due Date: Unit 8
    Percentage of Course Grade: 2%.
CRITERIA DISTINGUISHED
Accurately solves all computation aspects of the aggregate planning problem.
50%		 Accurately solves all computation aspects of the problem and shows work.
Provides summary and rationale useful in interpreting the aggregate planning results.
50%		 Accurately summarizes salient points with supporting rationale for interpreting results.