Nicole Angiuli
Business Group Project: Free Range, Inc.
Joan Davenport is evaluating forecast for the GD49-GD175 supplement compound for
Free Range, Inc. Davenport also has to generate aggregate monthly production plans for the GD
supplement compound. She will analyze these plans by comparing a pure level production plan
to the current policy, as well as a hybrid production plan. The current situation can be assessed
in terms of GD supplements demand, levels of employment, and manufacturing situation.
Demand
Demand forecasts for the GD supplements have exaggerated seasonal patterns. They
experience a sharp increase during the winter months. This is due to the fact that organic poultry
was not receiving enough feed from grazing, meaning they need dietary compounds from GD
division. Customers purchase the GD supplements on an as-needed basis, which is another
reason why there is a sharp increase for demand during winter. Another factor that influences
demand is that GD supplements rarely accept backorders. Additionally, the competition in this
industry is rising. Because of this, management came to the conclusion that it needs to
implement a well-developed plan for its production line.
*Derived from Table A.1 in text
Levels of Employment
The employment at GD supplement division varied throughout the year due to their
fluctuating demand. These jobs are manual labor and require very little training. Labor is
abundantly available in the region, however, the company faced challenges when it came to
hiring and firing employees when it was needed. Throughout the year, employment would rise
1
Uzair Dawood
Yessica Santos
BUS 384 - Business Operations & Planning
10 April 2019
2
to 250 employees and as low as 50 employees. This variability of employment between seasons
resulted in the union to pass a new labor law that demanded laid-off employees receiving a
severance payment. GD supplements goal is too accurately schedule a number of labor hours
and employees to ensure an efficient response to customer demand during the different seasons.
Manufacturing Situation
The new labor law changed the way the employees were paid for the month. Before the
new labor law, employees per paid on an hourly basis. Employees worked 40 hours per week, as
well as a maximum overtime of 10 hours per week. Under this policy, the wages for manual
labor is $10 per hour for regular time, as well as time and one-half for overtime pay. The new
labor law states that employees are guaranteed a $1,800 pay per month, regardless if they work
the entire month. Overtime pay would be time and one-half and would be limited to 25% of
regular time. Alongside this, the cost of hiring an employee is approximately $175 and the cost
of laying off an employee could be as much as $900.
On average, each employee can produce 1,000 pounds of GD supplements per month. If
working the 10-hour maximum overtime, each employee’s output would increase to 1,200
pounds. In order to improve customer service, the company decided to maintain a minimum of
10,000 pounds of product in inventory. The cost of storing 1,000 pounds of product per month is
3
$120. Currently, at the end of December 2013, the company will be very close to the 10,000
pound minimum inventory requirements.
Aggregate Plan
There are three assumptions to be made in comparing the pure level strategy to the current
policy:
1. Each month is a 4-week work month.
2. Productivity during overtime production is the same as regular production.
3. The beginning inventory is 10,000 starting in January 2013. This inventory is carried
from December 2012.
oe
A
BcD
Ee l4
G
H
I
t
K
L
M
N
1
PURE
LEVEL
Monthly
Production
137,667
2
Month
January(1)
February(2)
March(3)
April
(4)
May
(5)
June
(6)
July(7)
August(8)
September
(9)
October
(10)
November
(11)
December
(12)
3
Forecast
Quantity
55,000
57,000 63,000
75,000
121,000 187,000 234,000 263,000 222,000
148,000
120,000 107,000
4
[Production
Quantity
138,000
138,000 138,000
138,000 138,000 138,000
138,000 138,000
138,000
138,000
138,000 138,000
5
Overtime
Quantity
::::
-
- -
500
34,500
10,000
- -
6
Total
Quantity
138,000
138,000
138,000 138,000 138,000 138,000
138,000 138,500
172,500
148,000
138,000 138,000
7 Inventory
93,000
174,000
249,000 312,000
329,000 280,000
184,000
59,500 10,000 10,000
28,000 59,000
8
Current
Workers
138 138 138 138 138 138 138 138 138 138 138 138
9
Hire/Fire
88
oO
O
oO
0 0
oO oO
O o
oO oO
10
Overtime
Hours
::::
:
: -
80.00
5,520.00
1,600.00
: :
11
Overtime
Hours
Limit
5,520 5,520 5,520
5,520 5,520 5,520 5,520 5,520 5,520 5,520 5,520 5,520
12
Labor
Cost
'$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$
248,400
$2,980,800
13
Carrying
Cost
$
11,160
$
20,880
$
29,880
$
37,440
$
39,480
$
33,600
$
22,080
$
7,140
$
1,200
$
1,200
$
3,360
$
7,080
$
214,500
14
Overtime
Cost
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
1350
$
93,178
$
27,008
$
-
$
-
$
121,536
15
Hire
Cost
$
15,400
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$15,400
16
Fire
Cost $
~_$
~_$ ~_$ ~_$
~_$
~_$
~_$ ~_$
~_$ ~_$ ~_$ ~_$
-
17
Total
$
274,960
$
269,280
$
278,280
$
285,840
$
287,880
$
282,000
$
270,480
$256,890
$
342,778
$
276,608
$
251,760
$
255,480
[/93)332)236)
A
8
c D
E F
G
H
1
4
kK
L
M
N
1
PURE
LEVEL
Monthly
Production
=SUM(B3:M3)/12
2
Month
January
(1)
February
(2)
‘March
(3)
April
(4)
May
(5)
June
(6)
July
(7)
August
(8) (9)
__October
(10)
(21)
(22)
3
[Forecast
Quantity
55000
‘57000
63000 75000
121000 187000
7234000
263000
222000 148000 120000
4
Production
Quantity
=B8*1000 =C8*1000
=D8*1000
=£8*1000 =F8*1000
=G8*1000
=H8*1000
181000
——=18*1000
=K8*1000
=18*1000
5
Overtime
Quantity
0 o
o o o
o o
500
34500
0
6
Total
Quantity
=B44B5 =C4ACS
=D44D5
EAVES
FAS
GAGS
HAAHS
4S
=5)
4S
7 y
=B6-83+10000_=C6-C3187_—=D6-D34C7
=E6-E34D7___=F6-F34€7
=G6-G34F7
SHE-H3+G7_——=I6-134H7__—_=J6-J3
417
=16-134K7
8
Current
Workers
=50+89 138 138 138 138 138 138 138 138 138
9
Hire/Fire
88
0
0 0 0
0 0 0
0 0
10
Overtime
Hours
—_=B5/6.25
=€5/6.25
=05/6.25,
365
/6.25,
=F5/6.25
=65/6.25 =H5/6.25
215
/6.25
=15/6.25
=15/6.25
11
Overtime
Hours Limit_=10°88"4
=10°C8"4
=10°D8*4
=10°E8*4
=10°F8*4
=10°G8*4 =10°H8*4
=10°18%4
=10°/8%4
=10°18%4.
12
[Labor
Cost
=B8°1800 =C8*1800
=D8*1800
=£8*1800 =F8*1800
=68*1800 =H8*1800
=18*1800__—=18"1800
=18°1800
‘=SUM(B12:M12)
13
Carrying
Cost
=87°0.12 =€7°0.12
=07*0.12
=£7*0.12 =F7°0.12
=67*0.12 =H7*0.12
317°0.12
317°0.12
=17°0.12
=SUM(B13:M13)
14
Overtime
Cost
=810°16.88
=C10*16.88
—_—=D10"16.88
=E10°16.88 =F10°16.88
—-=G10°16.88
—=H10*16.88
—=/10*16.88
—=110°16.88
=110°16.88
=SUM(B14:M14)
15
Hire
Cost
=89°175
=9°175
=09*175,
3£9*175
=F9*175
=69°175
=H9*175
319°175
=/9*175
=19°175
=SUM(B15:M15)
16
Fire
Cost
0
=(c9*900)___=-(09*900)
=(69°900)
__=-(F9*900)_={G9*900)_=(H9*900)__=-(I9°900)__=-{N9*900)_={k9*900)__=(19*900)_=-(M9*900)
=SUM(B16:M16)
17
Total
=SUM(B12:816)
=SUM(C12:C16)
=SUM(D12:D16)
=SUM(E12:E16)
=SUM(F12:F16)
=SUM(G12:G16)
=SUM(H12:H16)
=SUM(I12:116)
=SUM(U12J16)
=SUM(K12:K16)
=SUM(L12:L16)
=SUM(M12:M16)
Pure
Level
Strategy
Pure
Level
Strategy
Employment
3o0o00
1
Po
28000
20090
«
sa000
lansayi)
etary)
Mach)
Home)
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Seem)
OoerB)
Nove)
Ommbe
2)
danse)
February)
March
2)
Aes)
a9)
ne
(6
aly)
‘Avg
()
Sestember()
Octobe
(20)
Novenber(12)Oecenber
(22)
5
Pure Level Strategy
6
Hybrid Strategy
Conclusion
The total cost for the current policy, pure level strategy, and hybrid strategy, is $3,250,460,
$3,332,236, and $3,225,955 respectively. The pure level strategy is even more than their current
strategy, meaning they should not choose this option. Out of all three options, the hybrid
strategy has the greatest cost savings. Based on this analysis, Joan Davenport should tell the
GD49-GD175 supplement compound and Free Range Inc. to implement the hybrid strategy.
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