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    Internet Case Study For Chapter 13: Aggregate Planning Cornwell Glass

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    Aisel Piala
    Cornwell Glass produces automobile glass and uses a forecasting system to predict weekly demand over the next year. Demand varies seasonally. Cornwell must consider costs of hiring/firing workers, overtime, subcontracting, inventory holding and late orders to develop a production plan minimizing total costs while meeting demand. The document provides Cornwell's capacity, cost and inventory data and poses discussion questions about determining optimal production schedules.

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    Internet Case Study For Chapter 13: Aggregate Planning Cornwell Glass

    Uploaded by

    Aisel Piala
    86 views5 pages
    Cornwell Glass produces automobile glass and uses a forecasting system to predict weekly demand over the next year. Demand varies seasonally. Cornwell must consider costs of hiring/firing workers, overtime, subcontracting, inventory holding and late orders to develop a production plan minimizing total costs while meeting demand. The document provides Cornwell's capacity, cost and inventory data and poses discussion questions about determining optimal production schedules.

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    Aggregate planning cases

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    AGGREGATE PLANNING-CASES

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    Cornwell Glass produces automobile glass and uses a forecasting system to predict weekly demand over the next year. Demand varies seasonally. Cornwell must consider costs of hiring/firing workers, overtime, subcontracting, inventory holding and late orders to develop a production plan minimizing total costs while meeting demand. The document provides Cornwell's capacity, cost and inventory data and poses discussion questions about determining optimal production schedules.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    86 views5 pages

    Internet Case Study For Chapter 13: Aggregate Planning Cornwell Glass

    Uploaded by

    Aisel Piala
    Cornwell Glass produces automobile glass and uses a forecasting system to predict weekly demand over the next year. Demand varies seasonally. Cornwell must consider costs of hiring/firing workers, overtime, subcontracting, inventory holding and late orders to develop a production plan minimizing total costs while meeting demand. The document provides Cornwell's capacity, cost and inventory data and poses discussion questions about determining optimal production schedules.

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    AGGREGATE PLANNING

    Internet Case Study for Chapter 13: Aggregate Planning


    Cornwell Glass
    Cornwell Glass produces replacement automobile glass for all makes of cars. Cornwell
    has a sophisticated forecasting system that uses data from past years to find seasonal
    factors and long-term trends. The system uses data from past weeks to find recent trends.
    The following table presents the forecasted demands for the coming year on a weekly
    basis.

    Week Demand Week Demand


    April 15 1,829 November 4 1,864
    22 1,820 11 1,989
    29 1,887 18 2,098
    May 6 1,958 25 2,244
    13 2,011 December 2 2,357
    20 2,063 9 2,368
    27 2,104 16 2,387
    June 3 2,161 23 2,402
    10 2,258 30 2,418
    17 2,307 January 6 2,417
    24 2,389 13 2,324
    July 1 2,434 20 2,204
    8 2,402 27 2,188
    15 2,385 February 3 2,168
    22 2,330 10 2,086
    29 2,323 17 1,954
    August 5 2,317 24 1,877
    12 2,222 March 3 1,822
    19 2,134 10 1,803
    26 2,065 17 1,777
    September 2 1,973 24 1,799
    9 1,912 31 1,803
    16 1,854 April 7 1,805
    23 1,763
    30 1,699
    October 7 1,620
    14 1,689
    21 1,754
    28 1,800

    Cornwell uses these forecasts for its production planning. It manufactures several types
    of glass, and demand is aggregated across products and measured in pounds.

    It is obvious from the demands that there is a great deal of seasonality/cyclicality in the
    demand pattern. Cornwell will need to take this into account in developing a production
    plan for the coming year.

    Cornwell must consider the costs of hiring or firing workers; using overtime;
    subcontracting; and holding inventory or running out of the product. The holding cost for
    glass is $.12 per pound per week. The company estimates that the cost of a late order is
    $20 per pound per week late.

    Cornwell currently costs out each hire at $5.63 per pound (based on training costs and
    production rates per worker). It costs out each fire at $15.73 per pound (based on
    unemployment compensation and loss of good will). The company currently has the
    capacity to manufacture 1,900 pounds of glass per week. This capacity cannot be
    exceeded under any plan. At most, 2,000 pounds can be subcontracted in a given week,
    and overtime is limited to 250 pounds per week. Glass that is manufactured during
    overtime costs $8 per pound more than glass manufactured during regular time. Glass
    that is subcontracted costs $2 more per pound than glass that is produced during
    overtime.

    The current inventory is 73 units, and currently production is working at full capacity,
    1,900 units. Cornwell has not been able to determine whether demands not met in the
    current month can be met later or whether these orders are lost.

    DISCUSSION QUESTIONS

    1. Find the production schedule Cornwell should follow under the various
    assumptions and policies, and detail the differences among these schedules.
    2. Consider the following aggregate planning problem for one quarter:

    Regular Time Overtime Subcontracting

    Production capacity/month 1,000 200 150

    Production cost/unit $5 $7 $8

    Assume that there is no initial inventory and a forecasted


    demand of 1,250 units in each of the 3 months. Carrying
    cost is $1 per unit per month. Solve this aggregate planning
    problem using the linear programming transportation
    method.

    3. A Birmingham, Alabama, foundry produces cast-iron ingots according to a 3-month


    capacity plan. The cost of labor averages $100 per regular shift hour and $140 per
    overtime (O.T.) hour. Inventory carrying cost is thought to be $4 per labor-hour of
    inventory carried. There are 50 direct labor-hours of inventory left over from March. For
    the next 3 months, demand and capacity (in labor-hours) are as follows:

    Capacity

    Month Regular Labor (hours) O.T. Labor (hours) Demand

    Apr. 2,880 355 3,000

    May 2,780 315 2,750

    June 2,760 305 2,950

    Develop an aggregate plan for the 3-month period using the


    transportation method.

    4. The James Lawson Chemical Supply Company manufactures and packages expensive
    vials of mercury. Given the following demand, supply, cost, and inventory data, allocate
    production capacity to meet demand at minimum cost using the transportation method. A
    constant workforce is expected. Back orders are permitted.

    Supply Capacity (in units)

    Period Regular Time Overtime Subcontract Demand (in units)

    1 25 5 6 32

    2 28 4 6 32

    3 30 8 6 40

    4 29 6 7 40
    Other Data

    Initial inventory 4 units

    Ending inventory desired 3 units

    Regular-time cost per unit $2,000

    Overtime cost per unit $2,475

    Subcontract cost per unit $3,200

    Carrying cost per unit per period $ 200

    Backorder cost per unit per period $ 600

    5. Refrigeration Corp. needs an aggregate plan for January through June for its
    refrigerator production. The company has developed the following data:

    Costs

    Holding cost $8/ refrigerator /month

    Subcontracting $80/ refrigerator

    Regular-time labor $12/hour

    Overtime labor $18/hour for hours above

    8 hours/worker/day

    Hiring cost $40/ refrigerator

    Layoff cost $80/ refrigerator

    Stockout cost none

    Other Data

    Current workforce 8 people


    (December)

    Labor hours/ refrigerator 4 hours

    Workdays/month 20 days

    Beginning inventory 250


    refrigerators

    Ending inventory 0 refrigerators

    Demand Forecast

    Jan. 400

    Feb. 500

    March 550

    April 700

    May 800

    June 700

    What will each of the two following strategies cost?

    (a) Plan A: Vary the work force so that production meets the
    forecasted demand. Bell had eight

    employees on staff in December.

    (b) Plan B: Vary overtime only and use a constant workforce of


    ten.

    (c) Which plan is best and why?

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