Skycell, a major European cell phone manufacturer, is making

production plans for the coming year. Skycell has worked

Skycell has worked its customers
(the service providers) to come up with
forecasts of monthly requirements (in thousands of phones) as Month
shown in Table 8-9. Jan
Manufacturing is primarily an assembly operation, Feb
and capacity is governed by the number of people on the Mar
production line. The plant operates for 20 days a month, Apr
eight hours each day. One person can assemble a phone May
every 10 minutes. Workers are paid 20 euros per hour and Jun
a 50 percent premium for overtime. The plant currently Jul
employs 1,250 workers. Component costs for each cell Aug
phone total 20 euros. Given the rapid decline in component Sep
and finished-product Oct
prices, cartrying inventory from one Nov
month to the next incurs a cost of 3 euros per phone per Dec
month. Skycell currently has a no-layoff policy in place'
overtime is limited to a maxiillum of 20 hours per month
per employee. Assume that Skycell has a starting inventory
of 50,000 units and wants to end tlee year with the same
level of inventorY.
a. Assuming no backlogs, no subcontracting,
and no new
hires, what is the optimum production schedule? What is
the annual cost of this schedule?
Is there any value for management to negotiate an
increase of allowed overtime per employ." p., month
from 20 hours to 40?
Reconsider parts (a) and (b) if Skycell srarts with only
1,200 employees.
Reconsider parts (a) and (b) if Skycell
starts with 1,300 employees.
what happens to the value of
additional overtime as the workforce size decreases?
consider part (a) for the case in which Skycell aims for a
level production
schedule such that the quantity produced
each month does not exceed the average demand over the
next 12 months (1 ,241,667) by 50,000 units. Thus, monthly production
including overtime should be no more than
1,291,667 . what would be the cost of this level production
schedule? what is the value of overtime flexibiity?
Demand
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Period Hired workforce overtime Inventory Stochout subcontracts Production Demand
0