Question

Please show how to do a pure chase strategy given this info

NUMBER OF EMPLOYEES 2013-PRODUCTION 1,000s MONTH January 90 May June September 130 130 100 October 107 December space was available at the plant, therefore, additional space would have to be rented. In addition, the cost of capital is high because of the company's low credit rating. Taking all of these factors into account, Joan estimated the cost of storing 1,000 pounds of product for one month to be nearly $120. The company had a policy of trying to maintain a buffer inventory to improve customer service. The management team recently decided that, for planning purposes, the minimum inventory level should be 10,000 pounds to provide sufficient buffer inventory. Simulating the Aggregate Planning Process Joan felt that a useful approach for determining the cost of alternative production plans was to develop a simulation based on the 2013 sales forecast. The forecast of the monthly sales for 2014 is presented in Table A.2. For simplicity in the simulation, she decided to use 12 average months to represent the year rather than actual months of varying length. This enabled her to use 1,000 pounds per month as the production rate for a worker on regular time for a month. Each employee on the payroll in any month would be paid the $1,800 base wage. Overtime would be limited to 25 percent of regular time and would be compensated for at a premium rate of 50 percent. The two variables in the production plan are the number of workers and the monthly production rate. Idle time could be specified as a part of the production plan. As an ple, if 100 workers are specified to produce 90,000 pounds in a month with all workers receiving their full base wage equivalent. On the other hand, overtime could be scheduled, up to 25 percent over regular time, by specifying production in excess of the production capability on regular time. Joan also knew that she must meet the demand requirements and maintain the minimum inventory for each month in the plan. There were 100 production employees on the payroll in December 2013, and Joan wondered whether any of those should be laid off for January. With the current produc- tion schedule, the company would end up at the end of December with very close to the 10,000-pound minimum inventory requirement. Joan was most interested in comparing Table A22014 Production and Employment Table A.2 2014 PRODUCTION 1,000s 60 60 60 80 130 200 250 280 240 170 150 120 MONTH January February March April May June July August September October November December a pure level production plan, with the current policy of changing the workforce each month to meet the estimat production requirements. She also wanted to evaluate a hybrid with fewer hirings and firings than what would be required under the current policy. or one with a minimum number of hirings and firings,

Answer 1

In a pure chase strategy, the production in regular time equals exactly with the forecast leading to zero inventory accumulation. The workforce may be adjusted by hiring and laying off in every period. Overtime is also not considered in case of a pure chase strategy.

Month	Forecast -2014	Production rate (lbs per employee per month)	Required workers	Hire	Lay-off
Dec			100
Jan	60,000	1,000	60	0	40
Feb	60,000	1,000	60	0	0
Mar	60,000	1,000	60	0	0
Apr	80,000	1,000	80	20	0
May	130,000	1,000	130	50	0
Jun	200,000	1,000	200	70	0
Jul	250,000	1,000	250	50	0
Aug	280,000	1,000	280	30	0
Sep	240,000	1,000	240	0	40
Oct	170,000	1,000	170	0	70
Nov	150,000	1,000	150	0	20
Dec	120,000	1,000	120	0	30
Totals			1,800	220	200

Note that the hiring and lay-off cost is not appearing in the question. If given, the total cost of this plan can be computed as

Total cost = 1,800 * $1,800 + 220 * Hiring cost per worker hired + 200 * Lay-off cost per worker laid-off.

Calculations

A B Production rate (lbs Kequired workers 100 Month Forecast -2014 Lay-off Hire 2 per employee per Dec 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 =MAX(0,E4-E3) =MLAX(0.ES-E4) =MLAX(0.E6-E5) =MAX(0,E3-E4) =MLAX(0.E4-E5) =MLAX(0.ES-E6) 4 Jan 60000 5 Feb 60000 6 Mar 60000 7Apr 80000 8May 130000 9 Jun 200000 10 Ju 250000 11 Aug 280000 -C6/D6 C9D9 =MAX(0E10-E9) =MAX(0E9-E10) MAX(0,E11-E10) EMAX(0E10-E11) MAX(0E12-E 1 1) =MAX(0.E11-E12) MAX(0.Е 13-E12) =MAX(0.E12-E13) -MAX(0.Е 14-Е 13) -MAX(0,E13-E14) =MAX(0.E 15-E 14) =MAX(0E14-E15) -C10 D10 C11/D11 -C12/D12 C13/D13 -C14/D14 C15/D15 Sep 240000 13 Oct 170000 14 Nov 150000 15 Dec 120000 16 Totals -SUM(E4 E15) SUM(F4F15) SUM(G4:G15)