Aggregate Production Planning

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Aggregate Production Planning
Finance
Vendor
Operations
Sales
Marketing
Engineering
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Aggregate Production Planning (APP)
A macro approach to operational planning that
focuses on overall capacity. APP links
higher-level facility planning to lower level
scheduling decisions within a medium-term
planning horizon (2 to 18 months).
Aggregate Production Planning
Demand Planning
Master Production Scheduling
Capacity Planning
Material Requirements and Capacity Planning
Shop Floor Control
Purchasing
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APP

• Role of Aggregate Planning
• Long-term planning function
• Strategic preparation for tactical actions
• Aggregate Planning Issues
• Staffing -hiring, firing, training
• Procurement - supplier contracts for materials,
  components
• Sub-Contracting - capacity vendoring
• Marketing - promotional activities

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Basic Aggregation
Cotton Shirts
Mens
Womens
Boys
Girls
Style B
Style C
Style A
Week1
Week2
Week3
Week4
Week5
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APP Inputs

• Problem project production of single product
  over planning horizon.
• Inputs

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Pure APP Planning Strategies
Demand
Production
Units
Time
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Pure APP Planning Strategies
Demand Production
Units
Time
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Example

• Bob and Company would like to project the firms
  aggregate needs over the next 5 months. Expected
  demand follows
• Month 1 1400 units
• Month 2 1600 units
• Month 3 1800 units
• Month 4 2200 units
• Month 5 1500 units
• Beginning inventory is 200 units, backorder cost
  50 per unit per month
• inventory holding cost 20 per unit per month
• Currently Bob has 25 employees
• each employee can manufacture 50 units per month
• fire cost is 2000 per employee and hire cost is
  1000 per employee
• Which is a better plan for Bob, level or chase?

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Developing a Master Production Schedule

• Step 1 Disaggregate the production plan into sku
  by sku forecasts corresponding to a manageable
  unit of time.
• Step 2 Record customer orders accepted to date.
• Step 3 Project on hand inventory as follows
• It It-1 MPSt - max(Ft or COt)
• where It projected inventory balance at the
  end of period t.
• MPSt production quantity due in period t
• Ft forecast of demand in period t
• COt customer orders booked for shipment in
  period t

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MPS (cont.)

• Step 4 Calculate production quantity (MPS)
  required to maintain inventory at or above
  safety stock levels
• Step 5 Calculate the quantity of end-items
  marketing has Available to Promise (ATP)
  potential customers.
• ATP1 I0 MPS1 - CCO
• ATPt MPSt - CCO
• where ATPt available to promise in week t
• I0 current on-hand inventory
• MPSt MPS quantity in week t
• CCO cumulative customer orders until next
  MPS

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MPS Numerical Example
Factory lot size for this sku 75 units Safety
stock required 0 units Time bucket 1 week
1
2
3
4
5
6
7
8
Forecast
30
30
40
40
50
50
60
20
Customer orders
45
20
12
10
0
0
0
0
Projected on-hand
50
5
50
10
45
70
20
35
15
MPS quantity
75
75
75
75
Available to promise
5
43
65
75
75
Average Inventory 250/8 31.25 Orders Placed
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MPS Numerical Example
Factory lot size for this sku 100 units Safety
stock required 0 units Time bucket 1 week
1
2
3
4
5
6
7
8
Forecast
30
30
40
40
50
50
60
20
Customer orders
45
20
12
10
0
0
0
0
Projected on-hand
50
5
75
35
95
45
95
35
15
MPS quantity
100
100
100
Available to promise
5
68
90
100
Average Inventory 400/8 50 Orders Placed 3
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Rough Cut Capacity Planning (RCCP)

• Quick check on capacity of key resources
• Use Bill of Resource (BOR) for each item in MPS
• Infeasibilities addressed by altering MPS or
  adding capacity (e.g., overtime)

total load on the facility
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MPS requirements
Total capacity required
Allocated to workcenters
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Rough Cut Capacity Planning Using Overall Factors
MPS
Capacity
Allocated
WW1 DK5011550 Z101.4910 364
SK60 6360 Z105.3910 273
Critical 910
Z107.3910 273
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Change MPS requirements of SK to 30 per week