Reference no: EM132262624

Shown below are the forecasted quarterly demands for a product in 2019: Q1: 40,000 Q2: 70,000 Q3: 20,000 Q4: 50,000 Inventory holding cost is $6 per unit per quarter. Backlog cost is $18 per unit per quarter. The regular-time wage rate is $30/hour. Hiring/Layoff costs are $1,000 and $2,000 respectively. Each unit requires 2 labor hours. There are 500 working hours in each quarter. The current workforce consists of 150 workers. There is an initial inventory of 20,000 units, but no initial backlog. (Hint: The initial inventory can be used to offset the first quarter’s demand.) Q1. Compute the annual cost of the following aggregate plans, and print out our standard S&OP Template for each plan. Plan 1: Chase Strategy Plan 2: Level Strategy Plan 3: Hybrid Strategy (20,000; 50,000; 50,000; 40,000) Plan 4: Optimal Strategy Q2. The company is weighing the following options for 2019. Option A: Lease a warehouse for a fixed annual cost of $20,000. This will decrease the inventory holding cost to only $3 per unit per quarter. Option B: Enter into a contract with a staffing firm for a fixed annual cost of $60,000. This will decrease the hiring and layoff costs to $250 per hire and $500 per layoff. Option C: Do nothing. Which option should the company choose? Justify your answer with an analysis of the trade-offs (Hint: Re-run the optimal strategy with each option and choose the one with lowest overall annual cost).