Rowley Apparel, manufacturer of the famous “Race-ARama” swimwear line, needs help planning production for next year. Demand for swimwear follows a seasonal pattern, as shown here. Given the following costs and demand
forecasts, test these four strategies for meeting demand:
(a) level production with overtime and subcontracting, as
needed, (b) level production with backorders as needed,
(c) chase demand, and (d) 3000 units regular production
from April through September and as much regular, overtime, and subcontracting production in the other months as
needed to meet annual demand. Determine the cost of each
strategy. Which strategy would you recommend?
Month Demand Forecast
January 1000
February 500
March 500
April 2000
May 3000
June 4000
July 5000
August 3000
September 1000
October 500
November 500
December 3000
Hiring cost $500 per worker
Firing cost $500 per worker
Inventory carrying cost $1 per unit per quarter
Regular production cost $10 per unit
14-3. Rowley Apparel, manufacturer of the famous “Race-ARama” swimwear line, needs help planning production for
next year. Demand for swimwear follows a seasonal pattern, as shown here. Given the following costs and demand
forecasts, test these four strategies for meeting demand:
(a) level production with overtime and subcontracting, as
needed, (b) level production with backorders as needed,
(c) chase demand, and (d) 3000 units regular production
from April through September and as much regular, overtime, and subcontracting production in the other months as
needed to meet annual demand. Determine the cost of each
strategy. Which strategy would you recommend?
Month Demand Forecast
January 1000
February 500
March 500
April 2000
May 3000
June 4000
July 5000
August 3000
September 1000
October 500
November 500
December 3000
Beginning workforce 8 workers
Subcontracting capacity unlimited
Overtime capacity 2000 units/month
Production rate per worker 250 units/month
Regular wage rate $15 per unit
Overtime wage rate $25 per unit
Subcontracting cost $30 per unit
Hiring cost $100 per worker
Firing cost $200 per worker
Holding cost $0.50 per unit/month
Backordering cost $10 per unit/month