In-Line Industries (ILI) produces recreational in-line skates. Demand is seasonal, peaking in the summer months. ILI has forecasted the following demand in pairs of skates for their most popular line of skates for the next 8 months:
Month Demand (pairs) March 900 April 1500 May 2500 June 3000 July 1400 August 1000 September 600 October 400
The company will have 500 units in inventory at the beginning of March and would like to have 1000 units in inventory at the end of October in anticipation of increased demand during the holiday season. There are currently 6 employees, each of whom can produce 220 units a month in regular time. The cost of hiring an employee is $1200 and the cost of firing an employee is $600. Labor cost per unit is $15 if produced in regular time and $20 if produced in overtime. The inventory holding cost is $2 per unit/month. Backorders are assumed to have a cost of $10 per unit/month.
Jack Stoner, the production manager, heard about level and chase aggregate plans and would like to know which would be more appropriate in this case for the next 8 months.
Assume that you have been hired as a consultant and that your job is to respond to Jacks questions by developing the two plans he heard about and reporting to him in a memo the results of your analysis. Which plan would you recommend? Make sure to include in your analysis, in addition to cost, non-financial considerations such as customer service and other qualitative operational considerations.
The memo should not exceed 3 pages including any displays.
Last part: Assume that Jack is also interested to know whether there is a production plan that would cost less than either the level or the chase plan. If you can find such a plan, include it in your report.
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