Aggregate Planning

Rohit kapoor
 APP Exercise
• A manufacturer of electrical switchgears is in the process of preparing
the aggregate production plan for the next year. Let us assume that a
good measure of capacity is the number of working hours available
per month. Table 1 presents details pertaining to the forecast
demand for the “equivalent” model of switchgears and the number of
working days available during the planning horizon. The following
relevant details are also available:
– The manufacturer currently works on a single shift basis and employs 125
workers.
– One unit of switchgear requires 100 hours of production time.
– It is expected that at the beginning of the planning horizon, there will be
a finished goods inventory of 200 switchgears.
Inventory carrying costs are INR 1000 per switchgear per month and unit
shortage/backlogging costs are 200 percent of unit carrying cost.
 Table 1
Month Demand (in Units) Number of Working Days
April 250 23
May 220 22
June 300 21
July 290 24
August 260 22
September 180 22
October 200 19
November 220 23
December 250 21
January 200 23
February 240 20
March 270 24
Devise a level production strategy with constant workforce and constant
working hours. Compute the cost of the plan.
 Part II
• Consider the previous example. Assume the switchgear
manufacturer has no opening stock of inventory and chooses to
devise a chase production strategy. The following additional
information is available:
– Overtime costs are INR 40 per hour and under-time costs are INR
20 per hour
– Hiring and training expenses are INR 7500 per worker and laying-
off costs are INR 5000 per worker
Evaluate the following options for chase strategy and offer your
suggestions to the switchgear manufacturer:
Utilizing overtime and under-time alternatives
Using hiring and laying-off alternatives for capacity adjustment
 Part III
Consider Part II example. Assume that on the basis of these
computations, the switchgear manufacturer has come up with
a plan that employs the following alternatives:
Hire 25 more workers at the beginning of April.
Lay off the 25 workers at the end of August.
Maintain constant working hours (1 shift of 8 hours)
throughout the year.
Absorb the demand-supply mismatch by building inventory
during periods of lean demand and by resorting to OT during
periods of excess demand.
Evaluate the cost of this plan and compare it with the earlier
alternatives. What are the key inferences?