FreshTech production lab

FreshTech Electronics produces two smartwatch models. January to June is the low season; July to December is the high season.

Each worker assembles 1,000 smartwatches per month and earns $3,000 per month. The original costs are $1.50 per unit per month for storage, $1,200 per hire and $1,800 per layoff. Annual demand is 228,000 smartwatches.

• These are two fixed strategies, not an optimisation over every possible plan. The lower-cost strategy is the cheaper of these two under the selected costs.
• Both plans start and finish the year with zero inventory and meet all monthly demand. There are no shortages, overtime or subcontracting.
• To match the classroom solution, Level starts with 19 workers and Chase with 12. Initial recruitment is not charged for either plan.
• Level produces 19,000 units every month. Its end-of-month inventories add up to 252,000 unit-months. Storage cost is this sum multiplied by the holding cost.
• Chase hires 14 workers at the start of July and lays off 14 after December production, ready for the next low season. All 26 workers are paid for December.
• Each plan uses 228 worker-months, so each has an annual wage bill of $684,000. Wages and productivity stay fixed in this exploration.
• Changing an input creates an experimental scenario. It does not change the original case. Costs are in USD; results are displayed to the nearest cent when needed.