Question

Skycell, a major European cell phone manufacturer, is making production plans for the coming year. Skycell has worked with its customers (the service providers) to come up with forecasts of monthly requirements (in thousands of phones) as shown in table below:

January February March April May June 1,000 1,100 1,000 1,200 1,500 1,600

July August September October November December 1,600 900 1,100 800 1,400 1,700

Manufacturing is primarily an assembly operation, and capacity is governed by the number of people on the production line. The plant operates for 20 days a month, eight hours each day. One person can assemble a phone every 10 minutes. Workers are paid 20 euros per hour and a 50 percent premium for overtime. The plant currently employs 1,250 workers. Component cost for each cell phone totals 20 euros. Given the rapid decline in component and finished-product prices, carrying inventory from one month to the next incurs a cost of 3 euros per phone per month. Skycell currently has a no-layoff policy in place. Overtime is limited to a maximum of 20 hours per month per employee. Assume that Skycell has a starting inventory of 50,000 units and wants to end the year with the same level of inventory.

Assume that backorder cost is 1 euro per phone per month, develop a formulation that can determine the optimal production schedule.

Answer 1

Solution:

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