Faquhar Industries Executive Summary
Executive Summary
Farquhar Industries is a medium-size producer of metal products. They have two separate production lines according to the requirements of the manufacturing process. Due to this differentiation, both lines are studied separately.
Based on the demand forecast, we will follow the Aggregate Planning methodology for planning production in an intermediate term, one year. We consider this model adequate, because demand presents variations of +/- 20% in the job shop and more than +/- 30% in the line flow.
Our objective is meet the demand forecast at the minimum cost without damaging the labor relationship with employees.
Job shop
Demand requirements for job shop or manual operations are stated in terms of hours. In addition, those custom-made products are not inventoried, so production must meet exactly the monthly demand. Under daily basis, we have 10 employees working 160 hours a month, totaling 1600 hours/month. However these hours will not be enough to meet the demand, so we need the following alternatives (with their respective costs): * Employment and dismissal of workers (500€, 2560€) * Overtime work (50% premium)
Considering that for the long run is always cheaper having an extra regular worker than overtime work and that we can hire short time workers (including penalty fee when firing them), the planning shown in the following table is the optimal one.
| Demand(hours) | Working plan | Employees | Cost | Cost Hiring/firing | Cost/Unit | January | 1.800 | 9 hours/day | 10 | 26.800,00 € | 0,00 € | 14,89 € | February | 1.500 | 8 hours/day | 10 | 25.600,00 € | 0,00 € | 17,07 € | March | 1.900 | 9 hours/day + 2,5 hours weekend | 10 | 32.800,00 € | 0,00 € | 17,26 € | April | 1.600 | 8 hours/day | 10 | 25.600,00 € | 0,00 € | 16,00 € | May | 2.000 | 8 hours/day +80 extra hours | 12 | 32.640,00 € | 1.000,00 € | 16,32 € | June | 2.200 | 9 hours/day + 40 extra hours | 12 | 35.640,00 € | 0,00 € | 16,20 € | July | 2.000 | 8
Farquhar Industries is a medium-size producer of metal products. They have two separate production lines according to the requirements of the manufacturing process. Due to this differentiation, both lines are studied separately.
Based on the demand forecast, we will follow the Aggregate Planning methodology for planning production in an intermediate term, one year. We consider this model adequate, because demand presents variations of +/- 20% in the job shop and more than +/- 30% in the line flow.
Our objective is meet the demand forecast at the minimum cost without damaging the labor relationship with employees.
Job shop
Demand requirements for job shop or manual operations are stated in terms of hours. In addition, those custom-made products are not inventoried, so production must meet exactly the monthly demand. Under daily basis, we have 10 employees working 160 hours a month, totaling 1600 hours/month. However these hours will not be enough to meet the demand, so we need the following alternatives (with their respective costs): * Employment and dismissal of workers (500€, 2560€) * Overtime work (50% premium)
Considering that for the long run is always cheaper having an extra regular worker than overtime work and that we can hire short time workers (including penalty fee when firing them), the planning shown in the following table is the optimal one.
| Demand(hours) | Working plan | Employees | Cost | Cost Hiring/firing | Cost/Unit | January | 1.800 | 9 hours/day | 10 | 26.800,00 € | 0,00 € | 14,89 € | February | 1.500 | 8 hours/day | 10 | 25.600,00 € | 0,00 € | 17,07 € | March | 1.900 | 9 hours/day + 2,5 hours weekend | 10 | 32.800,00 € | 0,00 € | 17,26 € | April | 1.600 | 8 hours/day | 10 | 25.600,00 € | 0,00 € | 16,00 € | May | 2.000 | 8 hours/day +80 extra hours | 12 | 32.640,00 € | 1.000,00 € | 16,32 € | June | 2.200 | 9 hours/day + 40 extra hours | 12 | 35.640,00 € | 0,00 € | 16,20 € | July | 2.000 | 8