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# Aggregate Planning

## Q.1 Level strategy Using inventory related alternatives

Prepare the aggregate production plan for the next year with the help of the following details:
1.00 The manufacturer works on a single shift of 8 hrs and employs 125 workers.
2.00 One unit requires 100 hrs. of production time.
3.00 Opening inventory of 200 units is available at the beginning.
4.00 Inventory carrying costs are Rs. 1000 per unit and shortage or backlog costs are 200 percent
Devise a level production strategy with constant work force and constant working hours and compute the cost of the

Given:

## Month Demand(units) No. of Working Days

April 250.00 23.00
May 220.00 22.00
June 300.00 21.00
July 290.00 24.00
August 260.00 22.00
September 180.00 22.00
October 200.00 19.00
November 220.00 23.00
December 250.00 21.00
January 200.00 23.00
February 240.00 20.00
March 270.00 24.00

Solution ss-dd
Month DD(units) SS(units) Mismatch OP.Inv Cl.Inv Avg Inv Cost of Inv
April 250.00 230.00 (20.00) 200.00 180.00 190.00 190000.00
May 220.00 220.00 0.00 180.00 180.00 180.00 180000.00
June 300.00 210.00 (90.00) 180.00 90.00 135.00 135000.00
July 290.00 240.00 (50.00) 90.00 40.00 65.00 65000.00
August 260.00 220.00 (40.00) 40.00 0.00 20.00 20000.00
September 180.00 220.00 40.00 0.00 40.00 20.00 20000.00
October 200.00 190.00 (10.00) 40.00 30.00 35.00 35000.00
November 220.00 230.00 10.00 30.00 40.00 35.00 35000.00
December 250.00 210.00 (40.00) 40.00 0.00 20.00 20000.00
January 200.00 230.00 30.00 0.00 30.00 15.00 15000.00
February 240.00 200.00 (40.00) 30.00 (10.00) 10.00 30000.00
March 270.00 240.00 (30.00) (10.00) (40.00) (25.00) 80000.00
Total cost of the plan 825000.00

## Q.2 Chase Strategy (using capacity related alternatives)

I Overtime costs are Rs. 40 per hr. and undertime costs are Rs.20 per hr.
II Hiring and training expenses are Rs. 7500 per worker and laying off costs are Rs. 5000
Assume no opening inventory is available and the manufacture chooses to devise a chase production strategy
Evaluate the following options:
a Utilising overtime and undertime alternatives.
b Using hiring and layoff alternative for capacity adjustment.
Solution (a) Chase strategy- ot/ut
SS-DD(units) (in hrs)
Month Mismatch Mismatch Overtime Undertime OT/UT Cost
April (20.00) (2000.00) 2000.00 0.00 80000.00
May 0.00 0.00 0.00 0.00 0.00
June (90.00) (9000.00) 9000.00 0.00 360000.00
July (50.00) (5000.00) 5000.00 0.00 200000.00
August (40.00) (4000.00) 4000.00 0.00 160000.00
September 40.00 4000.00 0.00 4000.00 80000.00
October (10.00) (1000.00) 1000.00 0.00 40000.00
November 10.00 1000.00 0.00 1000.00 20000.00
December (40.00) (4000.00) 4000.00 0.00 160000.00
January 30.00 3000.00 0.00 3000.00 60000.00
February (40.00) (4000.00) 4000.00 0.00 160000.00
March (30.00) (3000.00) 3000.00 0.00 120000.00
1440000.00

Sol (b) Chase Strategy hire/Layoff Hire Layoff Cost of hiring or layoff
(units) (hrs.) Worker workers
Month Mismatch mismatch Days
April (20.00) (2000.00) 23.00 11.00 0.00 82500.00
May 0.00 0.00 22.00 0.00 0.00 0.00
June (90.00) (9000.00) 21.00 54.00 0.00 405000.00
July (50.00) (5000.00) 24.00 27.00 0.00 202500.00
August (40.00) (4000.00) 22.00 23.00 0.00 172500.00
September 40.00 4000.00 22.00 0.00 22.00 110000.00
October (10.00) (1000.00) 19.00 7.00 0.00 52500.00
November 10.00 1000.00 23.00 0.00 5.00 25000.00
December (40.00) (4000.00) 21.00 24.00 0.00 180000.00
January 30.00 3000.00 23.00 0.00 16.00 80000.00
February (40.00) (4000.00) 20.00 25.00 0.00 187500.00
March (30.00) (3000.00) 24.00 16.00 0.00 120000.00
1617500.00

## Q.3 Mixed Strategy

No Opening inventory
hire 25 workers at the beginning of april
layoff 25 workers at the end of september
Maintain constant orking hrs. (1 shift of 8 hrs.) throughout the year
Absorb dd-ss mismatch by building inventory during lean dd and restoring to ot during exces dd.

Month Days DD(units) SS(units) Op.Inv. Cl.inv. Avg. inv. Cost of inv.
April 23.00 250.00 276.00 0.00 26.00 13.00 13000.00
May 22.00 220.00 264.00 26.00 70.00 48.00 48000.00
June 21.00 300.00 252.00 70.00 22.00 46.00 46000.00
July 24.00 290.00 288.00 22.00 20.00 21.00 21000.00
August 22.00 260.00 264.00 20.00 24.00 22.00 22000.00
September 22.00 180.00 220.00 24.00 64.00 44.00 44000.00
October 19.00 200.00 190.00 64.00 54.00 59.00 59000.00
November 23.00 220.00 230.00 54.00 64.00 59.00 59000.00
December 21.00 250.00 210.00 64.00 24.00 44.00 44000.00
January 23.00 200.00 230.00 24.00 54.00 39.00 39000.00
February 20.00 240.00 200.00 54.00 14.00 34.00 34000.00
March 24.00 270.00 240.00 14.00 (16.00) 7.00 7000.00
436000.00
Inference Cost
I Level Strategy 825000.00
II Chase Strategy ot/ut 1440000.00
III Chase Strategy hire/layoff 1617500.00
Mixed Strategy 812500.00 lowest
d compute the cost of the plan.