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Agg Production Plan Assignment 2 Sol.

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15 views2 pages

Agg Production Plan Assignment 2 Sol.

Uploaded by

aj894
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Assignment 2 (Aggregate Production Planning)

Problem 1.
ABC Corporation has developed a forecast for a group of items that has the following seasonal
demand pattern.
Quarter Demand Cumulative Demand
1 220 220
2 170 390
3 400 790
4 600 1390
5 380 1770
6 200 1970
7 130 2100
8 300 2400

1. Plot the demand as a histogram. Determine the production rate required to meet average
demand, and plot the average demand forecast on the graph.
2. Suppose that the firm estimates that it costs Rs.100 per unit to increase the production rate,
Rs.150 to decrease the production rate, Rs.50 per quarter to carry the items on inventory,
and an incremental cost of Rs.80 per unit if subcontracted and Rs. 20 per unit if overtime
and Rs 10 per unit if regular time is used. While solving the level strategy assume that
inventory with 270 at Beginning of Period 1 is available.
3. Compare the cost incurred if pure strategies are used.
4. Given these costs, design a mixed strategy solution for this problem. Based on past
experience and available personnel, management may decide to maintain a constant
production rate of 200 per quarter and permit 25% overtime when the demand exceeds the
production rate.

Problem 2.
You are supplied with a monthly demand forecast, an organizational policy of requiring 10% of a
month’s forecast as safety stock, and the number of operating days available each month. There is
no inventory available at the beginning of the first month, January. The following table contains
the demand requirements.
Three potential plans for the production are:
1. Produce to exact production requirements by varying the size of the work force on
regular hours. Assume there are 250 workers available in January.
2. Maintain a constant work force of 518 workers. Assume no subcontracting is available
and inventory will fluctuate with stockouts filled from the following month's production.
3. Produce with a fixed work force of 500 on regular time and subcontract all excess
demand over the period of production. Inventory will increase when production exceeds
demand; no stockouts are permitted.

Problem 3.
Acme Ltd is a producer of an item, which is used as sports item. The demand forecast for this item
for the next 5 periods is 5000, 12,000, 11,000, 7,500 and 5,000 units. The production cost per unit
made on regular time is Rs 50 and Rs 54 for each unit produced on overtime. This item can also
be subcontracted at a cost of Rs 57 per unit. Inventory holding costs are Rs 6 per unit per period
and no backorders are allowed. In each period, 9000 units can be produced on regular time, 1800
units can be produced on overtime and up to 2500 units can be subcontracted. Set up an appropriate
transportation problem format to solve the above aggregate production-planning problem.

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