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CHAPTER 11

CHAPTER 11. Aggregate Production Planning. ã 1998 South-Western College Publishing. Chapter Outline. I. Introduction II. The Concept of Aggregation III. An Overview of Production-Planning Activities IV. Framework for Aggregate Production Planning

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CHAPTER 11

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  1. CHAPTER 11 Aggregate Production Planning ã 1998 South-Western College Publishing

  2. Chapter Outline I. Introduction II. The Concept of Aggregation III. An Overview of Production-Planning Activities IV. Framework for Aggregate Production Planning V. Techniques for Aggregate Production Planning VI. Aggregate Planning in Service Companies VII. Implementing Aggregate Production Plans - Managerial Issues VIII. Hierarchical Production Planning

  3. Aggregate production planning is medium-term capacity planning over a two to eighteen month planning horizon. It involves determining the lowest-cost method of providing the adjustable capacity for meeting production requirements.

  4. Capacity Decisions Hierarchy Linkages Facilities Planning Aggregate Planning Scheduling Time Frame Facilities Planning Aggregate Planning Scheduling Time

  5. Aggregation refers to the idea of focusing on overall capacity, rather than individual products or services. Aggregation is done according to: • Products • Labor • Time

  6. Production Planning • Long Range Planning • Strategic planning (1-5 years) • Medium Range Planning • Employment, output, and inventory levels (2-18 months) • Short Range Planning • Job scheduling, machine loading, and job sequencing (0-2 months)

  7. Aggregate production planning involves managing... • Work force levels- the number of workers required for production. • Production rates - the number of units produced per time period. • Inventory levels - the balance of unused units carried forward from the previous period.

  8. Common objectives of production planning... MINIMIZE:cost, inventory levels, changes in work force levels, use of overtime, use of subcontracting, changes in production rates, changes in production rates, plant/personnel idle time MAXIMIZE:profits, customer service

  9. Methods of Influencing Demand • Price Incentives • Reservations • Backlogs • Complementary Products or Services • Advertising/promotion

  10. Methods of Influencing Supply • Hiring/firing workers • Overtime/slack time • Part time/temporary labor • Subcontracting • Cooperative arrangements • Inventories

  11. Aggregate Production Planning Variable Costs • Hiring/firing costs • Overtime/slack time costs • Part time/temporary labor costs • Subcontracting costs • Cooperative arrangements costs • Inventory carrying costs • Backorder or stock out costs

  12. Aggregate Production Planning Strategies • Chase strategy • production rates or work force levels are adjusted to match demand requirements over planning horizon • Level strategy • constant production rate or work force level is maintained over planning horizon • Mixed strategy • both inventory level changes and work force level changes occur

  13. Aggregate Production Planning Techniques • Trial-and-error method • Mathematical techniques

  14. Trial-and-Error Method Examples of alternative strategies: • Vary work force levels • Level work force, vary inventories and backorders • Level work force, use subcontracting • Level work force, use overtime and subcontracting

  15. - Linear Decision Rule - Mgmt. Coefficient Models - Parametric Prod. Planning - Search Decision Rule - Production-Switching Heuristic - Linear Programming - Transportation Method - Goal Programming - Mixed Integer Programming - Simulation Models Mathematical Techniques

  16. Managerial Issues in Aggregate Production Planning 1. APP should be tailored to the particular company and situation. 2. APP may be constrained by union contracts or company policies. 3. Mathematical techniques will likely have to be balanced with managerial judgment and experience. 4. A tendency to blur the distinction between production planning and production scheduling.

  17. Aggregate Planning in Services For service companies, aggregate planning results in staffing plans that call for changing the number of employees or subcontracting.

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