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Aggregate planning

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• You buy the raw material at a fixed cost of $10 per unit. You can assume that the delivery of the raw material is instantaneous.
• In order to produce the goods, you may need to hire employees.
• Each employee produces exactly 25 parts a day, and costs you $100 in salary and benefits per day.
• If you find yourself short of capacity, you can do two things:
1. Hire more workers at a cost of $150 per employee hired, due to paperwork and training employees hired become productive on the next day.
2. Outsource the jobs at a cost of $20 per part (you still need to provide the raw material).
• If you so desire, you can reduce your workforce. Firing each employee costs you $200 due to severance pay.
• You sell each item for $40. However, if the demand is higher than your inventory level, you are penalized $15 per item per day of shortage. Items short represent obligations to customers and have to be supplied later.
• Your holding costs are $10 per day per item. This cost applies to items that have been produced but not yet sold.
The demand for your products is given in Table 1, and you need to conclude the game with 75 parts as well (finish inventory).
Currently you have 10 employees on your payroll and 75 parts in initial inventory.
Your Objectives:
1. Develop a production aggregate plan based on the pure strategies (leveled production, and a chase policy). Assess the quality of your plan.
2. Develop a more optimal production schedule as to maximize the profit of your company. This schedule should include hiring and firing policy as well as outsourcing.

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