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Exam 13: Aggregate Planning

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Question 31

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

A) subcontracting
B) back-ordering during high-demand periods
C) changing inventory levels
D) varying workforce size
E) varying production rates

F) A) and B)
G) D) and E)

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Question 32

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Reddick's Specialty Electronics makes weatherproof surveillance systems for parking lots. Demand estimates for the next four quarters are 25, 9, 13, and 17 units. Prepare an aggregate plan that uses inventory, regular time and overtime and back orders. Subcontracting is not allowed. Regular time capacity is 15 units for quarters 1 and 2, 18 units for quarters 3 and 4. Overtime capacity is 3 units per quarter. Regular time cost is $2000 per unit, while overtime cost is $3000 per unit. Back order cost is $300 per unit per quarter; inventory holding cost is $100 per unit per quarter. Beginning inventory is zero. The data inputs for this problem, and the optimal solution, generated by microcomputer software, appear below. Answer the following questions based on the scenario and the solution. a. How many total units will be produced in quarter 1 for delivery in quarter 1? b. How many units in total will be used to fill back orders over the four quarters? c. What is the cost to produce one unit in Quarter 4 using overtime to deliver in quarter 1 (filling a back order)? d. At the end of quarter 3, what is the ending inventory of finished systems? e. What is the total cost of the solution? f. What is the average cost per unit?

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a. 15; b. 10; c. $3...

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Question 33

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What is the primary management challenge when implementing yield management?

List, in order, the five steps of the graphical method of aggregate planning. Is it possible that these steps can be properly followed and the solution properly implemented without using a graph? Explain.

A small private university normally charges the same price-$400-per credit-hour for all courses and for all students. While the university is pretty near capacity in the fall and spring, it finds that its classrooms are only about 40% occupied during the summer session. A student of operations management (who has recently read this chapter) wonders if yield management might be useful to both the university and its students alike. This student, with help from some economics majors, estimates a demand curve for summer course enrollment. Points on this demand curve include 6000 credit-hours at the current rate of $400, 10,000 credit hours at $240, 15,000 credit-hours at $180. Based on this demand curve, what price point would best serve the university, if its objective is the greatest revenue for the summer session?

Finding an ideal mixed strategy is complicated by the huge number of possible strategies.

Aggregate planning in manufacturing ties organizational strategic goals to a production plan.

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

Identify (a) the demand options for aggregate planning; and (b) the capacity (supply) options for aggregate planning.

A firm uses the pure chase strategy of aggregate planning. It produced 1200 units in the last period. Demand in the next period is estimated at 900, and demand over the next six periods (its aggregate planning horizon) is estimated to average 1000 units. In following the chase strategy, the firm will?

In level scheduling, what is kept uniform from month to month?

The text states that trial-and-error methods continue to be widely used, in spite of the development of various models. Using your knowledge from earlier in this course or from other quantitative courses you might have taken, speculate on why managers continue to use "primitive" devices when such sophistication is available.

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.

A manufacturer of industrial seafood processing equipment wants you to develop an aggregate plan for the four quarters of the upcoming year using the following data on demand and capacity. $\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Quarter } & \text { Units } & \begin{array}{l}\text { Regular } \\\text { Time }\end{array} & \begin{array}{l}\text { Over- } \\\text { time }\end{array} & \begin{array}{l}\text { Sub- } \\\text { contract }\end{array} & \begin{array}{l}\text { Initial inventory } \\\text { Regular time cost }\end{array} & 250 \text { units \$1.25/unit } \\\hline 1 & 200 & 400 & 80 & 100 & \text { Overtime cost } & \$ 1.50 / \text { unit } \\\hline 2 & 750 & 400 & 80 & 100 & \text { Subcontracting } \\&&&&&\text { cost } & 2.00 / \text { unit } \\\hline 3&1200&800&160&100&\text { Canyying cost }&\$ 0.50 / \text { unit/quarter }\\\hline 4 & 450 & 400 & 80 & 100 & \begin{array}{l}\text { No back ordering } \\\text { is allowed }\end{array} \\\hline\end{array}$ a. Find the optimal plan using the transportation method. b. What is the cost of the plan? c. Does any regular time capacity go unused? How much in what periods? d. What capacity went unused in this solution (list in detail)?

The textbook illustrates demand management in the form of price cuts or discounts. Can demand manipulation for aggregate planning involve price increases? Explain; provide an example.

A firm's demand in the next four quarters (its aggregate planning horizon) is forecast to be 80, 50, 40, and 90 units. Last quarter, the firm produced 60 units. If it uses level scheduling, the firm will

Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.

Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.

A hotel room that goes unrented, a dental appointment that no patient booked, and an airline seat that went unsold, are all examples of ________ in services inventory.

In aggregate planning, one of the adjustable elements of capacity is the extent of subcontracting.