Reference no: EM132224490

Chase Strategy versus Level Strategy Use the POM for Windows software Aggregate Planning module to conduct the basic calculations necessary for evaluating the problems below. You may have to adjust entered fields to fit the problems as stated. When you have completed each individual problem: Save to an Excel file using the Save-to-Excel button. Save each additional problem to the same Excel sheet. Submit the Excel file via the instructor drop box. At the same time, submit the analysis via the instructor drop box. An aggregate planning dilemma A firm’s aggregate demand requirements are projected (see table). The operations manager is considering a new plan. The new plan would begin in January with 200 units on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle time costs. Unit costs for regular production are $50. Use the above costs and situations to evaluate the plans below. Plan A Vary the workforce level to execute a chase strategy by producing the quantity demanded in the prior month. The December demand and rate of production are both 1600 units per month. The cost of hiring additional workers is $5000 per 1000 units. The cost of laying off workers is $7500 per 100 units. (POM Hint for Plan A) Use "Lost Sales" in the Shortages selection box for all Plans. Use "User Defined" as the Method drop down box. Use the appropriate per unit costs of hiring additional workers and laying off workers in the "Value" box next to the "Increase cost" and "Decrease cost" boxes on the entry screen. While it's not intuitively obvious, bringing in part-time workers in a chase strategy adds costs per unit of production, and laying off workers also has a cost in administration, goodwill, and decreased production efficiency. "Units last period" should be 1600. Plan B Use a level production strategy by producing at a constant rate of 1400 units per month, which will meet minimum demand. Then use subcontracting, producing additional units at a premium price of $75 per unit. Evaluate this plan by computing the costs for January through August. Costs per unit are still $50. The maximum number of units that can be subcontracted is 1000 per month. (POM Hint for Plan B) Use "Constant Reg Time, then OT, then Sub" as the Method drop down box Reenter Regular time capacity at 1400 per month. Overtime capacity should be 0 per month. Enter subcontract capacity at 1000 per month. Use Plan A costs except where changed in Plan B. Plan C Keep the workforce stable at producing 1600 units per month. Permit a maximum overtime production of 20% of regular time production at $50.50 (an additional cost of $0.50) per unit. No subcontracting is allowed. (POM Hint for Plan C) Use "Constant Reg Time, then OT, then Sub" as the Method drop down box Regular time capacity remains 1600 per month. Enter the maximum overtime UNIT production possible for each month into the Overtime Capacity column. Remove all Subcontract Capacity amounts. Use Plan B costs except where changed in Plan C. Plan D Keep the current workforce, which is producing 1600 units per month. Subcontract to meet the rest of the demand at the $75 rate. (POM Hint for Plan D) Use "Constant Reg Time, then OT, then Sub" as the Method drop down box Regular time capacity remains 1600 per month. Remove the maximum overtime UNIT production possible for each month from the Overtime Capacity column. Enter Subcontract capacity at 1000 per month. Use Plan C costs except where changed in Plan D. Analysis Evaluate the four plans (A–D) in a written recommendation to management. Based on your analysis, be sure to recommend a course of action to management. Be sure to justify your answer, as management is notorious for not understanding data analysis. In your recommendation, be sure to also comment on: Any limits to your ability to solve the indicated plan calculations based on limits to the solution software. Any criteria, other than lowest cost, that are important to your recommendation. This assignment should be long enough to present the summary of the problem results and the written memo to management containing your justifications and other comments. It should be written in the form of a memo to management. Of the 15 points possible, 5 are for problem solutions, 5 for the analysis and criteria, and 5 for the format, style, and spelling of the memo to management. If you save your POM solutions as Excel files, you will need to modify those files so their results match your POM results.