Reference no: EM131983348
The Shafer Company has the following demand data for the last two years of sales for all models of their popular Polybob product:
Month 2000 Demand 2001 Demand
January 233 254
February 301 325
March 421 398
April 355 369
May 296 324
June 288 297
July 232 255
August 194 241
September 273 256
October 243 266
November 221 235
December 247 249
The Shafer Company currently has 5 employees on the Polybob line, each capable of producing approximately 2 polybobs per day (assume 25 days per month). It costs them $4000 per person to hire a new person, and $6000 to lay a person off. The employees each earn $20 per hour for the standard eight-hour day, with $10 extra per hour premium for each hour of overtime. Each employee is limited to no more than 5 days of overtime per month. They can subcontract the production of the polybob, but to do so costs them $42 per unit above the normal standard cost. They can use inventory, but inventory holding costs are $25 per month per unit, based on the number of units in inventory at the end of the month. They have room for only 200 units in inventory, after which they must use a public storage facility which adds another $15 per month to the inventory holding cost. They currently have (as of the end of December, 2001) 29 units in inventory. Answer the following questions:
1. Plot demand data and analyze the seasonality. Discuss in the group if you need to take into account seasonality for forecasting next years demand. Summarize the discussion and state your conclusion.
2. Explain what kind of forecasting methods you can use for forecasting the demand for 2002.
3. Use the demand data to develop a forecast for 2002 annual demand (month by month). What method did you use and why?
4. Use your forecast data to develop the “best” aggregate operations plan you can with the data given. Discuss why you think your method is the best, and also discuss the pros and cons of using your method over alternative approach(es).