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operations planning

operations planning

Your company has just acquired a new subsidiary that makes two products, Clodhopper and Clodbuster. The Clodhopper is intended for the general consumer market and its demand is higher and more seasonal than the Clodbuster, which is intended for the commercial user market. Both products share a number of component parts and subassemblies, primarily differing in their engine and tiller subassemblies. All of the managers at the acquired company quit the day your company took possession. You are the person who has been assigned to run this acquisition. Since all of the managers quit, the only planning information you have is historical data.

Assignment:
Your task is to create two aggregate plans for 2015: a plan using the chase strategy, and a plan using the mixed strategy (level production with inventory).
• Use the aggregate planning form supplied and print the spreadsheets (landscape) one to a page. Spreadsheets must be formatted to fit the entire spreadsheet on a single page. Fill in all appropriate data, including the title of the plan.
• Do not make any changes to the format/layout of the spreadsheet. This is one place in industry where creativity in presenting data is not appreciated since many of the cells in the forms are normally linked, and changes can lead to significant errors in the results.
• Size the printout so that it fills the page from side-to-side (no extraneous white space). Delete extraneous items from your printout (e.g. “Use this form for your
aggregate plans”). Check and correct your printout for cut-off words, e.g.

• Plans must follow the requirements exactly. Do not attempt to make your plans “better” by changing the planning strategy (for example, if the chase plan requires firing everyone one month and hiring them back the next month, show that in your plan
• Plans must meet all the operating constraints given in the “Part 1 Data” section below.
• Use the comment function to show the formula for Shipments. This must cover the case for months when supply exceeds demand, and the case for months when demand exceeds supply. (Review – New comment – Show all comments ** and ** Page layout – Page setup [click on dialog box launcher in lower right corner] – Sheet – Comments – As displayed on sheet). Handwritten notes are not acceptable.
• Use the header function to show your name in the upper right corner of both plans (Print preview – Page setup – Header/footer – Custom header).
• Create a cover page (portrait) using the format below. Note that the cost/unit produced is the total cost (staffing, hire/fire, inventory/backlog, and material cost).

Fill in the cover page

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• Submit your completed assignment with the cover page (executive summary), the chase plan as the second page, and the mixed plan as the third page. Staple portrait pages in the upper left corner and landscape pages in the upper right corner as shown:

Staple Staple

Part 1 Data:
Use the forecast provided and the following information to create your aggregate plans:
? Values in the spreadsheet (demand, production rates, staffing levels, etc.) are to be number of units or people (not $). They are to be expressed in whole numbers (no decimal values). Costs will appear in the last row and the upper right hand corner of the spreadsheet only. Cost calculations, of course, will need to retain at least 2 decimal points (cents) but whole $ should be reported.
? Assume 20 production days per month (4 weeks of 5 days each)
? The production level in December 2013 was 6000 units per month
? The ending inventory level for December 2013 (8400 units) is the beginning inventory for January 2014
? Desired safety stock inventory level is 1000 units, but this level to subject to the other operating constraints
? Desired inventory at the end of the year (after December 2014 demand is satisfied) is 2000 units, but this level is subject to the other operating constraints
? The maximum level of inventory that the firm can store at one time is 19,500 units
? The maximum level of production in the facility in any month is 24,000 units.
? You must use whole people – there are no part time employees. Employees do not produce more per month than is required by the plan.
? The chase plan and the mixed (level production with inventory) plan are to consider only regular production (employees working 40 hours per week with no overtime).
? Plans must meet all forecasted demand for the year.

? Cost Information:
Inventory holding cost $7 per unit per month based on ending inventory for month
Backorder cost $9 per unit per month based on ending backorder level in a month
Costs of hiring one additional employee $4000
Costs of firing one employee $2500
Average pay rate $8 an hour
Labor to produce one unit 80 minutes (one employee can produce 120 units per month)
Material cost to produce one unit $31

Additional information:
? If you can not meet all forecast demand in a month, ship everything that you can (do not hold safety stock if you are in backlog). Show any shortfall as backlog, not as negative inventory (e.g. short by 200 units: on-hand inventory = 0, backlog = 200, [inventory – backlog] = –200).
? Show backlog as a cumulative total (e.g. if the following month you are short an additional 300 units, backlog would be 500 units, and [inventory – backlog] would be –500. Ship the backlog when you can.
? Materials units = Regular production units (show units, not $ in this column). This column is included so that the cost calculations will be straightforward (total cost = staffing cost + hire cost + fire cost + inventory cost + backlog cost + material cost)
? Show all cost calculations in the bottom row, and show the total cost in the upper right corner of the spreadsheet.

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