Varying the workforce size in response to the output requirements: Under this strategy, the size of the workforce is varied by hiring and laying off workers in direct proportion to demand.  The management determines the number of workers needed to meet each month's output requirements, based on average worker productivity. Workers are laid off when the quantity to be produced is less and are hired when there is an increase in orders. Many US automakers follow the varying workforce strategy.

This strategy has many disadvantages. The varying employment level involves hiring and laying off costs, in addition to the indirect cost of training new employees. It also affects workforce morale when some workers are laid off. Moreover, skilled workers may not be readily available when they are needed. Firms, which have agreements with unions on wages, hiring and layoffs, are constrained in using this strategy.

Problem

In a textile firm, a worker is capable of tailoring 3 garments per day. Assume the time taken for each garment is the same.

Given:

Hiring costs = Rs. 3000

Layoff costs = Rs. 4000

Current employee strength = 40

Aggregate demand for next four months is given in the following table:

Based on the given information, generate a production plan by following the varying workforce strategy.

Solution

The aggregate production plan with varying workforce levels is given in Table 9.1.

At the beginning of the production plan, the workforce level is 40. In order to satisfy the first month's demand, organization needs 44 workers. So it hires 4 new workers to meet the demand.

Number of units produced by each worker in the first month with 24 working days = 24×3 = 72

Total output of 40 workers = 72×40 = 2880

And the demand in the first month is 3170. Therefore, there is a deficit of 290 units.

In order to meet the demand of 3170, organization needs 4 more workers.

The cost of hiring in the first month = 4×3000 = Rs. 12000

Similarly we can calculate the hiring and laying off cost for other months based on number of worker required to satisfy the demand.    

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