An Aggregate Planning Example
The Stampede Popcorn Company has forecasted demand for the next six months as follows:
Month
Expected Demand (cases)
Production Days
Sep
210
22
Oct
180
21
Nov
220
22
Dec
350
18
Jan
500
19
Feb
400
21
The company also knows that it has the following costs:
Inventory Carrying:
Labour-hours to produce a case:
Average pay rate:
Overtime pay rate:
$4 per case per month
1.2 hours per case
$8 per hour ($64 per day)
$10 per hour
The company wants to analyse three different aggregate plans.
Plan 1: maintain a constant workforce throughout the six month period, with no layoffs and no
overtime.
Average Requirement
= Total Expected Demand  Number of Production Days
=
Assuming beginning inventory = 0 and planned ending inventory = 0, what will happen each month?
Month Production
Demand
Inventory
Ending Inventory
Forecast
Change
Sep
Oct
Nov
Dec
Jan
Feb
=
Labour hours required per day = 1.2 hours per case x
Workforce required =
Costs
Inventory =
Labour =
Total =
Plan 2: Maintain workforce at a constant level to meet the lowest demand month, and meet all
demand above this level by subcontracting. The subcontracting cost to produce a case is $20.
Lowest demand month is:
Daily Demand = Monthly Demand / Production Days =
Total Labour Hours =
Workforce required =
In house production =
Subcontract units =
Costs
Labour =
Subcontracting =
Total =
Plan 3: The workforce size will be varied by hiring and firing, and the production rate will equal
demand. The cost of increasing the production rate (ie training and hiring) is $15 per extra unit
produced. The cost of decreasing the production rate (ie layoff) is $10 per unit not produced.
Month Forecast
Sep
Production Cost
Hiring Cost
Layoff Cost
Total Cost



Oct
Nov
Dec
Jan
Feb
An MRP Example
The components for the Awesome speaker kit are shown in the diagram below:
Question 1: How many of each component are required to produce a new order of 50
Awesome Speaker kits?
Part A:
Part B: 2 x number of As =
Part C: 3 x number of As =
Part D: 2 x number of Bs + 2 x number of Fs =
Part E: 2 x number of Bs + 2 x number of Cs =
Part F: 2 x number of Cs =
Part G: 1 x number of Fs =
Question 2: Given the lead times shown in the table, contract a gross material requirements
plan and draw up a production schedule that will satisfy the demand for 50 Awesome speaker
kits by week 8.
Component:
Lead Time (weeks):
A
1
1
B
2
2
C
1
D
1
E
2
3
4
5
F
3
6
A. Required
Order Release
B. Required
Order Release
C. Required
Order Release
E. Required
Order Release
F. Required
Order Release
D. Required
Order Release
G. Required
Order Release
G
2
7
9
Lead Time
1 week
2 weeks
1 week
2 weeks
3 weeks
1 week
2 weeks
Question 3: The company has the on-hand inventory shown in the table below. Construct a
net requirements plan.
Component:
On Hand:
A
10
B
15
C
20
D
10
E
10
F
5
G
0
Lot Size
Lead Time
On Hand
Item ID
A
B
C
E
F
D
G
1
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
Gross Requirements
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
2
3
4
5
6
7
8