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5. Problem Aggregate Planning

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Example for Production Strategy
Demand forecast
Number of working days
JANUARY
1,800
22
FEBRUARY
1,500
19
APRIL
900
21
MAY
1,100
22
JUNE
1,600
20
TOTALS
8,000
125
COSTS
Rs. 100.00/unit
Rs. 1.50/unit/month
Rs. 5.00/unit/month
Rs. 20.00/unit (Rs. 120 subcontracting cost less Rs.
100 material savings)
Rs. 200.00/worker
Rs. 250.00/worker
5/unit
Rs. 4.00/hour
Rs. 6.00/hour
Materials
Inventory holding cost
Marginal cost of stockout
Marginal cost of subcontracting
Hiring and training cost
Layoff cost
Labor hours required
Straight-time cost (first eight hours each day)
Overtime cost (time and a half)
Beginning inventory
Safety stock
MARCH
1,100
21
INVENTORY
400 units
25 % of month demand
Aggregate Production Planning Requirements
Beginning inventory
Demand forecast
Safety stock (.25 x Demand forecast)
Production requirement (Demand forecast +
Safety stock – Beginning inventory)
Ending inventory (Beginning inventory +
Production requirement – Demand forecast)
JAN
400
1,800
450
1,850
FEB
450
1,500
375
1,425
MAR
375
1,100
275
1,000
APR
275
900
225
850
450
375
275
225
MAY JUNE
225
275
1,100 1,600
275
400
1,150 1,725
275
400
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