Hill’s operations manager (see Problems 13.3 through 13.5) is also considering two mixed strategies for January–August: Produce in overtime or subcontracting only when there is no inventory.
◆Plan D: Keep the current workforce stable at producing 1,600 units per month. Permit a maximum of 20% overtime at an additional cost of $50 per unit. A warehouse now constrains the maximum allowable inventory on hand to 400 units or less.
â—†Plan E: Keep the current workforce, which is producing 1,600 units per month, and subcontract to meet the rest of the demand.
Evaluate plans D and E and make a recommendation.
Note: Do not produce in overtime if production or inventory are adequate to cover demand.
Problem 13.5
Hill is now considering plan C: Keep a stable workforce by maintaining a constant production rate equal to the average requirements and allow varying inventory levels. Beginning inventory, stockout costs, and holding costs are provided in Problem 13.3.
Plot the demand with a graph that also shows average requirements. Conduct your analysis for January through August.
Problem 13.3
The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next 8 months as follows:
Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan A.
Plan A: Vary the workforce level to execute a strategy that produces the quantity demanded in the prior month. The December demand and rate of production are both 1,600 units per month. The cost of hiring additional workers is $5,000 per 100 units. The cost of laying off workers is $7,500 per 100 units. Evaluate this plan.
Note: Both hiring and layoff costs are incurred in the month of the change. For example, going from 1,600 in January to 1,400 in February incurs a cost of layoff for 200 units in February.
