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Aggregate Planning

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Aggregate Planning Overview of Planning Levels Long-range plans Long term capacity Location/layout Intermediate plans (General levels) Employment Output Short-range ... – PowerPoint PPT presentation

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Title: Aggregate Planning


1
Chapter 12
  • Aggregate Planning

2
Overview of Planning Levels
  • Long-range plans
  • Long term capacity
  • Location/layout
  • Intermediate plans (General levels)
  • Employment
  • Output
  • Short-range plans (Detailed plans)
  • Machine loading
  • Job assignments

3
Planning Sequence
Figure 12-1
4
Conditions Favoring the Use of Aggregate
Planning
  • The market demand for the output of the
    operations system is forecasted to be fluctuating
    or changing over an intermediate planning horizon
    (6-18 months)
  • The firm has some alternatives available to
    change the intermediate- or short-term capacity
    of the operations system
  • The planner can model the relevant relationships
    and costs

5
Description of Aggregate Planning
  • Management selects the alternative or set of
    alternatives the firm plans to use to cope with
    the forecasted changing or fluctuating market
    demand
  • The typical objective is to select the plan (a
    set of alternatives) which minimizes related
    costs over the planning horizon
  • The result is the quantity and scheduling of
    aggregate production over the planning horizon

6
Inputs to the Aggregate Planning Process
  • A forecast of aggregate demand covering an
    intermediate-term planning horizon (6-18 months)
  • The alternative means available to adjust
    short-to medium-term system capacity, the costs
    of using each alternative and the extent each
    alternative impacts capacity
  • The current status of the system in terms of
    workforce level, inventory level and production
    rate

7
Outputs of theAggregate Planning Process
  • A production plan aggregate decisions for each
    period in the planning horizon about
  • workforce level
  • inventory level
  • production rate
  • Projected costs of the production plan over the
    planning horizon

8
An Overview of Aggregate Planning
Product decisions (Chapter 4)
Market Demand
Research and Technology
Work Force
Process planning capacity decisions (Chapter 5)
Raw materials available
Demand forecasts, orders (Chapter 3)
Inventory on hand
Aggregate plan
External capacity (subcontractors)
Master production schedule MRP systems (Chapter
14)
Detailed Work Schedules (Chapter 17)
9
Demand Options in Aggregate Planning
  • Alternatives that may reduce the forecasted
    demand fluctuations
  • pricing
  • promotion
  • backordering during high demand periods
  • new demand, e.g., counter seasonal product mixing

10
Capacity Options in Aggregate Planning
  • Alternatives that may be available to change
    intermediate- or short-term capacity
  • varying work force size by hiring or layoffs
  • varying capacity through the use of overtime or
    idle time
  • using part-time workers
  • using contract workers
  • changing inventory levels
  • subcontracting

11
Summary of Planning Techniques
12
Graphic or Informal Approach
  • Provides a framework for evaluating an aggregate
    plan
  • Easy to use and understand
  • Graphs of forecasted demand may assist planner in
    generating a plan
  • Model is flexible
  • No optimization
  • Static - relies on the planner to generate a plan

13
Forecast and Average Forecast Demand
14
Cumulative Forecast
15
Cumulative Forecast
Production Plan
Cumulative Forecasted Demand
16
Cumulative Forecast
Production Plan
Cumulative Forecasted Demand
17
Basic Strategies for Meeting Uneven Demand
  • Maintain a level workforce
  • Maintain a steady output rate
  • Match demand period by period
  • Use a combination of decision variables

18
Basic Strategies Examined
  • Level output or capacity
  • Maintaining a steady rate of regular-time output
    while meeting variations in demand by a
    combination of options.
  • Chase demand
  • Matching capacity to demand the planned output
    for a period is the expected demand for that
    period.

19
Basic Relationships
  • Period-ending inventories or backlogs are
    determined using the inventory balance equation
  • A shortfall between the amount available to the
    market output during the period plus beginning
    inventory and the market demand is made up
    (buffered) by inventory, backlog, overtime,
    part-time labor and/or subcontracting

20
Cost Calculations
  • regular cost/unit x regular output quantity
  • overtime cost/unit x overtime quantity
  • subcontract cost/unit x subcontract quantity
  • cost/hire x number hired
  • cost/ layoff x number laid off
  • carrying cost/unit x average inventory
  • back order cost/ unit x number of backorder units
  • Output
  • Regular
  • Overtime
  • Subcontract
  • Hire/Layoff
  • Hire
  • Layoff
  • Inventory
  • Back orders

21
Total Cost for a Period
  • Output cost
  • Hire/Lay off cost
  • Inventory cost
  • Back-order cost
  • Regular
  • Overtime
  • subcontract

22
Aggregate Planning in Services
  • Services occur when they are rendered
  • Demand for service can be difficult to predict
  • Capacity available can be difficult to predict
  • Labor flexibility can be an advantage in services

23
Disaggregating the Aggregate Plan
  • Breaking down the aggregate plan into specific
    product requirements in order to determine labor
    requirements, materials, and inventory
    requirements
  • The result is a master schedule
  • quantity and timing of specific end items for a
    scheduled horizon
  • used to do rough-cut capacity planning

24
Master Scheduling Process
Figure 12-5
Inputs
Outputs
Beginning inventory
Projected inventory
Master scheduling
Forecast
Master production schedule
Customer orders
Uncommitted inventory
25
Figure 12-8
Projected On-hand Inventory
Beginning Inventory
Customer orders are larger than forecast in week
1 projected on-hand is 64-33 31
Forecast is larger than customer orders in week
3 projected on-hand inventory is 1-30 -29
Forecast is larger than customer orders in week
2 projected on-hand inventory is 31-30 1
26
Figure 12-10
Projected On-hand Inventory with MPS
27
Figure 12-11
Available-to-Promise Inventory
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