SOM 306 A.

Dechter

Case #2: Aggregate Planning at Rowley Apparel

Rowley Apparel, manufacturers of the famous Race-A-Rama swimwear line, would like to plan production for next year. Demand for swimwear is extremely seasonal. The aggregate demand forecast for next year is given below:

Month January February March April May June July August September October November December

Demand Forecast 1000 500 500 2000 3000 4000 5000 3000 1000 500 500 3000

The company expects to have no inventory at the beginning of January and would like to have no inventory at the end of December. There are currently 8 employees, each of who can produce 240 units a month in regular time. The cost of hiring an employee is $1000 and the cost of firing an employee is $500. Labor cost per unit is $15 if produced in regular time and $25 if produced in overtime. The inventory holding cost is $0.50 per unit/month. Backorders are undesirable and assumed to have a cost of $10 per unit/month. Joe Barnes, the production manager, heard about level and chase aggregate plans and would like to know which would be more appropriate in this case. He also suspects that being extreme options, neither the level nor the chase is the most cost-effective plan and that a hybrid plan, which uses elements from both, might be better. Your job is to respond to Joes questions by developing the three plans. Which plan would you recommend? Make sure to include in your analysis, in addition to cost, qualitative considerations such as customer service and operations.