Operations and Supply Chain Management The Core

254 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
LO8–2 Construct and evaluate aggregate plans that employ different strategies for meeting
demand.
∙ Companies commonly use simple cut-and-try (trial-and-error) techniques for analyzing
aggregate planning problems. Sophisticated mathematical programming techniques can also
be used.
∙ Strategies vary greatly depending on the situation faced by the company. Plans are typically
evaluated based on cost, but it is important to consider the feasibility of the plan (that
overtime is not excessive, for example).
LO8–3 Explain yield management and why it is an important strategy.
∙ Yield management occurs when a firm adjusts the price of its product or service in order
to influence demand. Usually, it is done to make future demand more predictable, which is
important to successful sales and operations planning.
∙ This practice is commonly used in the airline, hotel, casino, and auto retail industries, for
example.
∙ Policies that involve overbooking, requiring deposits, and no-show or cancellation penalties
are coordinated with the different pricing scheme.
Yield management Given limited capacity, the process of allocating it to customers at the right
price and time to maximize profit.
SOLVED PROBLEMS
Excel:
Aggregate
Planning
Solved
Problem
LO8–2 Jason Enterprises (JE) produces video telephones for the home market. Quality is not
quite as good as it could be at this point, but the selling price is low and Jason can study market
response while spending more time on R&D.
At this stage, however, JE needs to develop an aggregate production plan for the six months
from January through June. You have been commissioned to create the plan. The following
information should help:
DEMAND AND WORKING DAYS
JANUARY FEBRUARY MARCH APRIL MAY JUNE TOTALS
Demand forecast
Number of working days
500
22
600
19
650
21
800
21
900
22
800
20
4,250
125
COSTS
Materials
Inventory holding cost
Marginal cost of stock-out
Marginal cost of subcontracting
Hiring and training cost
Layoff cost
Labor hours required
Straight-time cost (first eight hours each day)
Overtime cost (time and a half)
$100.00/unit
$10.00/unit/month
$20.00/unit/month
$100.00/unit ($200 subcontracting cost
less $100 material savings)
$50.00/worker
$100.00/worker
4/unit
$12.50/hour
$18.75/hour
INVENTORY
Beginning inventory
Safety stock required
200 units
0% of month demand