Create a Minimum Cost Chase Plan for the Forecast Shown

question 22

Essay

Create a minimum cost chase plan for the forecast shown in the table. There is no beginning inventory and regular production capacity is 350 units. Overtime costs $20 extra and is limited to 50 units per month and subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40 per unit and there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in inventory. What is the total plan cost above regular production cost?
$$\begin{array} { | l | c | l | l | l | l | } \hline { \text { Month } } & \text { Forecast } & \text { Regular } & \text { Overtime } & \text { Subcontracting } & \begin{array} { c } \text { Ending } \\\text { Inventory }\end{array} \\\hline \text { January } & 250 & & & & \\\hline \text { February } & 400 & & & & \\\hline \text { March } & 500 & & & & \\\hline \text { April } & 350 & & & & \\\hline\end{array}$$

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Definitions:

Collaboration

The action of working with someone to produce or create something, often seen in business, science, and creative fields.

Coordination Problems

Challenges faced in aligning actions, schedules, or tasks among various parties or units within an organization.

CRP Systems

Capacity Requirement Planning (CRP) Systems are used in manufacturing to plan the production capacity needed to meet customer demands.

Bullwhip Effect

The phenomenon where variations in demand cause increasingly larger fluctuations in the supply chain, often leading to inefficiency and excess inventory.