Mini Cases

Case I (15 marks)

Atkinson Mining Company mines Aluminum. The company had the following Sale for Aluminum during the past ten years:

Year	Aluminum Sales (tons)
1	2840
2	3007
3	2701
4	2481
5	2601
6	2314
7	1928
8	2068
9	2343
10	2895

(a)    Use an adjusted exponential smoothing model (),an initial forecast , and initial trend factor () and a linear regression model, and show forecasted sales value of Aluminum in year 11 for each model.

(b)   Compare the forecast accuracy of the two models in (a) using Mean Absolute Deviation. Indicate which forecast is more accurate.

(c)    Monitor the adjusted exponential smoothing forecast in (a) for bias using a tracking signal and a control chart with.  Indicate whether or not the forecast is in control.

Case II. York Moulding (35 marks)

Suppose that York Moulding manufactures, among other products in its portfolio, a family of electronic gadgets with the following expected demand figures (in units) over the coming six months:

Month	1	2	3	4	5	6
Expected Demand	8,000	11,000	11,000	9,000	8,000	9,000

The following planning parameters apply:

Current number of workers 20, Output rate per worker 2.5 units/hour Number of regular time hours 8 hours/day, Number of working days 20 days/month, Regular time labor cost $10/hour, Overtime labor cost $15/hour, Maximum overtime hours allowed 600 worker-hours/month, Hiring cost (including training) $450/worker, Layoff cost $650/worker, Inventory carrying cost $10/unit carried over, Backorder cost $20/unit backordered, Opening inventory 300 units, Planned ending inventory (end of month 6) 100 units

The resulting production capacity on regular time is 8,000 units per month, which will clearly be insufficient to cover the expected requirements. No subcontracting is contemplated, however.

  

Management is reluctant to pursue, in the face of fluctuating demand, a chase strategy – in view of negative implications on employee morale. Two scenarios immediately identified are:

Scenario 1:    

Maintain the current workforce level throughout the planning horizon, and use only overtime in attempting to meet demand.

Scenario 2:    

In view of the higher demands in months 2 and 3, hire temporary workers during months of peak demand.

Applying a “trial and error” approach, formulate three alternative plans:

• Under Scenario 1, the shortfall in regular time production will need to be fully covered by overtime spread through the six-month period. Formulate two alternative aggregate plans as follows:

Alternative A:    Use maximum overtime hours in each of months 1-5 and just enough overtime in month 6 to attain the planned ending inventory.

Alternative B: Use an equal number of overtime hours in each of months 1-6 while attaining the planned ending inventory at the end of month 6.

• Under Scenario 2, formulate an aggregate plan as follows:

Alternative C: Hire 4 temporary workers at the beginning of month 2 and lay them all off at the end of month 3. Use only 300 overtime hours (50% of maximum overtime hours allowed) in each of months 1-5 and just enough overtime in month 6 to attain the planned ending inventory.

Show your three alternative aggregate plans (A, B, and C) and the corresponding relevant (regular time and overtime labour, inventory carrying, backorder, hiring, and layoff) costs using the template available next page.

Which of alternatives A and B yields a lower total relevant cost for Scenario 1?

Which of the three alternatives yields the lowest total relevant cost?

 (you must need to use provided templates, don’t alter any column)