Discussion

Aggregate production planning

In level strategy the production is fixed at 51 million cases, the demand
we have is at 58.125 million cases, in order to save inventory and
production cost because the demand drops in the future, so we have
backorder cost of 3.183 million in the first month. We only have
backorder cost for the first 3 months where demand is high but
afterwards the production is enough for the demand. The total annual
cost with level strategy is 102.14575 million.
In chase strategy everything gets better, to meet the demand of 58.125
million PTC need 514 workers but when the demand start to fall out
after the first 3 months they can drop the extra baggage. In total 56
employees will be let go. The chase strategy will have the total annual
cost of 77.33 million.
In hybrid strategy where we are giving idle time but no overtime is
because overtime is getting more expensive than idle time, we hire a fix
fleet of 514 and we pay them to work, we dont have any backorder cost,
so we have a bit little figure of annual cost of 83.268 million.
Chase strategy is the most suitable of the all.

Lot sizing, selecting the best option

Lot for lot size seems the most economic one to follow with the cost of
only 7.5 million, complete the demand that is required for the period and
wait for the next, but the market of the cigarettes is different, the push
strategy is on the roll so, just keep that in mind that we would need
inventory for the changing market. We will look into POQ and EOQ,
somehow the POQ sizing is more efficient than EOQ, as shown in
numbers, and the cost for using EOQ is 39.2 million on the other hand if
we use POQ sizing 24.3 million is the cost.