Red Tomato Case

Aggregate Planning at Red Tomato Tools

Manufacturer of gardening equipments Assembler of purchased parts into a multipurpose gardening machine Demand is highly seasonal

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Aggregate Planning at Red Tomato Tools

Month January February March April May June Demand Forecast 1,600 3,000 3,200 3,800 2,200 2,200

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Aggregate Planning at Red Tomato Tools

Options for handling the seasonality are

– 1. Adding workers during the peak season – 2. Subcontracting out some of the work – 3. Building up inventory during the slow months – 4. Building up a backlog of orders that will be delivered late to customers

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Aggregate Planning

Item Materials Inventory holding cost Marginal cost of a stockout Hiring and training costs Layoff cost Labor hours required Regular time cost Over time cost Cost of subcontracting Cost (TL) 10/unit 2/unit/month 5/unit/month 300/worker 500/worker 4/unit 4/hour 6/hour 30/unit

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Aggregate Planning

Unit price = 40 Inventory at the beginning of January = 1000 units Workforce at the beginning of January = 80 employees 20 working days/month 8 hours/day Inventory at the end of June at least 500 units No employee can work more than 10 h of overtime /month

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Aggregate Planning (Define Decision Variables)

Wt = Workforce size for month t, t = 1, ..., 6 Ht = Number of employees hired at the beginning of month t, t = 1, ..., 6 Lt = Number of employees laid off at the beginning of month t, t = 1, ..., 6 Pt = Production in month t, t = 1, ..., 6 It = Inventory at the end of month t, t = 1, ..., 6 St = Number of units stocked out at the end of month t, t = 1, ..., 6 Ct = Number of units subcontracted for month t, t = 1, ..., 6 Ot = Number of overtime hours worked in month t, t = 1, ..., 6

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Aggregate Planning Objective Function

Minimize the...