Management Lite & Ezy 33 – Aggregate Planning III

Please also read Part I and Part II.

Example

A DVD player manufacturer is doing an aggregate planning for July through December. The firm has gathered the following data:

Plan: The firm will use the strategy of constant workforce with overtime.

Armed with the data provided, we will work out the production level, labor hours, labor cost, inventory holding cost etc.

Production – regular-time

= (no. of workers x no. of hours per day x no. of days)/(labor-hours/DVD)

= (8 x 8 x 20)/4

= 320

Production – overtime (except July)

= Demand forecast – Inventory (beginning of the month) – (Production at regular time)

Labor hours

= Production x labor hours per DVD

= Production x 4

Holding cost

= Inventory (end of the month) x 8

Regular-time labor cost

= Regular-time labor hours x $12/hour

Overtime labor cost

= Overtime labor hours x $18/hour

References:

Jay Heizer & Barry Render, “Operations Management”, 8^th edition