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Planning Horizons

Responsible: Operations managers. Short-range plans Job assignments Ordering Job scheduling Dispatching. Intermediate-range plans Sales planning Production planning and budgeting Setting employment, inventory, subcontracting levels Analyzing operating plans.

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Planning Horizons

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  1. Responsible: Operations managers Short-range plans Job assignments Ordering Job scheduling Dispatching Intermediate-range plans Sales planning Production planning and budgeting Setting employment, inventory, subcontracting levels Analyzing operating plans Responsible: Top executives Responsible: Operations managers, supervisors, foremen Long-range plans R&D New product plans Capital expenses Facility location, expansion 1 year 5 years Today 3 Months Planning Horizon Planning Horizons

  2. Capacity Planning • A long-term strategic decision that establishes a firm’s overall level of production resources • Examples of Decision Variables Involved: • Building or closing structures or facilities • Upgrading equipment • Acquiring new businesses or selling existing subcomponents • Outsourcing services

  3. Aggregate Planning An intermediate time horizon “macro” approach for developing a production plan that determines what resource capacity a firm will need to meet its forecasted demand.

  4. Relationships of the Aggregate Plan Marketplace and Demand Research and Technology Product Decisions Work Force Process Planning & Decisions Raw Materials Available Inventory On Hand Demand Forecasts, orders Aggregate Schedule for Production External Capacity Master Production Schedule Detailed Work Schedules Plant Capacity Priority Planning & Scheduling

  5. Demand Options Pricing Promotion Product Mixing Backordering Stockout Supply Options Stockpile Inventory Maintain high demand-level resources Overtime/Idle Time Part Time Subcontract Resize Workforce Decision Variables for Aggregate Planning

  6. The Extremes Chase Strategy Level Strategy Production equals demand Production rate is constant

  7. Aggregate Planning Strategies • Mixed strategy • Combines 2 or more aggregate scheduling options • Level scheduling strategy • Produce same amount every day • Keep work force level constant • Vary non-work force capacity or demand options

  8. Aggregate Planning Methods • Graphical & charting techniques • Popular & easy-to-understand • Trial & error approach • Mathematical approaches • Linear programming model • Simulation

  9. The Graphical Approach to Aggregate Planning • Forecast the demand for each period • Determine the capacity for regular time, overtime, and subcontracting, for each period • Determine the labor costs, hiring and firing costs, and inventory holding costs • Consider company policies which may apply to the workers or to stock levels • Develop alternative plans, and examine their total costs

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