Gupta Furniture: Demand Fulfillment and Cost Efficiency through Aggregate Planning

The production supervisor of Gupta Furniture was tasked with selecting a mode of production that not only met the demand for the company’s best-selling product, the office interior chair, but also minimized the overall cost of production. The firm’s operations manager had stressed that the chosen production strategy should enable the company to meet demand at the lowest possible cost. As such, the brief was to prepare a comprehensive aggregate plan based on the forecasted demand scenario, considering how much to produce and when to produce in addition to determining which strategy among those traditionally applied would give the best results. The major challenge lay in planning and scheduling inventory, and determining regular production, overtime production, subcontracting, and employment levels over a medium term of 9 to 15 months, though both the short-term and long-term implications of these quantitative decisions also had to be taken into account.

This case is suitable for use in a core course on production and operation management and/or decision sciences at the graduate level, preferably after aggregate planning has been covered. It could also be used in a core course on production and operations management, addressing subtopics such as material requirements planning, inventory management, and production planning and control, preferably after students have been exposed to the basic topics. The case allows the instructor to teach students about the challenges of decision-making and exposes students to the standard steps in analyzing and implementing different production strategies and considering a minimum-cost alternative. It highlights how different production options impact cost on several fronts. The case highlights the importance of overall production planning in an industry where changes in demand levels and total production costs play a key role in the decision of production strategy. Working through this case and assignment questions will give students the opportunity to do the following:<br><br><ul><li>Grasp the basic elements of a sales and operation planning process.</li><li>Consider and quantitatively estimate the production figures for all months under various planning strategies.</li><li>Understand the relationship between various costs, such as hiring, layoffs, safety stock, inventory, holding, overtime, and subcontracting, and how the strategies utilized affect the total cost of production.</li><li>Highlight the importance of cost while deciding on the best production planning strategy.</li></ul>

• Aggregate Planning
• Cost of Production
• Production Strategies