Dr. Prashanth BharadwajDepartment of Management

AP Solutions

Trial and Error Technique

1. Determine the demand during each time period

2. Determine the capacities3. Determine production and service data4. Estimate the entire set of cost data5. Identify appropriate company policies6. Develop alternate plans7. Compute cost for each plan8. Select the best possible plan

Trial and Error Technique

Determine the demand during each time period

Determine the capacities

Determine production and service data

Estimate the entire set of cost data

Identify appropriate company policies

Trial and Error Technique

Develop alternate plans

Compute cost for each plan

Select the best possible plan

Assignment (Using Excel)

New England Shirt Company has this demand forecast for the next 6 months;

Month Jan Feb Mar Apr May Jun

Demand Forecast

2400

1200

2800

3600

3200

3600

Current Workforce 30Workdays/month 20Labor hours/unit 2

Cost Data

Holding cost $ 1.50/shirt/month

Shortage cost $ 3.00/shirt/month

Subcontracting cost $ 25/shirtHiring cost $ 200/workerLayoff cost $ 300/workerLabor cost—regular time $ 8 /hourLabor cost—over time $ 12/hour

Level Strategy:Produce same quantity each month during regular time. Utilize overtime if necessary             Regular Production capacity = 4 per worker/8-hour day = 4*20 work days*30 workers

= 2,400 units/month

       

(80 units/worker)  

Capacity of Workforce