Aditi Ananthakrishnan
Cohort A

1. A ‘better’ plan would be a plan that succeeded in minimizing costs while maintaining or increasing profits. I think that for MacPherson, a level strategy would be the most effective because of the concerns involving worker unions. If a chase strategy was employed, the layoffs would adversely affect the morale of the workforce.

In order to pursue a level strategy, it is assumed that the efficiency of workers can be thought of as constant. It is assumed that workers doing overtime have lower efficiency due to the extra 40 hours of work per week. This effect is reflected as a 20% decrease in efficiency for overtime workers, while the workers working regular hours are not affected.

I suggest that MacPherson build up inventory at the beginning of the cycle based on the aggregate forecast, and that they deal with fluctuations in inventory by adding overtime hours to the existing workforce. The reduction in overtime worker efficiency should be taken into consideration during times of peak demand and the inventory should be adjusted to compensate for this loss in efficiency.

2. Assumptions:

* Forecasts of the next year are reliable and accurate * Raw materials are readily available and will continue to be available as required * Worker hours directly and entirely contribute to production hours
- Inventory cost/appliance = $8
- Prod./employee/month = 40 appliances (480/12)
- Cost per unit:
Reg. employees cost $2400/month --> 2400/40=$60 (cost /appliance/regular)
Additional costs for regular employee:
Hiring cost: 1800/40=45
Layoff cost: 1200/40=30
Overtime employee cost $3300/40=82,5$

3. I think my plan is relatively flexible, but the inventory costs are high. However, the amount of overtime required can be adjusted based on the orders placed and the demand at any given point in time. Since