Skycell,a major European cell phone manufacturer, is making producution plans fo

Question

Skycell,a major European cell phone manufacturer, is making producution 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 table 8-9

d) Consider part (a) for the case in which Skycell aims for a level production schedule such that the quantity produced each month doesn't exceed the average demand over the next 6 months by 50000 units. Thus monthly level 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 flexibility?

End of six month = 50,000 units

e) Explain one shadow price and one reduced cost from the optimal solution for part (a).

Table 8-9 Monthy Demand for Cell Phones in Thousands Month Demand January 1000 February 1100 March 1000 April 1200 May 1500 June 1600

Explanation / Answer

(a)

Production Plan:

The total would be 3400 euros per employee and for 1250 employees it would be 4250000 for working 8 hrs for 20 days and 20 hrs overtime.

(b)

Yes, if the management increase the overtime from 20 hrs to 40 hrs, then it will significantly increase the production from 50000 units to 100000 at the end of every six months.

Month1 Month 2 Month 3 Month 4 Month 5 Month 6 Phones Assembled 5000 8000 10000 10000 8000 9000 Production Capacity 5000 8020 10000 10000 8000 9020 Inventory After Production 10000 9000 11000 11000 10000 10000 Demand 1000 1100 1000 1200 1500 1600 Excess 9000 7900 10000 9800 8500 8400 Ending Inventory 9000 7900 10000 9800 8500 8400

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