BUSI 403
Fall 2023
Problem Set D
Due: Oct 9th, 2023
Note:
1. An Excel spreadsheet containing data tables is available at Canvas.
2. Please round up the number of required workers/agents up to the next highest integer in all
problems.
Problem 1
GE Appliances produces home appliances, such as dishwashers, refrigerators, ovens etc. In your role as
Operations Manager for GE Appliances, you have just completed forecasting the following demand for its
refrigerators for the next 12 months:
Month
Demand
8222h2
4,010
5,105
7,210
8,015
7,005
6,605
8,200
13,100
11,200
7,500
5,950
87,900
January
February
March
April
May
June
July
August
September
October
November
December
Total
A worker can produce an average 200 refrigerators/month. Workers earn $4,500/month, and they do not
work overtime. GE Appliances spends $2,000 for each employee it hires (with training), and it costs $3,000
to lay off a worker. Hires and lay-offs occur on the first day of each month. At the end of each month, if
there is any inventory on hand, it costs $30 per unit to carry to the next period. If there are unsatisfied
orders (backorders) at the end of the month, a penalty cost of $120 per backordered unit is incurred. All
backorders must be fulfilled by the end of December. There is currently no inventory available in stock at
the beginning of January, and 28 employees are working in the company.
1
BUSI 403
Fall 2023
Problem Set D
Due: Oct 9th, 2023
a) Prepare a chase aggregate plan assuming that no inventory can be carried from one month to the
next month and that no backorders are allowed. Please display the workforce level on a monthly basis.
Compute the total cost of the chase plan.
b) Prepare a level aggregate plan that allows inventory holding from one month to the next, as well as
backorders. Calculate the inventory level or backorders at the end of each month. Compute the total
cost of the level plan.
c) Based on the total costs you calculated in part (a) and part (b), which plan is better?
Plan A is better. The total cost of the plan (2266000) is smaller than that of Plan B (4218450).
Problem 2
The manager of GE Appliances realizes that the unsatisfied demand is lost to competitors. Hence,
they need an aggregate plan that does not allow backorders. Using the information given in Problem 1,
please answer the following questions:
a) Prepare a level aggregate plan allowing inventories but not backorders. Display the amount of
inventory at the end of each month. Calculate the total cost of this plan.
b) The manager realizes an inventory record inaccuracy. It turns out that 1500 units of inventory were
not seen in the company’s information system, although it exists physically in the warehouse. Prepare
a level aggregate plan with a starting inventory of 1500 units at the beginning of January. Again,
2
BUSI 403
Fall 2023
Problem Set D
Due: Oct 9th, 2023
inventories are allowed, but backorders are not. Your plan should display the amount of inventory at
the end of each month. Compute the total cost of this plan.
Problem 3
The customer service of Blue Cross Blue Shield receives calls from customers regarding existing policies,
quotes, and technical issues about claims. The company is going to follow a level plan next year, where
the number of permanent representatives in customer service is constant throughout the year. In other
words, the company makes a one-shot decision on the number of permanent representatives and
hire/fire accordingly once at the beginning of January. The cost of hiring and training a permanent
representative is $3000. The cost of firing a permanent representative is $3200. Permanent
representatives are paid $4000 per month.
At the beginning of each month, Blue Cross Blue Shield can employ temporary representatives in case an
additional workforce is needed. Temporary representatives are paid $3500 per month. There is no cost
associated with hiring or firing temporary representatives. Assume that temporary representatives work
at the same rate as permanent representatives and do not require any training.
As of today, there are 35 permanent representatives. Each representative (permanent or temporary)
works 190 hours per month. Each call takes 13 min on average. To achieve the required service level, all
customer calls must be resolved by the end of the month (i.e., no carryover of calls from month to month).
The monthly demand forecast for the next year is given in the table below:
Month Demand Forecast (# of calls)
Jan
30,500
Feb
47,300
Mar
20,600
Apr
48,500
May
42,100
Jun
37,300
Jul
30,700
Aug
24,500
Sep
31,300
3
BUSI 403
Fall 2023
Problem Set D
Due: Oct 9th, 2023
Oct
42,800
Nov
44,300
Dec
20,300
a) Suppose it is decided that the number of permanent representatives must be equal to the number
of representatives required to meet the average monthly demand over the 12-month planning
horizon. Prepare the staffing plan for the next year and display the number of permanent and
temporary representatives employed in each month. Calculate the cost of the staffing plan.
b) Suppose now that the number of permanent representatives must be equal to the number of
representatives required to meet the minimum monthly demand over the 12-month planning
horizon. Prepare the staffing plan for the next year and display the number of permanent and
temporary representatives employed in each month. Calculate the cost of the staffing plan.
4