Beruflich Dokumente
Kultur Dokumente
TEAM: G
MUSAAB ZAFER
ZAHEERUDDIN ALI KHAN
TEAM G
FALL
2014
IME 483
TEAM: G
TABLE OF CONTENTS
TOPIC
PAGE
NO.
1. Introduction
2. Types of Strategies
FALL
2014
IME 483
TEAM: G
Introduction
The purpose of this assignment is to compare Aggregate Planning
methods and determining the more cost efficient strategy of three i.e. Level
Strategy, Chase Strategy and Mixed Strategy.
Using Level Chase and Mixed strategy models, the number of workers and the
resulting inventory levels are determined according to forecasted demand
values. The demand values (in units) are given in the Table 1 below
FALL
2014
IME 483
TEAM: G
Background
What is aggregate planning?
Aggregate planning is a technique for adjusting production to the ups and
downs of demand. An aggregate plan must include demand forecasts, resources
and capacity and express these as an aggregate, or combined, strategy.
IME 483
TEAM: G
accommodate
significant
changes
in
customer
orders
and
production.
FALL
2014
IME 483
TEAM: G
LEVEL STRATEGY.
A level strategy seeks to produce an aggregate plan that maintains a steady
production rate and/or a steady employment level. In order to satisfy changes
in customer demand, the firm must raise or lower inventory levels in
anticipation of increased or decreased levels of forecast demand. The firm
maintains a level workforce and a steady rate of output when demand is
somewhat low. This allows the firm to establish higher inventory levels than are
currently needed. As demand increases, the firm is able to continue a steady
production rate/steady employment level, while allowing the inventory surplus
to absorb the increased demand.
A level strategy allows a firm to maintain a constant level of output and still
meet demand. This is desirable from an employee relations standpoint.
Negative results of the level strategy would include the cost of excess
FALL
2014
IME 483
TEAM: G
Level Strategy
Total Cost= Hiring Cost+ Laying Off Cost+ Production Cost+ Inventory
Cost
= $2,780,300.00
Thus, total cost using Level Strategy is $2,780,300.00
CHASE STRATEGY
The chase strategy model of aggregate planning uses lean principles to
eliminate all excess inventories. Through hiring and firing workers with
fluctuating demand, this strategy tries to maintain the minimum inventory
required. The number of workers are first determined according to the given
FALL
2014
IME 483
TEAM: G
production rate and adjusted for each forecasted demand. The number of
workers and resulting inventories are tabulated and shown.
Table 2 shows the Chase Strategy approach to the given assignment problem.
The following calculations are done on excel and the general formulation can
be seen in the Excel File attached
FALL
2014
IME 483
TEAM: G
Chase Strategy
Total Cost= Hiring Cost+ Laying Off Cost+ Production Cost+ Inventory
Cost
= $2,897,075.00
Thus, total cost using Chase Strategy is $2,897,075.00
Mixed strategy
A cost effective aggregate plan which requires the use of a combination of
the various strategies is referred to as a mixed strategy. It uses alternatives
consisting of mixing inventory, back order, capacity change and work force
change.
IME 483
TEAM: G
Mixed Strategy
Total Cost= Hiring Cost+ Laying Off Cost+ Production Cost+ Inventory
Cost
= $2,158,225.00
Thus, total cost using Mixed Strategy is $2,158,225.00
LINEAR PROGRAMMING
Cost of Production: $350,
Inventory: $5/Month
Workers Pay: $1500/Month
IME 483
TEAM: G
Min
t=1
IME 483
TEAM: G
Conclusion
Calculations for each strategy yielded a range of cost values. A
comparison of the costs can be found in the Table below.
Model
Level strategy
$2,780,300.00
Chase strategy
$2,897,075.00
Mixed strategy
$2,158,225.00
Comparison of Three Strategys
IME 483
TEAM: G