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Chapter 13 Aggregate Planning

Chapter 13 Aggregate Planning. Planning Horizon. Long range. Intermediate range. Short range. Now. 2 months. 1 Year. Aggregate planning : Intermediate-range capacity planning, usually covering 2 to 12 months. Overview of Planning Levels. Short-range plans (Detailed plans)

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Chapter 13 Aggregate Planning

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  1. Chapter 13 Aggregate Planning

  2. Planning Horizon Long range Intermediate range Short range Now 2 months 1 Year Aggregate planning: Intermediate-range capacity planning, usually covering 2 to 12 months.

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

  4. Planning Sequence Economic, competitive, and political conditions Corporate strategies and policies Aggregate demand forecasts Establishes operations and capacity strategies Business Plan Establishes operations capacity Aggregate plan Establishes schedules for specific products Master schedule Figure 13.1

  5. Aggregate Planning • Begin with forecast of aggregate demand • Forecast intermediate range • General plan to meet demand by setting • Output levels • Employment • Finished goods inventory level • Production plan is the output of aggregate planning • Update plan periodically – rolling planning horizon always covers the next 12 – 18 months

  6. Aggregate Planning Strategies We will focus on aggregate planning as matching varying demand to fixed capacity.

  7. Aggregate Planning Outputs • Total cost of a plan • Projected levels of the following: • Inventory • Output • Employment • Subcontracting • Backordering

  8. Aggregate Planning Inputs Costs Inventory carrying Back orders Hiring/firing Overtime Inventory changes Subcontracting Resources Workforce Facilities Demand forecast Policies Subcontracting Overtime Inventory levels Back orders

  9. Demand Options • Pricing • Promotion • Back orders • New demand

  10. Capacity Options • Hire and layoff workers • Overtime/slack time • Part-time workers • Inventories • Subcontracting

  11. Aggregate Planning Strategies • Maintain a level workforce • Maintain a steady output rate • Match demand period by period • Use a combination of decision variables

  12. Basic Strategy • Level capacity strategy: • Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.

  13. Techniques for Aggregate Planning • Determine demand for each period • Determine capacities for each period • Identify policies that are pertinent • Determine units costs • Develop alternative plans and costs • Select the best plan that satisfies objectives. Otherwise return to step 5.

  14. Average Inventory Average inventory Beginning Inventory + Ending Inventory = 2

  15. Summary of Planning Techniques Table 13.7

  16. Mathematical Techniques Linear programming: Methods for obtaining optimal solutions to problems involving allocation of scarce resources in terms of cost minimization. Simulation models: Computerized models that can be tested under different scenarios to problems.

  17. Try problem 10, plan B only, on page 642. The solution is given on one of the last slides of this presentation.

  18. Aggregate Plan to Master Schedule AggregatePlanning Disaggregation MasterSchedule

  19. Disaggregating the Aggregate Plan • Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon. • Rough-cut capacity planning: Approximate balancing of capacity and demand to test the feasibility of a master schedule.

  20. Aggregate Plan to Master Schedule (from lawnmowers in general to specific types of lawnmowers) (Types of Lawnmowers)

  21. Master Scheduling Process Inputs Outputs Beginning inventory Projected inventory Master Scheduling Forecast Master production schedule Customer orders Uncommitted inventory PROCESS Feedback Loop Adjust plan if it is less than capacity

  22. Master Scheduling • Master schedule • Determines quantities needed to meet demand • Interfaces with • Marketing • Capacity planning • Production planning • Distribution planning

  23. Master Scheduler • Evaluates impact of new orders • Provides delivery dates for orders • Deals with problems • Production delays • Revising master schedule • Insufficient capacity

  24. Solved Problems: Problem 1 (pages 637 and 638 in the text)

  25. Solution to Problem 10, plan B, on page 642 of the text Plan B: Hire one worker and subcontract. Workforce = 20 + 1 = 21 workers.

  26. Solution to Problem 10 (continued) The total cost of Plan B is $14,140 + $200 = $14,340 On the top of page 638, the total cost of Plan A is $14,790. Therefore, Plan B is less costly, and it would be the preferred plan.

  27. See you in our next class meeting

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