Question: A company manufacturer needs help planning production for next year. Demand for its main product is expected to be,
|
Month
|
Demand Forecast
|
Month
|
Demand Forecast
|
Month
|
Demand Forecast
|
Month
|
Demand Forecast
|
|
Jan
|
1000
|
Apr
|
2000
|
Jul
|
5000
|
Oct
|
500
|
|
Feb
|
500
|
May
|
3000
|
Aug
|
3000
|
Nov
|
500
|
|
Mar
|
500
|
Jun
|
4000
|
Sep.
|
1000
|
Dec
|
3000
|
Given the following costs and demand forecast, test two strategies for meeting demand: (1) chase strategy with overtime or (2) 3000 units' level production from April through September, subcontracting production during the other months to meet demands. Explain which strategy is the best.
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Costs and Other Information
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Beginning workforce
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8 workers
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Holding cost
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$0.5 per unit/month
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|
Subcontracting capacity
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Unlimited
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Backordering cost
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$10 per unit/month
|
|
Production rate per worker
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250 units/month
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Subcontracting Cost
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$30 per unit
|
|
Regular wage rate
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$15/hour
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Overtime wage rate
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$30/hour
|