Aggregate Planning for a Bottling Company
A bottling company has decided to introduce a new line of premium bottled water that will include several flavours. The marketing management team predicts an upturn in demand based on the new offerings and the increased public awareness of drinking more water. They have prepared the following aggregate forecasts (tankloads of several flavours) for the next planning horizon of six month.
MonthMayJunJulAugSeptOctForecast (tankload)506070908070The production management team has prepared the following information. The production line has the capacity to produce 60 tankloads per month in regular time at the cost of $1,000 per tankload. Overtime production and subcontracting to the available suppliers cost $1,600 and $1,800 per tankload, respectively. It costs $200 to hold one tankload for one month. Demand can also be backordered at the cost of $5,000 per month per tankload. The company has no beginning inventory and wishes to end up the planning horizon with no inventory on hand.Among the production strategies being considered are the followings:? Level production supplemented by up to 10 tankloads a month from overtime.? A combination of overtime, inventory holding, and subcontracting.? Using overtime for up to 15 tankloads along with inventory holding to handle variations.Questions include:
1. Which production strategy should the production managers choose based on a total cost minimisation objective?
2. What information about this aggregate plan should be shared with various supply chain partners and why?