Operations Management: Inventory Managment – Economic Order Quantity – #29400


Question: The ABC toy company makes a few types of toy cars on one of its production line.

Based on orders received and forecasts of future demand, it is estimated that the demand (in units) for the next four seasons is: Fall 10,000; Winter 8000; Spring 7,000; Summer 12,000. Inventory at the beginning of Fall is 520 units. At the beginning of Fall, ABC has 30 workers.

Assume that the productivity is 0.5 units per worker hour, with eight hours per day and

60 days per season. Inventory cost is estimated based on the ending inventory for each period.

(a) Find the total cost of the level plan.

(b) Find the total cost of the chase plan.

(c) Suppose ABC has negotiated with the union on the option of using the regular workforce on overtime ($8/hour) during Winter and Spring, if necessary. Overtime is not available for the other seasons. The new company policy restricts hiring (or firing) to take place only once a year. Consequently, it is decided that hiring takes places only in the beginning of Summer while firing can be done at the end of Summer. Formulate the problem as a linear program. Be sure to define all the variables.

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