OutlineExamplesChase StrategyLevel StrategyOptimizationLESSON 9:
AGGREGATE PLANNINGEXAMPLESChase strategyProduce as much as
neededZero inventory, no holding cost, no shortagesZero inventory
is diicult to achieve !ecause "or# hours may not !e lexi!leLo"
inventory costs, high smoothing costsLevel strategyProduce a
constant amount each periodSta!le "or#orce, no hiring$iring, no
overtime,no su!contractLo" smoothing costs, high inventory costsTwo
Simple StrategiesCase
Strateg!%&%%%'%%%(%%%)%%%*%%%%*&%%%*'%%%Period+um!er o
,nits-emandProductionCase
Strateg!%.%%%*%%%%*.%%%&%%%%&.%%%/%%%%/.%%%'%%%%0all 1inter
Spring SummerPeriodsCumulative +um!er o
,nitsCumulative-emandCumulativeProductionLe"el
Strateg!%&%%%'%%%(%%%)%%%*%%%%*&%%%*'%%%Period+um!er o
,nits-emandProductionLe"el
Strateg!%.%%%*%%%%*.%%%&%%%%&.%%%/%%%%/.%%%'%%%%'.%%%0all
1inter Spring SummerPeriodsCumulative +um!er o
,nitsCumulative-emandCumulativeProductionOptimi#ation2he chase
and level strategies are t"o extreme strategies3 Chase strategy
minimizes inventory costs and level strategy minimizes smoothing
costs3 2he goal o optimization is to identiy a production plan that
minimizes the total inventory and smoothing costs32his can !e done
using linear programming3Lesson *% discusses the application o
linear programming using Excel Solver3 -evelop a production plan
and calculate the annualcost or a irm "hose demand orecast is all,
*%, %%%4 "inter, ),%%%4 spring 5,%%%4 summer, *&,%%%3 6nventory
at the !eginning o all is .%% units3 7t the !eginning o all you
currently have /% "or#ers, !ut you plan to hire temporary "or#ers
at the !eginning o summer and lay them o at the end o summer3 6n
addition, you have negotiated "ith the union an option to use the
regular "or#orce on overtime during "inter or spring i the overtime
is necessary to prevent stoc#8outs at the end o those 9uarters3
Overtime is not availa!le during all3 :Continued333;E$ample*%% or
each temp4 layo, >&%% or each "or#er laid o4 inventory
holding, >. per unit89uarter4 !ac#order, >*% per unit4
straight time, >. per hour4 overtime >) per hour3 7ssume that
the productivity is %3. units per "or#er hour, "ith eight hours per
day and (% days per season3-evelop a production plan using:*; all
the constraints as stated :&; chase strategy, no overtime, "or#
hours not lexi!le:/; chase strategy, no overtime, lexi!le hours
:sel study;E$ample:'; Suppose that a level strategy "ill !e used
"ithout any overtime3 1hat is the minimum num!er o "or#ers re9uired
to avoid shortages? -evelop a production plan using the minimum
num!er o "or#ers re9uired to avoid shortages3:.; 7ssuming that the
shortages are allo"ed and that ( ne" "or#ers "ill !e hired in the
!eginning o the all term develop a production plan using level
strategy and no overtime :sel study;:(; 7ssuming that the overtime
"ill !e used in all and "inter to prevent shortages and that 5 ne"
"or#ers "ill !e hired in the !eginning o the all term, develop a
production plan using level strategy "ith overtime :sel
study;E$amplePro%lem &: Te original pro%lemE$ample0orecast
@eginning Production ProductionProduction 6nventory
