BJMP2033 POM

CHAPTER 6 AGGREGATE PLANNING

Pak Ibrahim Seafood’s Café serves special dishes fresh from Andaman Sea such as Hot & Spicy Lobsters and Sweet & Sour
Garlic Snappers. The café is projecting the demand for the new branch that will be opened soon at Pulau Langkawi. Using
the information given, help Pak Ibrahim to manage it new branch’s production that will meet the demand at the lowest
cost. Based on several pure strategies, select the best ones:

a) Level production
b) Chase demand
c) Mixed strategy
d) Workforce of 20 individuals
e) Back-ordering

Information:
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
1000 1200 1200 3000 3000 3000 2200 2200 4000 4000 2200 3000

Beginning inventory = 500 Regular production cost = $36 per unit

Beginning workforce = 15 employees Overtime production cost = $54 per unit
Production rate = 100 unit per employee per month Subcontracting cost = $70 per unit
Regular capacity = Maximum of 25 employees Hiring cost = $100 per employee
Overtime = 200 units Firing cost = $200 per employee
Subcontracting = 2000 units Inventory holding cost = $10 per unit

Solutions:
a) Level production

Month Demand Regular OT SubK Inventory #Wkrs #Hired #Fired

Jan 1000 2500 2000
Feb 1200 2500

Mar 1200 2500

Apr 3000 2500

May 3000 2500

Jun 3000 2500

Jul 2200 2500

Aug 2200 2500

Sep 4000 2500

Oct 4000 2500

Nov 2200 2500

Dec 3000 2500

Total 30,000 30,000

Cost:

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 BJMP2033 POM
CHAPTER 6 AGGREGATE PLANNING
b) hase demand

Jan Feb Mar April May June July Aug Sept Oct Nov Dec
1000 1200 1200 3000 3000 3000 2200 2200 4000 4000 2200 3000

Beginning inventory = 500 Regular production cost = $36 per unit

Beginning workforce = 15 employees Overtime production cost = $54 per unit
Production rate = 100 unit per employee per month Subcontracting cost = $70 per unit
Regular capacity = Maximum of 25 employees Hiring cost = $100 per employee
Overtime = 200 units Firing cost = $200 per employee
Subcontracting = 2000 units Inventory holding cost = $10 per unit

Solutions:
Month Demand Regular OT SubK Inventory #Wkrs #Hired #Fired
Jan 1000
Feb 1200
Mar 1200
Apr 3000
May 3000
Jun 3000
Jul 2200
Aug 2200
Sep 4000
Oct 4000
Nov 2200
Dec 3000
Total 30,000

Cost:

c) Mixed Strategy – From January to August is using level production and Sept to December is using Chase demand.

Solutions:
Month Demand Regular OT SubK Inventory #Wkrs #Hired #Fired
Jan 1000
Feb 1200
Mar 1200
Apr 3000
May 3000
Jun 3000
Jul 2200
Aug 2200
Sep 4000
Oct 4000
Nov 2200
Dec 3000
Total 30,000

Cost:

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 BJMP2033 POM
CHAPTER 6 AGGREGATE PLANNING
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
1000 1200 1200 3000 3000 3000 2200 2200 4000 4000 2200 3000
Beginning inventory = 500 Regular production cost = $36 per unit
Beginning workforce = 15 employees Overtime production cost = $54 per unit
Production rate = 100 unit per employee per month Subcontracting cost = $70 per unit
Regular capacity = Maximum of 25 employees Hiring cost = $100 per employee
Overtime = 200 units Firing cost = $200 per employee
Subcontracting = 2000 units Inventory holding cost = $10 per unit
Back-Ordering cost = $80 per unit
d) Workforce of 20 individuals

Solutions:
Month Demand Regular OT SubK Inventory #Wkrs #Hired #Fired
Jan 1000
Feb 1200
Mar 1200
Apr 3000
May 3000
Jun 3000
Jul 2200
Aug 2200
Sep 4000
Oct 4000
Nov 2200
Dec 3000
Total 30,000

Cost:

e) Workforce of 15 individuals and Back-ordering

Solutions:
Month Demand Regular OT SubK Back-O Inventory #Wkrs #Hired #Fired
Jan 1000
Feb 1200
Mar 1200
Apr 3000
May 3000
Jun 3000
Jul 2200
Aug 2200
Sep 4000
Oct 4000
Nov 2200
Dec 3000
Total 30,000

Cost:

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 BJMP2033 POM
CHAPTER 6 AGGREGATE PLANNING
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
1000 1200 1200 3000 3000 3000 2200 2200 4000 4000 2200 3000
Beginning inventory = 500 Regular production cost = $36 per unit
Beginning workforce = 15 employees Overtime production cost = $54 per unit
Production rate = 100 unit per employee per month Subcontracting cost = $70 per unit
Regular capacity = Maximum of 25 employees Hiring cost = $100 per employee
Overtime = 1000 units Firing cost = $200 per employee
Subcontracting = as necessary units Inventory holding cost = $10 per unit

f) During long holidays, the regular production is maintained by 12 workers; support them with OT and SubK as
necessary.
Solutions:
Month Demand Regular OT SubK Inventory #Wkrs #Hired #Fired
Jan 1000
Feb 1200
Mar 1200
Apr 3000
May 3000
Jun 3000
Jul 2200
Aug 2200
Sep 4000
Oct 4000
Nov 2200
Dec 3000
Total 30,000

Cost:

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 BJMP2033 POM
CHAPTER 6 AGGREGATE PLANNING
AVAILABLE TO PROMISE (ATP)
- As customer orders come in consuming the forecast, the remaining quantities are available-to-promise to future
customers.
- The quantity of items (products) that can be promised to the customer; the difference between planned
production and customer orders already received. E.g., bookings for new cars, books, shoes, etc.

CAPABLE TO PROMISE (CTP)

- When product is not available, the system (computer system of MRP) proposes a capable-to-promise date that is
subject to customer approval.
- The quantity of items/products that can be produced and made available at a later date.
- A maximum output of the production process less what has been sold or promised. E.g., output is 500 units per
month of cars, but the demands (orders) from customers are 800 units per month.

1) How many units are ATP in period 1 and 4?

Period
On hand = 60 1 2 3 4 5 6
Forecast 50 100 100 100 100 50
Customer Orders 85 125 95 85 45 15
Master Production Schedule 250 250
ATP 100 120
Solution:
ATP in period 1 = (60 + 250) – (85 + 125) = 100
ATP in period 3 = (250) – (85 + 45) = 120

2) Complete the ATP in table below?

Period
On hand = 10 1 2 3 4 5 6
Forecast 50 50 50 50 50 50
Customer Orders 56 17 75 50 16 14
Master Production Schedule 100 100 100
ATP 12 0 70
Solution:
ATP in period 1 = (10 + 100) – (55 + 17) = 37 12 ATP in period 5 = (100) – (16+ 14) = 70
ATP in period 3 = (100) – (75 + 50) = 25

3) How many of BO’s are ATP in week 2 and 4?

Period
On hand = 60 1 2 3 4 5 6
Forecast 50 110 150 150 100 50
Customer Orders 85 125 95 105 145 15
Master Production Schedule 250 100 150 250
ATP
Solution:

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 BJMP2033 POM
CHAPTER 6 AGGREGATE PLANNING
4) Calculate the ATP for periods 1, 3 and 5?
Period
On hand = 20 1 2 3 4 5 6
Forecast 50 150 100 150 100 150
Customer Orders 85 125 155 75 145 55
Master Production Schedule 250 200 250
ATP
Solution:

5) Calculate the ATP for all periods?

Period
On hand = 30 1 2 3 4 5 6
Forecast 50 100 150 100 150 50
Customer Orders 55 105 165 75 245 165
Master Production Schedule 250 100 250 100 250 200
ATP
Solution:

6) Calculate the ATP for periods 1, and 5?

Period
On hand = 100 1 2 3 4 5 6
Forecast 50 100 50 100 150 50
Customer Orders 85 60 155 55 185 95
Master Production Schedule 50 100 250
ATP
Solution:

7) Calculate the ATP for periods 1, 3 and 5?

Period
On hand = 30 1 2 3 4 5 6
Forecast 100 100 100 100 100 50
Customer Orders 85 105 155 35 155 105
Master Production Schedule 250 100 200 100 250
ATP
Solution: