Sales and Operations Planning You are assigned the task of developing the SOP for your company. The Demand Management module has carried out the forecast and then has already developed the sales plan. The Sales Plan is given below (the numbers are in 1000’s). Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 300 400 475 575 620 100 100 150 150 250 400 420 Other problem parameters are: Initial worker level = 500, Initial inventory = 100,000, Required ending inventory = 100,000, Cost per unit = $50, one worker can produce 600 units/month Hiring cost = $150 per worker, Firing cost = $300 per worker, Inventory holding cost = 0.5% of item cost/month, Shortage cost = 1% of item cost/month. Develop a Chase plan Develop a Level plan For each plan, calculate the end of month inventory (or shortage) level, monthly hiring and firing schedule and costs, monthly inventory and shortage costs, and the total cost.


Since there are no parameters given for temporary or contract workers, the assumption is that everyone that is hired or fired is a regular worker.

The chase plan involves a lot of hiring and firing as it targets the monthly demand irrespective of the hiring firing cost. This way, the inventory and backlog cost is minimized but the impact is seen due to hiring and firing.

Also the Level plan takes into consideration the entire demand is uniform. For this reason the entire demand is added and divided by 12 for even distribution. However this gives rise to inventory storage cost and at some points backlog cost. The monthly production target here is 328334. However to round up and close the year with 100,000 inventory, the last month production is 328326.

The images are attached with the tables.

Chase plan and level plan respectively

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