22020883d

Tai ho fai
Workshop 3

1
 Workshop Exercise: Integrated Production Planning

Background
Sweet Delights Bakery specializes in making gourmet cakes. Due to increasing demand, they need to
improve their production planning processes. As the industrial engineer, you are tasked with developing a
comprehensive production plan, including aggregate planning, master production scheduling, net
requirements planning, gross requirements planning, and lot-sizing.

Information:
Product Line: Gourmet Cakes

% Share of Material Cost Setup Time Average Production Time

SKU
Units Sold ($)/Unit (hour) /Batch Batch Size (hour)/Unit
S001 20 62 60 15 5
S002 65 90 70 14 4.5
S003 15 86 80 16 8.5

Demand Forecast (Monthly)

Month Demand Forecast
January 300
February 250
March 350
April 400
May 360
June 420
July 300
August 250
September 350
October 400
November 360
December 420

Cost Information
 Inventory holding cost: $20/unit
 Stockout cost: $80/unit
 Hiring cost: $5000/worker
 Layoff cost: $7000/worker
 Regular time production cost: $60/hour
 Overtime production cost: $100/hour

Operational Information:
 Current Workforce: 20 workers
 Working days/month: 20 days
 Working hours/day: 8 hours
 Production units are the integers

2
Tasks 1: Aggregate Planning
 Calculate aggregate material cost/unit and aggregate net production time/unit
 Evaluate the production capacity/workforce
 Develop an aggregate production plan using the Level and Chase strategies.
 Determine the total cost for each strategy.

Remark: No. of Hiring (H), No. of Laid Off (L), Size of Workforce (W), Overtime Hours (O), Inventory
Level (IL), Stockout (S), Total Production Size (P) and Demand (D)

Aggregate material cost/unit:

S001: 20% x 62 = $12.4/ unit

S002: 65% x 90 =$58.5/ unit
S003: 15% x 86 =$12.9/ unit
S001+S002+S003=$ 83.8/per unit

Aggregate net production time/unit:

S001:20%x((60/15)+5)=1.8 hrs/unit
S002: 65%x((70/14)+4.5)=6.175 hrs/unit
S003: 15%x((80/16)+8.5)=2.025 hrs/unit

S001+S002+S003=1.8+6.175+2.025=10 hrs/unit

Production capacity/workforce:

Total monthly working hours : 20x20x8=3200 hrs/month

Total Production capacity:3200/10 =320units

Production capacity/workforce=320units/20 workers = 16units/ workforce

3
Chase Strategy:
Period H L W O IL S P D
Beginning 0 0 20 0 0 0 - -
January 0 1 19 0 4 0 304 300
February 0 3 16 0 10 0 256 250
March 6 0 22 0 12 0 352 350
April 3 0 25 0 12 0 400 400
May 0 3 22 0 4 0 352 360
June 4 0 26 0 0 0 416 420
July 0 7 19 0 4 0 304 300
August 0 3 16 0 10 0 256 250
September 6 0 22 0 12 0 352 350
October 3 0 25 0 12 0 400 400
November 0 3 22 0 4 0 352 360
December 4 0 26 0 0 0 416 420

Cost of
H L W O IL S P
Period
January 0 7000 182400 0 80 0 25475.2
February 0 21000 153600 0 200 0 21452.8
March 30000 0 211200 0 240 0 29497.6
April 15000 0 240000 0 240 0 33520
May 0 21000 211200 0 80 0 29497.6
June 20000 0 249600 0 0 0 34860.8
July 0 49000 182400 0 80 0 25475.2
August 0 21000 153600 0 200 0 21452.8
September 30000 0 211200 0 240 0 29497.6
October 15000 0 240000 0 240 0 33520
November 0 21000 211200 0 80 0 29497.6
December 20000 0 249600 0 0 0 34860.8
Total 130000 140000 2496000 0 1464 0 348608

Total cost:$ 3,116,072

4
Level Strategy:
Period H L W O IL S P D
Beginning 0 0 20 0 0 0 - -
January 0 0 22 0 52 0 352 300
February 0 0 22 0 154 0 352 250
March 0 0 22 0 156 0 352 350
April 0 0 22 0 108 0 352 400
May 0 0 22 0 100 0 352 360
June 0 0 22 0 32 0 352 420
July 0 0 22 0 84 0 352 300
August 0 0 22 0 186 0 352 250
September 0 0 22 0 188 0 352 350
October 0 0 22 0 140 0 352 400
November 0 0 22 0 132 0 352 360
December 0 0 22 0 64 0 352 420

Cost of
H L W O IL S P
Period
January 0 0 211200 0 1040 0 29497.6
February 0 0 211200 0 3080 0 29497.6
March 0 0 211200 0 3120 0 29497.6
April 0 0 211200 0 2160 0 29497.6
May 0 0 211200 0 2000 0 29497.6
June 0 0 211200 0 640 0 29497.6
July 0 0 211200 0 1860 0 29497.6
August 0 0 211200 0 3720 0 29497.6
September 0 0 211200 0 3760 0 29497.6
October 0 0 211200 0 2800 0 29497.6
November 0 0 211200 0 2640 0 29497.6
December 0 0 211200 0 1280 0 29497.6
Total 0 0 2534400 0 27920 0 353971.2

Total cost: $2,916,291.2

5
Flexibility Strategy:
Period H L W O IL S P D
Beginning 0 0 20 0 0 0 - -
January 0 0 20 0 0 0 300 300
February 0 0 20 0 10 0 260 250
March 0 0 20 10 0 0 340 350
April 0 0 20 40 0 0 400 400
May 0 0 20 20 0 0 360 360
June 0 0 20 50 0 0 420 420
July 0 0 20 0 0 0 300 300
August 0 0 20 0 10 0 260 250
September 0 0 20 10 0 0 340 350
October 0 0 20 40 0 0 400 400
November 0 0 20 20 0 0 360 360
December 0 0 20 50 0 0 420 420

Cost of
H L W O IL S P
Period
January 0 0 192000 0 0 0 25140
February 0 0 192000 0 200 0 21788
March 0 0 192000 1000 0 0 28492
April 0 0 192000 4000 0 0 33520
May 0 0 192000 2000 0 0 30168
June 0 0 192000 5000 0 0 35196
July 0 0 192000 0 0 0 25140
August 0 0 192000 0 200 0 21788
September 0 0 192000 1000 0 0 28492
October 0 0 192000 4000 0 0 33520
November 0 0 192000 2000 0 0 30168
December 0 0 192000 5000 0 0 35196
Total 0 0 2304000 24000 400 0 348608

Ap Ma Oc No De
Jan Feb Mar Jun Jul Aug Sep
r y t v c
2 18.7 16.2 21.2 26.2 18.7 16.2 21. 22. 26.
Working days/month 25 22.5 25
0 5 5 5 5 5 5 5 5 5
Working hours/day 8 8 8 8 8 8 8 8 8 8 8 8 8
units/workforce/ 1
15 13 17 20 18 21 15 13 17 20 18 21
month 6

6
Total cost: $2,677,008