IE 466 - Production and Inventory Control Spring 2014 Homework 4 Due Monday February 17, 2014 Please submit

one Excel le to Blackboard. Also please attach a print out of each spreadsheet to your homework. 1. Sapporo Paint Company is in the process of planning labor force requirements and production levels for the next four quarters. The marketing department has provided production with the following forecasts of demand for over the next year: Quarter 1 2 3 4 Demand Forecast (in thousands of gallons) 380 630 220 160

Assume that there are currently 280 employees with the company. Employees are hired for at least one full quarter. Hiring costs amount to $1,200 per employee and ring costs are $2,500 per employee. Inventory costs are $1 per gallon per quarter. It is estimated that one worker produces 1,000 gallons each quarter. Assume that Sapporo currently has 80,000 gallons of paint in inventory and would like to end the year with an inventory of at least 20,000 gallons. (a) Determine the minimum constant workforce plan for Sapporo Paint and the cost of the plan. Assume that stock-outs are not allowed. (b) Determine the zero inventory plan that hires and res workers each quarter to match demand as closely as possible and the cost that plan (c) If Sapporo were able to back-order excess demand at a cost of $2 per gallon per quarter, determine a minimum constant workforce plan that holds less inventory than the plan you found in part (a), but incurs stock-outs in quarter 2. Determine the cost of the new plan

2. Dorian Gray owns a small rm in the Pana Valley that grows grapes. The grapes dried on the premises and sold to a number of large supermarket chains. Based on past experience and committed contracts, he estimates that sales over the next ve years in thousands of packages will be as follows: Year 1 2 3 4 5 Forecasted Demand (thousands of packages) 300 120 200 110 135

Assume that each worker stays on the job for at least one year, and that Gray currently has three workers on the payroll. He estimates that he will have 20,000 packages on hand at the end of the current year. Assume that, on the average, each worker is paid $25,000 per year and is responsible for producing 30,000 packages. Inventory costs have been estimated to be 4 cents per package per year, and shortages are not allowed. Based on the eort of interviewing and training new workers, Farmer Gray estimates that it costs $500 for each worker hired. Severance pay amounts to $1,000 per worker. (a) Assuming that shortages are not allowed, determine the minimum constant workforce that he will need over the next ve years. Hint: Set up a table similar to Table 3-3. The minimum # of workers required for the planning period is the maximum entry in column D (b) Evaluate the cost of the plan found in part (a). (c) Graph the cumulative demand, determine a production plan and evaluate the cost of the following plans: (c1) a plan that changes the production rate exactly once during the ve years, (c2) a plan that changes the production rate exactly twice during the ve years. (d) For this question only. Suppose that grapes unsold a the end of any year must be discarded. Assume a disposal cost of $0.20 per package. Resolve parts (a) and (b) under these conditions. (e) Formulate the problem as a linear program. Dene all variables and include all the required constraints (f) Solve the problem using an Excel spreadsheet. Round the variables in the resulting solution and determine the cost of the plan you obtain. 2

3. The Willy Wonka Chocolate Factory can obtain demand forecasts of Umpa-Lumpa chocolate chip cookies for the next four months based on past orders. These forecasts and the number of workdays per month are as follows: Month 1 2 3 4 Demand Forecast (thousands of cookies) 850 1,260 510 980 Workdays 26 24 20 18

During a 46-day period when there were 120 workers, the factory produced 1.7 million cookies. There are currently 100 worker employed and there is no starting inventory of cookies. (a) Determine the minimum constant workforce required to meet demand over the next four months. (b) Assume that cI = 10 cents per cookie per month, cH = $100, and cF = $200. Add columns that give the cumulative on-hand inventory and inventory cost. What is the total cost of the plan derived in part (a) (c) Formulate the problem as a linear program. Dene all variables and include all the required constraints. (d) Suppose that the cost of hiring workers each period is $100 for each worker until 20 workers are hired, $400 for each worker between 21 and 50 workers are hired and $700 for each worker hired beyond 50. i. Formulate the complete linear program of this revised problem. ii. Solve the revised problem using an Excel spreadsheet. What dierence does the new hiring cost function make in the solution? Optional No submission required. (e) Construct a plan that changes the level of the workforce to meet monthly demand as close as possible (i.e., zero inventory plan). In designing the logic for your calculations be sure that inventor does not go negative in any month. Determine the cost of this plan.