Models where we determine workforce levels and production schedules for a multiperiod time

horizon are called aggregate planning models.

We want to build up an aggregated planning for a shoe production company minimising the total
cost including HR cost (hire/fire cost), Salary (Regular /Overtime), Raw material cost, Inventory
holding cost.

The planning should involve with decisions: the number of persons to hire and fire per month, the
number of overtimes to cope with extra volume within maximum allowed hours per month, and the
monthly production unit to satisfy the forecasted demands per month.

Several inputs are required for this type of problem:

Initial inventory of shoes 600
Initial number of workers 80
Regular hours/worker/month 160
Maximum overtime hours/worker/month 20
Hiring cost/worker $1,600
Firing cost/worker $2,000
Regular wages/worker/month $1,500
Overtime wage rate/hour $11
Labor hours/pair of shoes 4
Raw material cost/pair of shoes $15
Holding cost/pair of shoes in inventory/month $3
Shortage cost/pair of shoes/month $20
Month1 Month2 Month3 Month4
Forecasted demand 3000 5000 2000 1000

1. Please provide the Minimum Total cost from the aggregated planning for the four months
to meet the forecasted demand every month.

2. Please provide the Minimum Total cost from the aggregated planning for the four months
to meet the Total forecasted demand allowing back logs (paying shortage cost).