⑧ Aggregate Units of Production Slope=C Slope=Cp Negative--Back-orders Positive--Inventory Fig.3-3 Holding and Back-Order Costs (3)Shortage costs- .Shortage occurs when demands are higher than anticipated; .For aggregate planning,it is assumed that excess demand is backlogged and filled in a future period; .In a highly competitive situation,the excess demand may be lost--- lost sales; Generally considered to be linear.Aggregate Units of Production (3) Shortage costs- •Shortage occurs when demands are higher than anticipated; •For aggregate planning, it is assumed that excess demand is backlogged and filled in a future period; •In a highly competitive situation, the excess demand may be lost--- lost sales; •Generally considered to be linear. Negative--Back-orders Slope = CP Slope = Ci $ Cost Positive--Inventory  Fig.3-3 Holding and Back-Order Costs