13

CHAPTER

Aggregate
Planning

DISCUSSION QUESTIONS
1.

(a)
(b)

(c)

2.

(a)
(b)

Aggregate planning is the determination of the quantity and timing of production for the
immediate future (often from 3 to 18 months ahead)
Demand optionsan attempt is made to manipulate demand
n
Influence demand: employ advertising, promotion, personal selling, price cuts, etc., to
either change the magnitude of demand, or shift it in time
n
Back order during high demand periods
n
Counterseasonal product mixing: produce lawn mowers and snow blowers
Capacity optionsattempt to absorb fluctuations in demand
n
Change inventory levels
n
Vary size of workforce by hiring and firing
n
Vary production rate through use of overtime or idle time
n
Subcontract
n
Use part-time workers
A pure strategy manipulates only a single variableinventory, production rates, manpower
levels, capacity, etc.whereas a mixed strategy manipulates two or more variables
simultaneously.
Four not mixed strategies are:
n
Change inventory levels
n
Vary workforce size
n
Vary production rate by use of overtime and idle time
n
Subcontract
Other pure strategies were described in the answer to question 1, above.

3.

Mathematical models are not more widely used because they tend to be relatively complex and are
seldom understood by those persons performing the aggregate planning activities.

4.

The advantage of varying the size of the workforce as required to adjust production capacity is that
one has a fundamental ability to change production capacity in relatively small and precise
increments. The disadvantages are that a ready supply of skilled labor is not always available,
newly hired personnel must be trained, and firings or layoffs undermine the morale of all employees
and can lead to a widespread decrease in overall productivity.

5.

Aggregate planning is usually considered to encompass several production cycles. Some products,
large ships or nuclear reactors, for example, have very long production cycles (years or tens of
years). Other products, such as lawn mowers or jewelry have production cycles measured in days.

6.

The Master Production Schedule (MPS) is produced by disaggregating the aggregate plan.

Chapter 13: Aggregate Planning

227

7.

Some mathematical approaches to aggregate planning are:

n
Linear programmingbasically views the problem as one of maximizing (or minimizing) a
linear criteria subject to a set of linear constraints.
n
Linear decision rulespecifies an optimum production rate and workforce level over a
specific period. Minimizes total cost of payroll, hiring, layoffs, overtime, and inventory
through a series of quadratic cost curves. Uses calculus to derive a pair of linear equations
that are then solved for values that minimize cost.
n
Management coefficients modelheuristic decision rule that manager applies based upon
his or her experience. A formal model is built based upon managers experience. Regression
is used to develop relationships between pertinent variables for future decisions.
n
Simulationthe outcomes projected to result from the choice of various alternatives are
simulated. Various rules used to choose the best.
Note: The linear programming and linear decision rule techniques are based upon algorithms that
generate optimal solutions. The management coefficients model and simulation techniques
employ heuristics that generate good, but not necessarily optimal, solutions.

8.

Aggregate planning in services differs from aggregate planning in manufacturing in the following
ways:
n
Most services are perishable and cannot be inventoried. It is virtually impossible to produce
the service early in anticipation of higher demand at a later time.
n
Demand for services is often difficult to predict. Demand variations are typically more severe
and more frequent.
n
Services are more customized than manufactured goods and can be offered in many different
forms. This variability makes it difficult to allocate capacity. Units of capacity may also be
hard to define.
n
Because most services cannot be transported, service capacity must be available at the
appropriate place as well as at the appropriate time.
n
Service capacity is generally altered by changes in labor, rather than by equipment or space,
and labor is a highly flexible resource.

9.

Graphical aggregate planning methods, while based on trial and error, are useful because they
require only limited computations and usually lead to optimal solutions.

10.

Limitations of the transportation method include that it does not work well when one attempts to
include the effect of hiring and layoffs in the model.

11.

Impact on quality each of the eight planning strategies might have:

n
Changing inventory levelsshortages can result in lost sales due to longer lead times and
poorer customer service
n
Hiring and layoffspoor training and low morale are issues
n
Overtime or idle timeovertime can wear employees down, while idle time can impact
morale
n
Subcontractingsubs may not deliver the quality expected on time
n
Part-timersmay not be well trained or educated
n
Influencing demandpromotions may make the firm unable to balance demand with
capacity
n
Back orderingimpacts on customer satisfaction
n
Counterseasonal product mixingexpertise in the second product area may be weak

12.

Varying inventory levels and back ordering have this disadvantage in common: customers may go
elsewhere.

13.

Yield management adds another set of decisions to the aggregate plan, to capacity planning, and to
scheduling. However, of these yield management issues, the aggregate plan may be the one least
affected. Auto rental companies, airlines, and hotels now all vary inventory (autos, seats, rooms)
and prices to reflect ways to maximize their yield (profit). Lead time (vacationers price shop more
and are willing to do so earlier) days of the week, seasons, holidays, and conventions all impact the
yield. In many cases, the aggregate supply is the least affected.

228

Instructors Solutions Manual t/a Operations Management

CRITICAL THINKING EXERCISE

Overtime seems to be more of an American phenomena than a global one. Overtime in airlines can be
deadly if pilots are exhausted. What are the implications of heavy use of overtime in various industries?
Heavy overtime in manufacturing results in burnout and quality problems. Each group of students might
pick an industry for this exercise and look at the overtime issues in that area.

END-OF-CHAPTER PROBLEMS
13.1 Month
Jan
Feb
Mar
Apr
May
Jun

Expected Demand
900
700
800
1,200
1,500
1,100
6,200

Production Days
22
18
21
21
22
20
124

Demand Per Day

41
39
38
57
68
55

6,200
50 units/day
124
. hours/unit
Constant workforce of 6 persons; overtime to meet extra demand: Labor 16
Average daily production requirement

Production rate/day = persons

Month
Jan
Feb
Mar
Apr
May
Jun

hours day
8
6
30 units/day
hours unit
16
.

Expected Demand Production (@ 30/day)

900
660
700
540
800
630
1,200
630
1,500
660
1,100
600

Overtime
240
160
170
570
840
500
2,480

Cost analysis:
Regular Production:
CR 6 persons $40 124 $29,760
Overtime:
CO 2,480 units 0.2 man-days/unit $56 /man-day = $27,776
Total cost:
CT 29,760 27,776 $57,536

Chapter 13: Aggregate Planning

229

. hours/unit
13.2 Constant workforce of 7 persons; subcontract to meet extra demand: Labor 16
Production rate/day = persons
Month
Jan
Feb
Mar
Apr
May
Jun

hours day
8
7
35 units/day
hours unit
16
.

Expected Demand Production (@ 35/day)

900
770
700
630
800
735
1,200
735
1,500
770
1,100
700

Subcontract
130
70
65
465
730
400
1,860

Cost analysis:
Regular production:
CR 7 persons $40 124 $34,720
Subcontracting:
CS 1860
,
units $10 $18,600
Total cost:
CT 34,720 18,600 $53,320
Comparing:
Carrying cost
Reg. time
Overtime
Subcont.
Hire
Layoff
Total cost

Plan 1
9,250
49,600
0
0
0
0
58,850

Plan 2
0
37,696
0
14,880
0
0
52,576

Plan 3
0
49,600
0
0
8,000
9,000
66,600

Plan 4
400
39,680
13,888
0
0
0
53,968

Plan 5
0
29,760
27,776
0
0
0
57,536

Plan 6
0
34,720
0
18,600
0
0
53,320

Based simply upon total cost, Plan 2 is preferable. From a practical viewpoint, Plans 2, 4, and 6
will likely have equivalent costs. Practical implementation of Plan 2 may, for example, require the
employment of eight full-time employees, rather than seven full-time and one part-time employee.
When several plans have roughly equivalent costs, other parameters gain importancesuch as the
amount of control one would have over production and excess wear on equipment and personnel.
Plan 3 should be avoided.
13.3

Period
1
2
3
4
5
6
7
8

Expected Demand
1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400
14,200
Plan A
Production
(Result of
Previous

230

Hire

Fire

Extra

Instructors Solutions Manual t/a Operations Management

Period Demand
1
1,200*
2
1,600
3
1,800
4
1,800
5
2,200
6
2,200
7
1,800
8
1,400
*

Month)
1,600
1,200
1,600
1,800
1,800
2,200
2,200
1,800

(Units) (Units)
400

Cost
30,000 (cost to go from 1,600 in Jan. to 1,200 in Feb.)

20,000 (cost to go from 1,200 in Feb. to 1,600 in Mar.)

10,000

400
20,000

400
30,000
400
30,000
Total Extra Cost: $140,000
400
200

Note: Period 1 demand was given as 1,400 units. Because we have 200 units in beginning inventory, the demand to be met by
production is only 1,200 units.

13.4
Period
0
1
2
3
4
5
6
7
8

Demand

Production

1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400

1,400
1,400
1,400
1,400
1,400
1,400
1,400
1,400

13.5 (a)
Period
0
1
2
3
4
5
6
7
8

Demand

Production

1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400

1,775
1,775
1,775
1,775
1,775
1,775
1,775
1,775

Plan B
Ending Inv.
200
200
0
0
0
0
0
0
0

Plan C
Ending Inv.
200
575
750
725
700
275
0
0
375

Subcon (Units)

Extra Cost

400
400
800
800
400

Total Extra Cost:

4,000

30,000
30,000
60,000
60,000
30,000

Stockouts (Units)

150
25
Total Extra Cost:

$214,000

Extra Cost
11,500
15,000
14,500
14,000
5,500
15,000
2,500
7,500
$85,500

All other things being equal, it would appear that Plan C, with a cost of $85,000, should be
recommended over Plan A (cost = $130,000) or Plan B (cost = $214,000).

Chapter 13: Aggregate Planning

231

(b)

Graph of Plan C
2,200
2,100
2,000
1,900
1,800

1,775

1,700
1,600
1,500
1,400
0

Jan Feb Mar Apr May Jun

Jul Aug

13.6 (a) Plan D: Maximum units in overtime 0.20 1,600 320

Period
0
1
2
3
4
5
6
7
8

Demand

Reg.
(Units)

1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400

1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600

Plan D
O.T.
End Inv.
(Units) (Units)
200

400

400

200

320

320

200

200

Stockouts
(Units)

Extra
Cost

8,000
8,000
4,000
0
280
44,000
280
44,000
10,000
4,000
Total Extra Cost: $122,000

Noting that the additional cost of a stockout is much greater than the sum of the additional costs for
overtime plus inventory storage, one might look ahead and schedule overtime where possible.
The resulting aggregate plan would be:
Reg.
Period Demand (Units)
0
1
1,400
1,600
2
1,600
1,600
3
1,800
1,600
4
1,800
1,600
5
2,200
1,600
6
2,200
1,600
7
1,800
1,600
8
1,400
1,600
(b)

232

O.T.
End Inv.
(Units) (Units)
200

400

400
200
400
200
400
320
120
320

200

200

Stockouts
(Units)

Extra
Cost

8,000
8,000
18,000
18,000
18,400
160
32,000
10,000
4,000
Total Extra Cost: $116,400

Plan E

Instructors Solutions Manual t/a Operations Management

Period
0
1
2
3
4
5
6
7
8

Demand

Production Subcont (Units)

1,400
1,600
1,800
1,800
2,200
2,200
1,800
1,400

1,600
1,600
1,600
1,600
1,600
1,600
1,600
1,600

Ending Inv.
200
400
400
200

Extra Cost
8,000
8,000
4,000
0
45,000
45,000
15,000
4,000
$129,000

600
600
200
200
Total Extra Cost:

All other things being equal, it would appear that Plan D, with a cost of $122,000, should be
recommended over Plan E (cost = $129,000).
Note that of all the plans discussed, it would appear that Plan C, with a cost of $85,500,
should be recommended over all others.
13.7

Month Expected Demand

Jul
400
Aug
500
Sep
550
Oct
700
Nov
800
Dec
700
Production per person per day: 8 hrs/person 4 hours/VCR
Therefore, each person can produce 2 VCRs per day, or 40 VCRs per month.
(a)
Aggregate plan, hiring/firing only:

Period
Jun
Jul
Aug
Sep
Oct
Nov
Dec

(b)

Beg.
Inventory
Over
(Short)
150
150
10
10
20
0
0

Unit
Demand
400
500
550
700
800
700

Units
Required

Hours
Required
at 4
each

Personnel
Required
at
20 days
at 8 hrs

250
510
540
680
800
700

1,000
2,040
2,160
2,720
3,200
2,800

6.25
12.75
13.50
17.00
20.00
17.50

Personnel
on
staff
8
6
13
14
17
20
17

Units
Produced

Production
Over
(Short)

240
520
560
680
800
680

10
10
20
0
0
20

Hire
$40
7
1
3
3

Fire
$80
2

3
Total Extra Cost:

Costs
Hire: 40
Layoff: 80
$160
$280
$40
$120
$120
$240
$960

Note: In computing cost, we assumed that, if the capacity of a fraction of a worker was
needed (was excess), one worker was hired (fired).
Aggregate plan, overtime only:
Period
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Demand

Production
(Regular)

Production
(Overtime)

400
500
550
700
800
700

320
320
320
320
320
320

110
230
380
480
380

Chapter 13: Aggregate Planning

Ending
Inv.
150
70

Extra
Cost

560
2,640
5,520
9,120
11,520
9,120
Total Extra Cost: $38,480

233

13.8 Calculating added costs for various planning options:

n
Holding: $8/unit/month
n
Back ordering: $16/unit/month
n
Subcontracting: $ 40/unit
n
Overtime: $24/unit ($16/hour over 8 hours)
n
Hiring: $1/unit
n
Firing: $2/unit
The optimal strategy is obviously to vary the workforce by hiring and firing. In Problem 13.7, the
cost of this strategy is given as $960.
An alternative wherein one hires 5 workers in August and 5 more in October follows:

Period
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Unit
Demand
400
500
550
700
800
700

Beg.
Inventory
Over
(Short)
150
150
70
90
60
80
0

Units
Required

Hours
Required
at 4
each

Personnel
Required
at
20 days
at 8 hrs

250
430
460
640
720
700

1,000
1,720
1,840
2,560
2,880
2,800

8.00
13.00
13.00
18.00
18.00
18.00

Personnel
on
staff
8
8
13
13
18
18
18

Units
Produced

Production
Over
(Short)

320
520
520
720
720
720

70
90
60
80
0
20

Hire
$40

Fire
$80

Costs
Hire: 40
Layoff: 80

0
$560
5
$920
0
$480
5
$840
0

0
0
$160
Total Extra Cost: $2,960

Students should be encouraged to consider the long-range implications of any aggregate planning
strategy involving planned hiring/firing with respect to the development of an appropriate labor
pool, etc.
13.9

Month
Apr
May
Jun
Jul
Aug
Sep
(a)

Expected Demand
1,000
1,200
1,400
1,800
1,800
1,600

Plan A: minimum rate of 1,000/month, subcontract for additional.

Period
Apr
May
Jun
Jul
Aug
Sep

234

Demand
1,000
1,200
1,400
1,800
1,800
1,600

Plan A
Production Ending Inv. Subcont. (Units)
1,000
0

1,000
0
200
1,000
0
400
1,000
0
800
1,000
0
800
1,000
0
600
Total Extra Cost:

Extra Cost
0
12,000
24,000
48,000
48,000
36,000
$168000

Instructors Solutions Manual t/a Operations Management

(b)

Plan B: vary workforce.

Period
Apr
May
Jun
Jul
Aug
Sep

Demand
1,000
1,200
1,400
1,800
1,800
1,600

Plan B
Production (Existing) Hire (Units)
1,300

1,000
200
1,200
200
1,400
400
1,800

1,800

13.10 (a)
Period
Mar
Apr
May
Jun
Jul
Aug
Sep
(b)

Demand

Production
(Units)

1,000
1,200
1,400
1,800
1,800
1,600

1,300
1,300
1,300
1,300
1,300
1,300

Plan C
Subcont.
(Units)

400
300

Fire (Units)
300

Extra Cost
18,000
6,000
6,000
12,000

200
12,000
Total Extra Cost: $54,000

Ending Inv.
300
600
700
600
100
0
0
Total Extra Cost:

Extra Cost
15,000
17,500
15,000
2,500
24,000
18,000
$92,000

Plan D: Maximum units in overtime 0.20 1,300 260

Month
Apr
May
Jun
Jul
Aug
Sep

Demand

Reg.
(Units)

1,000
1,200
1,400
1,800
1,800
1,600

1,300
1,300
1,300
1,300
1,300
1,300

Plan D
O.T.
(Units) End Inv.

100
260
260
260

180
180
180
0
0
0

Subcont.
(Units) Idle Time

Extra
Cost

120
100

11,700
10,500
8,500
60
14,000
240
24,800
40
12,800
Total Extra Cost: $82,300

If our object in comparing the plans is to identify the elements of an optimal plan, we must
consider the following:
Plans A, B, and D begin with zero initial inventory, Plan C begins with an initial
inventory of 300 units. It is therefore inappropriate to compare directly the results of Plan C
with those of Plans A, B, and D.
In addition, we can assume that the warehouse constraint introduced in Plan D would
have affected the costs of Plan A and Plan C had it been in effect in those plans.
What one can say is that the aggregate planning options should be utilized as available,
in the following order:
n
Carryover of inventory: $25/unit
n
Overtime: $40/unit
n
Hiring: $30/unit
n
Firing: $60/unit
n
Subcontracting: $60/unit
n
Stockout: $100/unit

Chapter 13: Aggregate Planning

235

13.11 The intent of the authors is that this problem be solved using the transportation problem format.
Assuming that back orders are not permitted, the solution is:
To Demand
From
Month 1
Reg. Time
5
Month 1
1,000
Overtime
7
Month 1
200
Subcont.
8
Month 1
50

Reg. Time
Month 2

Overtime
Month 2

Subcont.
Month 2

Reg. Time
Month 3

Overtime
Month 3

Subcont.
Month 3
Demand
1,250

Demand
Month 2
6

50

Excess
0

10

5
1,000
7
200
8
50
1,250

1,000
200

Demand
Month 3
7

1,250

100

100

0
0
100
300

Supply
1,000
200
150
1,000
200
150
1,000
200
150

Total cost = $ 20,400

13.12 Assuming that back orders are not permitted, the solution is:
To Demand
From
Month 1
Initial
0
Inventory
20
Reg. Time
100
Month 1
20
Overtime
150
Month 1
Subcont.
200
Month 1

Reg. Time
Month 2

Overtime
Month 2

Subcont.
Month 2

Reg. Time
Month 3

Overtime
Month 3

Subcont.
Month 3
Demand
40

Demand
Month 2
4

Demand
Month 3
8

Excess
0

104
10
154

108

158

204

208

100
35
150
5
200

104

154

50

204
100
30
150
10
200
40

10
5

7
5

0
0
0

5
32

Supply
20
30
10
5
35
12
5
30
10
5

Total cost is $11,790

236

Instructors Solutions Manual t/a Operations Management

13.13 Assuming that back orders are not permitted, the solution is:
To Demand
From
Month 1
Initial
0
Inventory
500
Reg. Time
70
Month 1
1,100
Overtime
110
Month 1
400
Subcont.
120
Month 1

Reg. Time
Month 2

Overtime
Month 2

Subcont.
Month 2

Reg. Time
Month 3

Overtime
Month 3

Subcont.
Month 3

Reg. Time
Month 4

Overtime
Month 4

Subcont.
Month 4
Demand
2,000

Demand
Month 2
4

Demand
Month 3
8

Demand
Month 4
12

Excess
0

74
400
114

78

82

118

122

124

128

132

70
1,600
110
400
120
100

74

78

114

118

124

128

70
750
110
200
120
550

74

114

124

2,500

1,500

70
1,600
110
400
120
100
2,100

600

500

50

0
0
500
1,150

Supply
500
1,500
400
600
1,600
400
600
750
200
600
1,600
400
600

Total cost = $627,100

Chapter 13: Aggregate Planning

237

An alternative solution is:

To Demand
From
Month 1
Initial
0
Inventory
500
Reg. Time
70
Month 1
1,500
Overtime
110
Month 1
Subcont.
120
Month 1

Reg. Time
Month 2

Overtime
Month 2

Subcont.
Month 2

Reg. Time
Month 3

Overtime
Month 3

Subcont.
Month 3

Reg. Time
Month 4

Overtime
Month 4

Subcont.
Month 4
Demand
2,000

Demand
Month 2
4

Demand
Month 3
8

Demand
Month 4
12

Excess
0

74

78

82

114
400
124

118

122

128

132

74

78

114

118

124

128

70
750
110
200
120
550

74

114

124

70
1,600
110
400
120
100

2,500

1,500

70
1,600
110
400
120
100
2,100

600

500

50

0
0
0

500
1,150

Supply
500
1,500
400
600
1,600
400
600
750
200
600
1,600
400
600

Total cost = $627,100

238

Instructors Solutions Manual t/a Operations Management

13.14 Assuming that back orders are not permitted, the solution is:
To Demand Demand Demand Demand
From
Month 1 Month 2 Month 3 Month 4
Reg. Time
985
1,085
1,185
1,285
Month 1
235
Overtime
1,310
1,410
1,510
1,610
Month 1
20
Subcont.
1,500
1,600
1,700
1,800
Month 1

Reg. Time
985
1,085
1,185
Month 2
255

Overtime
1,310
1,410
1,510
Month 2
24

Subcont.
1,500
1,600
1,700
Month 2
15

Reg. Time
985
1,085
Month 3
290

Overtime
1,310
1,410
Month 3
26

Subcont.
1,500
1,600
Month 3
5

Reg. Time
985
Month 4
300

Overtime
1,310
Month 4
1

Subcont.
1,500
Month 4
Demand
255
294
321
301

Excess
0

Supply
235

0
12

20

12

255

24

15

290

0
10

26

15

0
23
17
62

300

24

17

Total cost = $1,186,810

13.15 Assuming that back orders are not permitted, the solution is:
To Demand
From
April
Beginning
0
Inventory
50
Reg. Time
100
April
2,880
Overtime
140
April
70

Reg. Time
May

Overtime
May

Reg. Time
June

Overtime
June
Demand
3,000

Demand
May
4

Demand
June
8

Excess
0

104

108

144

148

100
2,750
140

104
30
144

2,750

100
2,760
140
160
2,950

285

0
315

0
0

145
745

Supply
50
2,880
355
2,780
315
2,760
305

Total cost = $874,320

Chapter 13: Aggregate Planning

239

13.16 Assuming that back orders are not permitted, the solution is:
To
From
Reg. Time
Jan
Overtime
Jan
Reg. Time
Feb
Overtime
Feb
Reg. Time
Mar
Overtime
Mar
Reg. Time
Apr
Overtime
Apr
Reg. Time
May
Overtime
May
Reg. Time
Jun
Overtime
Jun
Subcont.
Demand

Jan
1
12
700
16
300

Feb
2
13
100
17

Mar
3
14

Apr
4
15

May
5
16

Jun
6
17

Excess
0

18

19

20

21

13

14

15

16

17

18

19

20

12
800
16
300

13

14

15

17

18

19

12
800
16
300

13

14

17

18

12
800
16
300

12

11
1,100
16
300

18.5

18.5

1,000

1,200

18.5
150
1,250

18.5
350
1,450

18.5
1,400

17
11
1,100
16
300
18.5
1,400

100

0
0

100

0
0

Supply
800
300
800
300
800
300
800
300
1,100
400
1,100
400
500

200

Total cost = $100,750

240

Instructors Solutions Manual t/a Operations Management

13.17 Even though back orders are permitted, note they are not used. One of the multiple optimal
solutions is:
To Demand Demand Demand Demand
From
1
2
3
4
Initial
0
200
400
600
Inventory
4
Reg. Time
2,000
2,200
2,400
2,600
1
25
Overtime
2,475
2,675
2,875
3,075
1
3
2
Subcont.
3,200
3,400
3,600
3,800
1
Reg. Time
2,600
2,000
2,200
2,400
2
28
Overtime
3,075
2,475
2,675
2,875
2
2
2
Subcont.
3,800
3,200
3,400
3,600
2
Reg. Time
3,200
2,600
2,000
2,200
3
30
Overtime
3,675
3,075
2,475
2,675
3
8
Subcont.
4,400
3,800
3,200
3,400
3
1
Reg. Time
3,800
3,200
2,600
2,000
4
29
Overtime
4,275
3,675
3,075
2,475
4
6
Subcont.
5,000
4,400
3,800
3,200
4
4
Demand
32
32
40
40

End
Inv
800

Excess
0

2,800

3,275

4,000

2,600

3,075

3,800

2,400

2,875

3,600

2,200

2,675

3,400
3
3

Supply
4
25
5
6
28
4
6
30
8
6
29
6
7

17

Total cost = $308,125

Note: Ending inventory of 3 units held to period 5 each require the additional carrying cost of
$200. You may wish to convey this hint to students when assigning the problem.

Chapter 13: Aggregate Planning

241

13.18 Assuming that back orders are not permitted one solution, of multiple optional solutions, is:
To
From
Subcont.

Demand
1
135

Demand
2
135

Demand
3
135

Demand
4
135

Reg. Time
1
Overtime
1
Reg. Time
2
Overtime
2
Reg. Time
3
Overtime
3
Reg. Time
4
Overtime
4
Reg. Time
5
Overtime
4
Demand

100
150
125

103

106

109

Demand
5
135
50
112

128

131

134

137

140

100
150
125
10

103

106

109

112

128

131
10
103
20
128
10
100
150
125
10

134

137

106

109

131

134

103

106

128

131

100
150
125
10
210

103

128

100
130
125

150

160

130

200

End
(Dummy)
Inv
Excess
135
0
20
30
115
0

20

20

Supply
100
150

20
150
20
150
10
150
10
150
10

50

Total cost = $90,850

Note: Ending inventory of 20 units held to period 6 each require the additional carrying cost of
$3 if produced on regular or overtime. Because they are optimally produced by subcontracting
(which is available, at any time), no additional carrying cost is incurred.
13.19 (a)

Method Produce to demand (let workforce vary)

Shortages: Lost salesShortages not carried from period to period
0
0
0
$1,000
$1,300 $1,500
$100
$0
All pds
Capacities
Units
Pd
Demnd Regtm Ovrtm Subcon Regtm Ovrtm Subcon Holdng Shortg
Init
0
0
0
0
Pd1
255
235
20
12
235
20
0
0
0
Pd2
294
255
24
16
255
24
15
0
0
Pd3
321
290
26
15
290
26
5
0
0
Pd4
301
300
24
17
300
1
0
0
0
Pd5
330
300
30
17
300
30
0
0
0
Pd6
320
290
28
19
290
28
2
0
0
Pd7
345
300
30
19
300
30
15
0
0
Pd8
340
290
30
20
290
30
20
0
0
Tot
2,506
2,260
212
135
2,260
189
57
0
0
Subtotal Costs 2,260,000 245,700 85,500
0
0

Type

242

Summary Table
Units

$0

$0

Incres

Decres

0
20
35
10
0
0
10
0
75
0

0
0
0
0
10
0
10
20
0

Cost

Instructors Solutions Manual t/a Operations Management

Regtm
Ovrtm
Subcon
Holdng
Shortg
Incres
Decres

(b)

Method Produce to demand (let workforce vary)

Shortages: Lost salesShortages not carried from period to period
0
0
0
$1,000
$1,300 $1,500
$100
$0
All pds
Capacities
Units
Pd
Demnd Regtm Ovrtm Subcon Regtm Ovrtm Subcon Holdng Shortg
Init
0
0
0
0
Pd1
255
275
20
12
255
0
0
0
0
Pd2
294
275
24
16
275
19
0
0
0
Pd3
321
275
26
15
275
26
15
0
5
Pd4
301
275
24
17
275
24
2
0
0
Pd5
330
275
30
17
275
30
17
0
8
Pd6
320
275
28
19
275
28
17
0
0
Pd7
345
275
30
19
275
30
19
0
21
Pd8
340
275
30
20
275
30
20
0
15
Tot
2,506
2,200
212
135
2,180
187
90
0
49
Subtotal Costs 2,180,000 243,100 135,000
0
0

Type
Regtm
Ovrtm
Subcon
Holdng
Shortg
Incres
Decres

(c)

2,260
$2,260,000
189
$245,700
57
$85,500
0
$0
0
$0
75
$0
20
$0
Total cost = $2,591,200

$0

$0

Incres

Decres

0
20
0
0
0
0
0
0
20
0

0
0
0
0
0
0
0
0
0
0

$0

$0

Incres

Decres

0
20
35
10
0
0
10
0
75
0

0
0
0
0
0
10
0
10
20
0

Summary Table
Units
Cost
2,180
$2,180,000
187
$243,100
90
$135,000
0
$0
49
$0
20
$0
0
$0
Total cost = $2,558,100

Method Produce to demand (let workforce vary)

Shortages: Lost salesShortages not carried from period to period
0
0
0
$1,000
$1,400 $1,500
$100
$0
All pds
Capacities
Units
Pd
Demnd Regtm Ovrtm Subcon Regtm Ovrtm Subcon Holdng Shortg
Init
0
0
0
0
Pd1
255
235
20
12
235
20
0
0
0
Pd2
294
255
24
16
255
24
15
0
0
Pd3
321
290
26
15
290
26
5
0
0
Pd4
301
300
24
17
300
1
0
0
0
Pd5
330
300
30
17
300
30
0
0
0
Pd6
320
290
28
19
290
28
2
0
0
Pd7
345
300
30
19
300
30
15
0
0
Pd8
340
290
30
20
290
30
20
0
0
Tot
2,506
2,260
212
135
2,260
189
57
0
0
Subtotal Costs 2,260,000 264,600 85,500
0
0

Summary TableOvertime Costs: $1400

Type
Units
Cost
Regtm
2,260
$2,260,000
Ovrtm
189
$264,600
Subcon
57
$85,500

Chapter 13: Aggregate Planning

243

Holdng
Shortg
Incres
Decres

0
$0
0
$0
75
$0
20
$0
Total cost = $2,610,100

There is no change in the solution other than higher cost.

Method Produce to demand (let workforce vary)
Shortages: Lost salesShortages not carried from period to period
0
0
0
$1,000
$1,200 $1,500
$100
All pds
Capacities
Units
Pd
Demnd Regtm Ovrtm Subcon
Regtm
Ovrtm Subcon Holdng
Init
0
0
0
0
Pd1
255
235
20
12
235
20
0
0
Pd2
294
255
24
16
255
24
15
0
Pd3
321
290
26
15
290
26
5
0
Pd4
301
300
24
17
300
1
0
0
Pd5
330
300
30
17
300
30
0
0
Pd6
320
290
28
19
290
28
2
0
Pd7
345
300
30
19
300
30
15
0
Pd8
340
290
30
20
290
30
20
0
Tot
2,506
2,260
212
135
2,260
189
57
0
Subtotal Costs
2,260,000 226,800 85,500
0

$0

$0

$0

Shortg

Incres

Decres

0
0
0
0
0
0
0
0
0
0

0
20
35
10
0
0
10
0
75
0

0
0
0
0
0
10
0
10
20
0

Summary TableOvertime Costs: $1,400

Type
Units
Cost
Regtm
2,260
$2,260,000
Ovrtm
189
$226,800
Subcon
57
$85,500
Holdng
0
$0
Shortg
0
$0
Incres
75
$0
Decres
20
$0
Total cost = $2,572,300
Again, there is no change in the solution other than a higher cost.

CASE STUDIES
SOUTHWESTERN UNIVERSITY: F
This case provides the student with quantitative information to develop an aggregate capacity plan, but, as
often occurs in services, demand is so variable that there are not many viable staffing alternatives.
Students may also be frustrated by the lack of detailed data on the nature of service demand and the
resources required to meet demand. Even with these drawbacks, the student should be able to gain insight
into the aggregate planning problem and help the chief justify his personnel requests. Students may want
to talk with the police department at their own university to see how it handles similar problems.

244

Instructors Solutions Manual t/a Operations Management

1.

Which variations in demand for police services should be considered in an aggregate plan for
resources? Which variations can be handled with short-term scheduling adjustments?
An aggregate plan should set full-time staffing levels; estimate part-time and overtime needs for
budget purposes; determine times of the year for training, vacations, and other nonessential duties;
and establish an agreed-upon level of police services for the university community (i.e., What role
is the police officer to play? What response time to calls for service is appropriate? What services
should be provided?). Short-term scheduling adjustments can be made for different days of the
week, shifts, and special events.

2.

In what terms would you define capacity for the department? What additional information do you
need to determine capacity requirements?
Capacity would probably be expressed in terms of man-hours available. To determine what capacity
is required, we need information on the numbers of calls for service, types of calls, how long it
takes to service different types of calls, patrol expectations, and other duties such as escort services.

3.

Evaluate the current staffing plan. What does it cost? Are 26 officers sufficient to handle the
normal workload?
Cost of current staffing plan:
Salaries:
= $728,000
26 officers $28,000 per year
Overtime:
= $43,200
2,400 hours per year $18 per hour
Subcontractors:
= $32,400
40 officers 9 hours $18 per hour 5 football games per year
25 part-timers 9 hours $9 per hour 5 football games per year = $10,125
$813,725
Normal workload during fall and spring semesters:
1st shift
2nd shift
3rd shift

Weekday
5
5
6

Weekend
4
6
8

7-day Average
4.7
5.3
6.6
16.6

Number of 24-hour positions each week 16.6 3 5.5

Number of persons required = 5.5 positions 5 persons/position = 27.6 persons
Normal workload during the summer:
1st shift
2nd shift
3rd shift

Weekday
3
3
3

Weekend
2
3
4

7-day Average
2.7
3.0
3.3
9.0

Number of 24-hour positions each week 9.0 3 3.0

Number of persons required = 3.0 positions 5 persons/position = 15.0 persons
Twenty-six officers is more than enough to handle the normal workload during the three summer
months. However, during the remaining nine months of the year, the police department is almost
two persons short. Obviously, some overtime is currently being used to meet the demands of the
normal workweek.
4.

What would be the additional cost of the chiefs proposal? How would you suggest that the chief
justify his request?

Chapter 13: Aggregate Planning

245

Salary: 4 officers $28,000 per year = $112,000

Overtime: no additional cost, as subcontracting and overtime costs are the same.
To justify his proposal, the chief should point out that two positions (representing $56,000) are
needed to pursue the universitys request for more crime prevention, safety, and health programs.
The other two positions could save up to $18,720 in overtime premiums (total OT of 2,400 hours
minus football game OT of 1,360 hours time $18 per hour) and are needed to maintain the desired
level of police services. On a per hour basis, the salaried services are more cost effective than using
overtime or subcontracting (@ $18/hour).
5.

How much does it currently cost the university to provide police services for football games? What
would be the pros and cons of subcontracting this work completely to outside law enforcement
agencies?
Cost of police officers for football games:
18 officers work 8 hours overtime @ $18.00/hr
8 officers work 16 hours overtime @ $18.00/hr
40 outside officers work 9 hours @ $18.00/hr
25 part-timers work 9 hours @ $9/hr
5 football games per year
Cost 18 8 18 8 16 18 40 9 18 25 9 9 5
2.592 1,024 6,480 2,025 5
12,121 5 $60,605
Subcontracting security for football games would relieve the weary campus police and allow them
to perform their normal duties more effectively. However, football security is highly visible, and the
absence of campus police may hurt their image in the university community and rob them of the
opportunity to work closely with law enforcement personnel from agencies in a noncrisis situation.
It may also be difficult for the university to maintain the same level of control over subcontracted
work, especially in terms of discretionary treatment of students and alumni.
In terms of cost, it is doubtful that the work could be subcontracted as cheaply as it is currently
performed because the cost of supervisory and managerial personnel would have to be included in
the package (and currently no supervisors or managers are paid overtime for their work).

6.

Can you propose any other alternatives? What suggestions do you have for duties of police officers
in nonpeak hours?
Many of the innovative suggestions for handling the variability in demand for services involve
using part-time workers. Police officers require extensive training, so this alternative usually means
hiring off-duty police officers from other agencies. Under these circumstances, the hours that offduty officers can moonlight are limited, and, except for football Saturdays, may be hard to schedule
(i.e., all part-time agencies are busy at the same time). Another way to handle part-time or seasonal
requirements for work is to find complementary work for the full-time employees that follows a
different demand pattern. In this case, the nonpeak period for police services falls during the
summer months. What other university services increase during those months? Perhaps the idled
officers could be used as campus guides during summer orientation, as aides for the summer camps
and other summer programs held on campus, or as part of the grounds crew. At least one small
private college utilizes its police officers in this expanded fashion. It certainly increases the officers
involvement with the university community.

ANDREW-CARTER, INC.
This case presents some of the basic concepts of aggregate planning by the transportation method. The
case involves solving a rather complex set of transportation problems. Four different configurations of

246

Instructors Solutions Manual t/a Operations Management

operating plants have to be tested. The solutions, although requiring relatively few iterations to optimality,
involve degeneracy if solved manually.
The costs are:
Configuration
All plants operating
1 & 2 operating, 3 closed
1 & 3 operating, 2 closed
2 & 3 operating, 1 closed

Total Variable Cost

$179,730
188,930
183,430
188,360

Total Fixed Cost

$41,000
33,500
34,000
33,000

Total Cost
$220,730
222,430
217,430
221,360

The lowest weekly total cost, operating plants 1 and 3 with 2 closed, is $217,430. This is $3,300 per
week ($171,600 per year) or 1.5% less than the next most economical solution, operating all 3 plants.
Closing a plant without expanding capacity of the remaining plants means unemployment. The optimum
solution, using plants 1 and 3, indicates overtime production of 4,000 units at 1 and 0 overtime at 3. The
all-plant optima have no use of overtime and include substantial idle regular time capacity: 11,000 units
(55%) in plant 2 and either 5,000 units in 1 (19% of capacity) or 5,000 in 3 (20% of capacity). The idled
capacity versus unemployment question is an interesting, nonquantitative aspect of the case and could lead
to discussion of the forecasts for the housing market and thus the plants product.
The optimum producing and shipping pattern is:
From
Plant 1 (R.T.)
Plant 3 (R.T.)
Plant 3 (O.T.)

To (Amount)
W2 (13,000); W4 (14,000)
W1 (5,000); W3 (11,000); W4 (1,000); W5 (8,000)
W1 (4,000)

There are three alternative optimal producing and shipping patterns.

Getting the solution manually should not be attempted by hand. It will take eight tableaux to do the
All Plants configuration, with degeneracy appearing in the seventh tableau; the 1 & 2 configuration
takes five tableaux, etc. It is strongly suggested that POM for Windows, Excel, or other software be used.
EMBED

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CORNWELL GLASS
Entering the data provided into software, then toggling the pure strategies and trying them yields the
following costs.
Plan 1 (smooth production): $849,077
Plan 2 (meet demand exactly): $104,575
Plan 3 (produce 1,900 as base, then use OT and subcontracting): $82,858
At this point, the question is, can we do better with trial and error? A better solution follows.

Aggregate Planning
Time periods 52
Shortages: Back ordersCarry shortages from period to period
1,900
0
0
$0
$8.00
$10
All pds
Schedule
Pd
Demnd Regtm
Ovrtm
Subcon
Regtm
Ovrtm Subcon
Init
73
1,900
0
0

Chapter 13: Aggregate Planning

$0.12
Units
Holdng

$20.0

$5.63

$15.7

Shortg

Incres

Decres

247

A15
22
29
M6
13
20
27
J3
10
17
24
J1
8
15
22
29
A5
12
19
26
S2
9
16
23
30
O7
14
21
28
N4
11
18
25
D2
9
16
23
30
J6
13
20
27
F3
10
17
24
M3
10
17
24
31
A7
Tot

1,829
1,900
250
1,820
1,900
250
1,887
1,900
250
1,958
1,900
250
2,011
1,900
250
2,063
1,900
250
2,104
1,900
250
2,161
1,900
250
2,258
1,900
250
2,307
1,900
250
2,389
1,900
250
2,434
1,900
250
2,402
1,900
250
2,385
1,900
250
2,330
1,900
250
2,323
1,900
250
2,317
1,900
250
2,222
1,900
250
2,134
1,900
234
2,065
1,900
165
1,973
1,900
73
1,912
1,900
12
1,854
1,900
0
1,763
1,900
0
1,699
1,900
0
1,620
1,900
0
1,689
1,900
0
1,754
1,900
0
1,800
1,900
207
1,864
1,900
250
1,989
1,900
250
2,098
1,900
250
2,244
1,900
250
2,357
1,900
250
2,368
1,900
250
2,387
1,900
250
2,402
1,900
250
2,418
1,900
250
2,417
1,900
250
2,324
1,900
250
2,204
1,900
250
2,188
1,900
250
2,168
1,900
250
2,086
1,900
186
1,954
1,900
54
1,877
1,900
0
1,822
1,900
0
1,803
1,900
0
1,777
1,900
0
1,799
1,900
0
1,803
1,900
0
1,805
1,900
0
107,544
98,800
8,931
Subtotal Costs

0
0
0
0
0
0
0
0
0
0
0
0
0
0
15
173
167
72
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
427

1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
1,900
98,800

250
250
250
250
250
250
250
250
250
250
250
250
250
250
250
250
250
250
234
165
73
12
0
0
0
0
0
0
207
250
250
250
250
250
250
250
250
250
250
250
250
250
250
186
54
0
0
0
0
0
0
0
8,931
71,448

0
0
0
0
0
.0
0
0
0
0
0
0
0
0
15
173
167
72
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
427
4,270

394
724
987
1,179
1,318
1,405
1,451
1,440
1,332
1,175
936
652
400
165
0
0
0
0
0
0
0
0
46
183
384
664
875
1,021
1,328
1,614
1,775
1,827
1,733
1,526
1,308
1,071
819
551
284
110
56
18
0
0
0
23
101
198
321
422
519
614
32,949
3,953.9

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Total costs = $79,671.88

248

Instructors Solutions Manual t/a Operations Management