Determine the cost of each strategy. which strategy would you
Rowley Apparel, manufacturer of the famous “Race-A-Rama” 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
|