Question

A distribution centre’s forecasted demand is shown as the number of part-time employees required for each time period. Currently 10 part-time workers are employed. The following costs are given

Regular time wage rate: $2000 per week

Over time wage: 150% of regular wage rate

Hire cost: $1000 per person

Layoff cost: $500 per person

Period	1	2	3	4	5	6
Forecast demand	6	12	18	15	13	14

(a) Using Chase demand strategy, find the estimated total cost. Note that at the end of period 6, the number of part-time workers should be returned to the normal level (10 part-time workers)

Period	1	2	3	4	5	6	Total
Forecast demand	6	12	18	15	13	14
Worker hired
Worker fired

(b) Using maximum level (15 part-time workers), apply level capacity strategy to find the estimated total cost. In period 3, the demand is higher than 15. In such case, assume to use overtime for any number of workers higher than 15. Note that at the end of period 6, the number of part-time workers should be returned to the normal level (10 part-time workers)

Period	1	2	3	4	5	6	Total
Forecast demand	6	12	18	15	13	14	78
Work-force level	15	15	15	15	15	15
Worker hired	5
Worker fired						5
Overtime			3

(c) Comment which way is better than the other. From the decision you have, is there any other ways to further reduce the estimated total cost?

Answer 1