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Case Problem

Davis Instruments needs additional employees each month to meet production demands. They can hire temporary employees from Workforce Unlimited under three contract options with lengths of 1, 2, or 3 months at different costs. To minimize total costs, Davis should determine the optimal number of employees to hire under each option each month based on their needs and costs of training and contracts. Hiring some full-time employees could reduce total costs compared to temporary employees alone if training costs are reduced sufficiently.

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223 views2 pages

Case Problem

Davis Instruments needs additional employees each month to meet production demands. They can hire temporary employees from Workforce Unlimited under three contract options with lengths of 1, 2, or 3 months at different costs. To minimize total costs, Davis should determine the optimal number of employees to hire under each option each month based on their needs and costs of training and contracts. Hiring some full-time employees could reduce total costs compared to temporary employees alone if training costs are reduced sufficiently.

Uploaded by

rachita
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Case

Workforce Scheduling

Davis Instruments has two manufacturing plants located in Atlanta, Georgia. Product demand
varies considerably from month to month causing Davis extreme difficulty in workforce
scheduling. Recently Davis started hiring temporary workers supplied by Workforce Unlimited, a
company that specializes in providing temporary employees for firm in the greater Atlanta area.
Workforce Unlimited offered to provide temporary employees under three contract options that
differ in terms of the length of employment and the cost. The three-options are summarized:

Option Length of Employment Cost

1 One Month $2000


2 Two Months $4800
3 Three Months $7500

The longer contract periods are more expensive because Workforce Unlimited experiences greater
difficulty finding temporary workers who are willing to commit to longer work assignments. Over
the six months, Davis projects the following needs for additional employees.

Month: January February March April May June


Employee Needed 10 23 19 26 20 14

Each month, Davis can hire as many temporary employees as needed under each of the three
options. For instance, if Davis hires five employees in January under option 2, Workforce
Unlimited will supply Davis with five temporary workers who will work two months: January and
February. For these workers, Davis will have to pay 5($4800) = $24,000. Because of some merger
negotiations under way, Davis does not want to commit to any contractual obligations for
temporary employees that extent beyond June.

Davis quality control program requires each temporary employee to receive training at the time of
hire. The training program is required even if the person worked for Davis Instruments in past.
Davis estimates that the cost of training is $875 each time a temporary employee is hired. Thus, if
a temporary employee is hired for one month, Davis will incur a training cost of $875, but will
incur no additional training cost if the employee is on a two- or three-month contract.

Managerial Report

Develop a model that can be used to determine the number of temporary employees Davis should
hire each month under each contract plan in order to meet the projected needs at a minimum total
cost. Include the following items in your report:

a. A schedule that shows the number of temporary employees that Davis should hire each
month for each contract option.
b. A summary table that shows the number of temporary employees that Davis should hire
under each contract option, the associated contract cost for each option, and the associated
training cost for each option. Provide summary totals showing the total number of
temporary employees hired, total contract costs and training costs.

c. If the cost to train each temporary employee could be reduced to $700 per month, what
effect would this change have on hiring plan? Explain. Discuss the implication that this
effect on the hiring plan has for identifying methods for reducing training costs. How much
of a reduction in training costs would be required to change the hiring plan based on a
training costs of $875 per temporary employee?

d. Suppose that Davis hired 10 full time employees at the beginning of January in order to
satisfy part of the labor requirements over the next six months. If Davis can hire full time
employees for $16.50 per hour, including fringe benefits, what effect would it have on total
labor and training costs over the six-month period as compared to hiring only temporary
employees? Assume that full time and temporary employees both works approximately
160 hours per month. Provide a recommendation regarding the decision to hire additional
full-time employees.

d. January RHS= 0
FEB= 13
MAR= 9
APR=

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