Question

Sales and Operations Planning ABC Manufacturing is developing their 2020 SOP. The sales plan is already developed, using the forecast obtained from Demand Management and is as follows: (the numbers are in 1000’s)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

420 375 425 600 200 100 150 250 420 390 420 450

Other problem parameters are: Initial worker level = 500, Initial inventory = 100,000, Required ending inventory = 220,000, Cost per unit = $50, one worker can produce 600 units/month Hiring cost = $150 per worker, Firing cost = $300 per worker, Inventory holding cost = 0.5% of the item cost/month, Shortage cost = 1% of item cost/month. 1. Develop a Chase plan 2. Develop a Level plan For each plan, calculate the end of month inventory (or shortage) level, monthly hiring and firing schedule and costs, monthly inventory and shortage costs, and the total cost.

Upload your spreadsheet on to Canvas by the due date.

Answer 1

1. Chase Plan (without any shortages):

Month	Demand	Required ending inventory	Production required	Required # workers	# workers (integers)	Hire	Fire	Actual production	Actual ending inventory
Dec		100,000		500	500				100,000
Jan	420,000	0	320,000	533.33	534	34	0	320,400	400
Feb	375,000	0	375,000	625.00	625	92	0	375,000	400
Mar	425,000	0	425,000	708.33	708	83	0	424,800	200
Apr	600,000	0	600,000	1,000.00	1,000	292	0	600,000	200
May	200,000	0	200,000	333.33	333	0	667	199,800	0
Jun	100,000	0	100,000	166.67	167	0	167	100,200	200
Jul	150,000	0	150,000	250.00	250	83	0	150,000	200
Aug	250,000	0	250,000	416.67	417	167	0	250,200	400
Sep	420,000	0	420,000	700.00	700	283	0	420,000	400
Oct	390,000	0	390,000	650.00	650	0	50	390,000	400
Nov	420,000	0	420,000	700.00	700	50	0	420,000	400
Dec	450,000	220,000	670,000	1,116.67	1,116	417	0	669,600	220,000
Totals						1,501	883	4,320,000	223,200
Marginal costs						$150	$300	$50	$0.25
Cost						$225,100	$265,000	$216,000,000	$55,800
									$216,545,900

2. Level plan

Month	Demand	Required ending inventory	Production required	Leveled production	Required # workers	Hire	Fire	Actual production	Actual ending inventory	Backorder
Dec		100,000			500				100,000
Jan	420,000	0	320,000	360,000	600	100	0	360,000	40,000	0
Feb	375,000	0	375,000	360,000	600	0	0	360,000	25,000	0
Mar	425,000	0	425,000	360,000	600	0	0	360,000	0	40,000
Apr	600,000	0	600,000	360,000	600	0	0	360,000	0	280,000
May	200,000	0	200,000	360,000	600	0	0	360,000	0	120,000
Jun	100,000	0	100,000	360,000	600	0	0	360,000	140,000	0
Jul	150,000	0	150,000	360,000	600	0	0	360,000	350,000	0
Aug	250,000	0	250,000	360,000	600	0	0	360,000	460,000	0
Sep	420,000	0	420,000	360,000	600	0	0	360,000	400,000	0
Oct	390,000	0	390,000	360,000	600	0	0	360,000	370,000	0
Nov	420,000	0	420,000	360,000	600	0	0	360,000	310,000	0
Dec	450,000	220,000	670,000	360,000	600	0	0	360,000	220,000	0
Totals						100	0	4,320,000	2,315,000	440,000
Marginal costs						$150	$300	$50	$0.25	$0.50
Cost						$15,000	$0	$216,000,000	$578,750	$220,000
										$216,813,750