More In-Depth Example: The C&A Company
A firm with pronounced seasonal variation normally plans production with a 12-month time horizon in order to capture the extremes in demand during the busiest and slowest months. Haying said that. we present here an in-depth example using a six-month horizon in order more clearly to illustrate the general concepts that are involved in aggregate planning.We are given specific information about the C&A Company in Exhibit 15.4. Each alternative plan that is developed and presented is accompanied by both its full and marginal cost calculations to provide a comparison of these two approaches. The first step in evaluating each alternative plan is to convert the demand forecast into production requirements. This is accomplished by subtracting out the amount of inventory on hand at the beginning of the forecast period. In the C&A example, the beginning inventory on hand is -l00 units. We are now ready to formulate and evaluate alternative aggregate or production plans ior the C&A Company. Although one could develop a large number of alternative aggregate plans. we present four plans that we , evaluate with the objective of selecting that one with the lowest costs. Plan I. Produce to exact monthly production requirements using a regular eight-hour day by varying workforce size pure chase strategy).