Solve

• A manager has prepared a forecast of expected aggregate demand for the next
six months.
Period 1 2 3 4 5 6
Forecast 80 100 120 110 100 90

• Develop an aggregate plan to meet this demand given this additional

information:
• A level production rate of 100 units per month will be used.
• Using inventory (holding costs are $1 per unit per month) to absorb the uneven
demand but allowing some backlog (charged at the rate of $8 per unit per
month)
• Determine the cost of this plan if regular time cost is $20 per unit and beginning
inventory is zero.

Operations Management
 Period 1 2 3 4 5 6 Total
Forecast 80 100 120 110 100 90 600
Amount used to satisfy
demand
Output (Production in certain period)
Regular 100 100 100 100 100 100 600
Output - Forecast 20 0 -20 -10 0 10
Inventory
Beginning 0 20 20 0 0 0
Ending 20 20 0 0 0 0
Average 10 20 10 0 0 0 40
Backlog 10 10 20
Cost
Output
Regular 2000 2000 2000 2000 2000 2000 $12000
Inventory 10 20 10 0 0 0 $40
Back order 80 80 $160
Total $2010 $2020 $2010 $2080 $2080 $2000 $12,200
 Solve
• Given the projected demands for the next six months:
Period 1 2 3 4 5 6
Demand 180 170 140 150 130 150
• Prepare an aggregate plan that uses inventory, regular
time and overtime, and backorders. The plan must wind
up with no units in ending inventory in Period 6. Regular
time capacity is 150 units per month. Overtime capacity
is 20 units per month.
• Overtime cost is $30 per unit, backorder cost is $20 per
unit, inventory holding cost is $5 per unit, regular time
cost of $20 per unit, and beginning inventory is zero.

Operations Management
 150 – 180 = -30
So need overtime by 20 units, still need10 units as backlog

Period 1 2 3 4 5 6 Total
Forecast 180 170 140 150 130 150 920
Amount used to satisfy
demand
Output
Regular 150 150 150 150 150 150 900
Overtime 20 920-900=
20
Output - Forecast -10 -20 10 0 20 0
Inventory
Beginning 0 0 0 0 0 0
Ending 0 0 0 0 0 0
Average
Backlog 10 20+10=30 30-10=20 20 20-20=0 0
Cost
Output
Regular 3000 3000 3000 3000 3000 3000
Overtime 600
Inventory
Back order 200 600 400 400 0 0
Total $3800 $3600 $3400 $3400 $3000 $3000 $20,200
 SOLVE: Master Schedule
• Prepare a master schedule based on the following
information:
Week 1 2 3 4 5 6 7 8

Forecast 100 100 120 120 150 150 180 180

Orders 106 94 65 40 21 9 2 0

Currently there are 145 units in inventory.

Policy calls for a fixed order quantity of 250 units.
 Solution: Master Schedule
Beginning Periods
inventory
145 1 2 3 4 5 6 7 8
Forecast 100 100 120 120 150 150 180 180

Customer orders 106 94 65 40 21 9 2 0

(committed)
Projected on hand 39 -61
inventory
MPS

Available to
promise inventory
(uncommitted)
Solution: Master Schedule
Week Inventory Forecast Net inventory MPS Projected
from previous demand before master on hand
week production inventory
schedule
1 145 106 39 39
2 39 100 -61 250 189
3 189 120 69 69
4 69 120 -51 250 199
5 199 150 49 49
6 49 150 -101 250 149
7 149 180 -31 250 219
8 219 180 39 39
Solution: Master Schedule

Beginning Periods
inventory
145 1 2 3 4 5 6 7 8
Forecast 100 100 120 120 15 150 180 180
0
Customer orders 106 94 65 40 21 9 2 0
(committed)
Projected on hand 39 189 69 199 49 149 219 39
inventory
MPS 250 250 250 250
Available to 39 91 189 241 248
promise inventory
(uncommitted)