supply chain

Skycell, a major European cell phone manufacturer, is making production plans for the coming year. Skycell has worked with its customers (the service providers) to come up with the forecasts of monthly requirements (in thousands of phones) as shown in the table.

Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on the production line. The plant operates for 20 days a month, eight hours each day. One person can assemble a phone every 10 minutes. Workers are paid 20 euros per hour and a 50 percent premium for overtime. The plant currently employs 1,250 workers. Component costs for each cellphone total 20 euros. Given the rapid decline in component and finished-product prices, carrying inventory from one month to the next incurs a cost of 3 euros per phone per month. Skycell currently has a no-layoff policy in place. Overtime is limited to a maximum of 20 hours per month per employee. Assume that Skycell has a starting inventory of 50,000 units and wants to end the year with the same level of inventory.

  1. Assuming no backlogs, no subcontracting, and no new hires, formulate the aggregate planning problem to minimize the total cost. (8 pts)
  2. Assume Skycell aims for a level production schedule, all stockouts are backlogged and supplied from the following months’ production, what changes you need to make in your formulation? (6 pts)
  3. Now Skecell has a team of 50 people who are willing to work as seasonal workers. Hiring and layoff out of the 50 people is possible. The cost of bringing them is 800 euros per employee and the layoff cost is 1,200 euros per employee. How do you change your formulation in part 1? (6 pts)
Month Demand (in thousands)
Jan. 1000
Feb. 1100
March 1000
April 1200
May 1500
June 1600
July 1600
Aug. 900
Sep. 1100
Oct. 800
Nov. 1400
Dec. 1700

4. Solve part 1, Part 2 and Part 3 in excel. Is there any value for management to negotiate an increase of allowed overtime per employee per month from 20 hours to 40 hours? (10 pts)

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