Adv. Production and Inventory Control

The personnel department of a company wants to know how many workers will be needed each
month for the next six-month production period. The following table shows the monthly
demand forecast for the six-month period.
Month Demand
July 1,250
August 1,100
September 950
October 900
November 1,000
December 1,150
The inventory on hand at the end of June was 500 units. The company wants to maintain a
minimum inventory of 300 units each month and would like to have 400 units on hand at the
end of December. Each unit requires 5 employee-hours to produce, there are 20 working days
each month, and each employee works an 8-hours day. The workforce at the end of June was 35
workers. Assume Hiring cost =$500 and Firing cost = $1,000
a) Determine a minimum inventory production plan (chase strategy)
b) Determine the total cost for part a
c) Determine the level production plan that meets demand but does not hire or fire workers
during the six-month period.
d) Determine the total cost for part c
e) Construct the LP model for the problem and determine the optimal solution using LINDO or
Excel
2. Consider the following data
year 1 Demand (Thousands of packages)
1 300
2 120
3 200
4 135
Assume that the company has three workers on the payroll. The owner of the company estimates
that he will have 20,000 packages on hand at the end of the current year. Assume that, on average,
each worker is paid $ 25,000 per year and is responsible for producing 30,000 packages, inventory
cost have been estimated to be 4 cents per package per year and shortages are not allowed.
Based on the effort of interviewing and training new workers. The owner estimates that it cost
$500 for each worker hired. The firing cost is $1,000
a) Determine a minimum inventory production plan (chase strategy)
b) Determine the total cost for part a
c) Determine the level production plan that meets demand but does not hire or fire workers
during the 4-year period.
d) Determine the total cost for part c
e) Construct the LP model for the problem and determine the optimal solution using LINDO or
excel

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