BU 421 Unit 4 demand planning record example

Level Beats Chase by About $111,000: A Demand Planning Record That Turns a Composite Cabinet Plant's Seasonal 2027 Forecast Into Staffed Quarters

Student Name

Business, Herzing University

BU 421: Operations Management

Instructor Name

February 25, 2026

Level Beats Chase by About $111,000: A Demand Planning Record That Turns a Composite Cabinet Plant's Seasonal 2027 Forecast Into Staffed Quarters

Quarterly Demand and Its Seasonal Pattern

Like most of its industry, Tallgrass Cabinet Works, this course's invented Omaha cabinet plant, sells more cabinets in spring and summer, when homeowners remodel, than in fall and winter. This record converts the plant's 2027 forecast into quarterly labor requirements and compares three ways of staffing them. The history below, in cabinet boxes shipped, is taken from the plant's own shipping log, which is part of the invented case.

Removing the Seasonal Pattern

Each seasonal index is the three-year average for that quarter divided by the average of all quarters, 12,000 boxes. Q1's index, for example, is 10,500 divided by 12,000, or 0.875, meaning first quarters run about 12.5 percent below an average quarter. The four indices sum to 4.000, as they should.

Dividing each 2026 quarter by its index removes the season and exposes the trend. Deseasonalized, the 2026 quarters are 12,571, 12,469, 12,533 and 12,429 boxes, nearly flat within the year, which confirms that the swings in the raw figures are seasonal rather than signs of changing demand. Across years the series grows by about 2,000 boxes annually, and the forecast for 2027 is 52,000 boxes, the same figure used in the capacity worksheet. Spread as 13,000 a quarter and multiplied back by the indices, the quarterly forecast becomes 11,375 in Q1, 13,867 in Q2, 14,625 in Q3 and 12,133 in Q4. Nahmias and Olsen (2015) describe this ratio-to-average method as the simplest way to separate a stable seasonal pattern from trend.

From Boxes to Labor Hours

Across the plant, from cutting to packing, one cabinet box consumes 2.4 direct labor hours on average. That rate comes from dividing 2025's direct labor hours by boxes shipped, and it held within 3 percent in each quarter of the year. One worker supplies 520 regular hours a quarter, 13 weeks of 40 hours. Multiplying boxes by 2.4 gives hours, and dividing by 520 gives the workforce each quarter would need if output exactly matched demand. The plant begins 2027 with 58 workers and 1,000 standard carcasses in stock. Those unfinished boxes, in the sizes that about 70 percent of orders use, can be built ahead and finished when an order arrives, which is what makes a level plan possible for a semi-custom maker.

The costs used to compare the plans are the plant's 2025 figures: regular time at $28 an hour loaded, overtime at $42 an hour, $4,200 to recruit and train each new hire, $3,000 per separation for severance and unemployment insurance, and $6 per carcass per quarter to hold stock, counting space, handling and the money tied up.

Plan A: Level Output

The level plan holds 60 workers all year, which supplies 31,200 hours and 13,000 boxes each quarter. Two workers are hired at the start of Q1. Inventory absorbs the season: stock builds in Q1 and runs down through the summer.

Plan B: Chase Demand

The chase plan changes the workforce each quarter to match requirements, rounded to whole workers: 53 in Q1, 64 in Q2, 68 in Q3 and 56 in Q4. Starting from 58, that means five separations in Q1, 11 hires in Q2, four hires in Q3 and 12 separations in Q4. Stock stays at the 1,000-carcass buffer throughout.

Plan C: Steady Workforce With Summer Overtime

A third plan keeps the current 58 workers, hires no one and covers the shortfall with overtime. Fifty-eight workers supply 30,160 regular hours, or about 12,567 boxes, a quarter, which falls 1,733 boxes short of the year's demand. Those boxes need 4,160 overtime hours, all placed in Q3, about five and a half hours a week per worker for 13 weeks. Ending stock runs 2,192, 892, 567 and 1,000. The plan costs $3,377,920 in regular time, $174,720 in overtime and $27,906 in holding, a total of $3,580,546.

Comparison and Recommendation

The level plan costs $3,535,896, the overtime plan $3,580,546 and the chase plan $3,646,960. Level is cheapest by about $45,000 against overtime and about $111,000 against chase. Chase loses because hiring and separating 32 people a year costs $114,000, far more than the $9,000 of added holding cost the level plan pays to carry stock through the spring. Overtime loses because each overtime hour costs half again as much as a regular hour, and the plan buys more than 4,000 of them.

The level plan has one weak point: stock falls to 133 carcasses at the end of Q3, leaving little protection if summer demand runs above forecast. Tallgrass should adopt the level plan with 60 workers, keep overtime in reserve for Q3 if the stock falls below 500 carcasses in August and review the forecast at the end of each quarter. A stable workforce also supports the delivery reliability that Unit 1 ranked first, since new hires in a chase plan would be learning the job during the busiest quarter of the year. Heizer et al. (2020) note that level strategies suit firms whose inventory is cheap to hold and whose skilled labor is costly to replace, which describes a cabinet plant with a buildable stock of standard carcasses. Stevenson (2021) adds that the lowest-cost plan should be checked against the service it provides, which is why the recommendation carries the August trigger. Tallgrass Cabinet Works and every figure in this record are composites created for this course.

References

Heizer, J., Render, B., & Munson, C. (2020). Operations management: Sustainability and supply chain management (13th ed.). Pearson.

Nahmias, S., & Olsen, T. L. (2015). Production and operations analysis (7th ed.). Waveland Press.

Stevenson, W. J. (2021). Operations management (14th ed.). McGraw Hill.