Exam 16: Aggregate Planning

Normally, the transportation model is used to solve problems involving several physical sources of product and several physical uses of the product, as in factories and warehouses. How is it possible to use the transportation model where the "routes" are from one time period to another? Describe how this provides aggregate planners with a usable mathematical model.

Explain the fundamental difference between the "capacity options" and the "demand options" of aggregate planning strategies.

Which of the following is the term used for medium range capacity planning with a time horizon of three to eighteen months?

Fred's Fabrication has the following aggregate demand requirements and other data for the upcoming four quarters. Quarter Demand Previous quarter's output 800 units 1 700 Beginning inventory 0 units 2 900 Stockout cost \ 100 per unit 3 1200 Iniventory holding cost \ 10 per unit at end of quarter 4 600 Hiring workers \ 20 per unit Laying off workers \ 40 per unit Subcontracting cost \ 200 per unit Unit cost \ 100 per unit Which of the following production plans is better: Plan A-chase demand by hiring and layoffs; Plan B-pure level strategy, or Plan C-700 level with the remainder by subcontracting?

Because service firms do not inventory their output, pure chase strategy is not appropriate.

A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. In following the chase strategy, the firm will

Which of the following uses regression to incorporate historical managerial performance into aggregate planning?

Describe the advantages and limitations of the graphical method of aggregate planning.

Which of the following aggregate planning strategies might direct your client to a competitor?

Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

In aggregate planning, the amount of overtime and the size of the work force are both adjustable elements of capacity.

Which of these is among the demand options of aggregate planning?

Houma Containers, Inc., makes industrial fiberglass tanks that are used on offshore oil platforms. Demand for the next four months and capacities of the plant are shown in the table below. Unit cost on regular time is $400. Overtime cost is 150% of regular time cost. Subcontracting is available in substantial quantity but at a very high cost, $1100 per unit. Holding costs are $200 per tank per month; back orders cost the firm $1000 per unit per month. Houma's management believes that the transportation algorithm can be used to optimize this scheduling problem. The firm has no beginning inventory and anticipates no ending inventory. March April May June Demand 300 500 300 350 Regular capacity 200 200 250 250 Overtime capacity 50 50 50 50 Subcontract cap. 150 100 100 150 a. How many units will be produced on regular time in June? b. How many units will be produced by subcontracting over the four-month period? c. What will be the inventory at the end of April? d. What will be total production from all sources in April? e. What will be the total cost of the optimum solution? f. Does the firm utilize the expensive options of subcontracting and back ordering? When; why?

Which of the following aggregate planning strategies is known to lower employee morale?

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period) it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that

Which of these aggregate planning strategies adjusts capacity to match demand?

A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units and in period 2 demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1 (assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour)?

Disaggregation

The strategies of aggregate planning are broadly divided into demand options and capacity options.

Which of the following is consistent with a pure chase strategy?