National Institute of Technology Calicut Department of Mechanical Engineering

Linear Programming Methods for Aggregate Planning Problem - I

This formulation considers, here, the following variables: Regular time,
hiring, firing, over time, & inventory. The notations for the variables and
the system details are given below. The aggregate sales and production are
measured in number of units.
r ⎯ Regular time production cost /unit
h ⎯ hiring (increasing labour) cost/ unit
f ⎯ firing (decreasing labour) cost/ unit
Oc ⎯ Over time production cost / unit
Cc ⎯ Inventory carrying cost/unit/period
Rt ⎯ Units produced during regular time, t
Ht ⎯ Number of units increased during consecutive periods
Ft ⎯ Number of units decreased during consecutive periods.
Ot ⎯ Units produced during overtime in period t.
It ⎯ Inventory at the end of the period t.
Dt ⎯ Sales forecast for the period t.
RCt ⎯ Regular time capacity in period t
OCt ⎯ Over time capacity in period t
m ⎯ Number of periods in the planning horizon
Formulation
m m m m m

Total Cost C = r  Rt + h  H t + f  F + O O + C  I
t c t c t
t =1 t =1 t =1 t =1 t =1

Subjected to

i) Regular time production constraints:

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 National Institute of Technology Calicut Department of Mechanical Engineering

Rt  RCt ; t = 1, 2, …, m
ii) Over time production constraints
Ot  OCt; t = 1, 2, …, m
iii) Inventory constraints:
It = It-1 + Rt + Ot – Dt, t = 1, 2, …, m
iv) Hiring capacity constraints
Ht  Rt – Rt-1, t = 1, 2, …, m
v) Firing capacity constraints
Ft  Rt-1 – Rt, t = 1, 2, …, m
vi) Non-negativity constraints
Rt, Ot, It, Ht, Ft  0
vii) Initialising constraints

Io = given value (Inventory at the beginning of the

planning horizon)
Ro = given value (Units produced in the period before
starting the planning horizon)

Linear Programming Method for Aggregate Planning Problem - II

This formulation is based on measuring aggregate sales and

inventories in terms of direct labour hours. The variables considered are
regular time, over time, hiring, firing, inventory, & back order. The
production system details are as follows:
Rt ⎯ Regular time production hours scheduled in period t.

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 National Institute of Technology Calicut Department of Mechanical Engineering

Ot ⎯ Over time production hours scheduled in period t.

Ht ⎯ Number of employees hired in period t.
Ft ⎯ Number of employees fired in period t.
It ⎯ Hours stored in inventory at the end of period t.
Bt ⎯ Hours back ordered in period t.
Cr ⎯ Cost per labour hour of regular time production
Co ⎯ Cost per labour hour of over time production.
Ch ⎯ Cost of hiring an employee.
Cf ⎯ Cost of firing an employee.
Ci ⎯ Cost per period of carrying one labour hour of work.
Cb ⎯ Cost per period of back ordering one labour hour of work.
Dt ⎯ Hours of production to be sold in period t.
RLt ⎯ Regular time hours available in period t per worker.
OLt ⎯ Over time hours available in period t per worker.
Wt ⎯ Work force level in period t.
m ⎯ Number of periods in the planning horizon.
Minimize

TotalCost C =  (Cr Rt + CoOt + Ch H t + C f Ft + Ci I t + Cb Bt )

m

t =1

Subject to:
i) Inventory constraints:
It-1 + Rt + Ot + Bt = Dt + Bt-1 + It
ii) Regular time production constraints:

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 National Institute of Technology Calicut Department of Mechanical Engineering

Rt
 RLt
Wt

iii) Over time production constraints:

Ot
 OLt
Wt

iv) Work force level change constraints:

Wt – Wt-1 –Ht + Ft = 0
v) Initialising constraints:
Wo = given value (Workforce level at the beginning of
the planning horizon)
Io = given value (Inventory at the beginning of the
planning horizon)
Bo = given value (Back order level at the beginning of
the planning horizon)
Im = given value (Inventory at the end of the planning
horizon)
vi) Non-negativity constraints
Rt, Ot, It, Ht, Ft, Bt, Wt  0

Problem

The following data were obtained from Alpha manufacturing

company, using the linear programming model find the optimal
production. Backorders are not allowed.
Demand data: D1 = 150 units
D2 = 200 units
D3 = 300 units
Capacity data:

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 National Institute of Technology Calicut Department of Mechanical Engineering

Regular time capacity in units

RC1 = 200
RC2 = 300
RC3 = 150

Overtime capacity in units

OC1 = 50
OC2 = 75
OC3 = 35
Regular time cost/unit(r) = Rs.10
Overtime cost/unit (Oc) = Rs. 15
Inventory cost/unit/period (Cc) = Rs.5
Hiring cost/unit (h) = Rs.15
Lay-off cost/unit (f) = Rs.10
Units produced at t = 0, (R0) =150
Initial inventory (Io) = 0.
Formulate a linear programming problem for the above aggregate
planning problem to minimize the total cost, and solve using LINGO
optimisation Package.

Solution:
Formulation

Minimize Z = 10 ( R1 + R2 + R3) + 15 ( H1 + H2 + H3 ) + 10( F1 + F2 +

F3 ) + 15 ( O1 +O2+ O3) + 5 ( I1 + I2 + I3 ).

Subject to
R1 ≤ 200
R2 ≤ 300
R3 ≤ 150

O1 ≤ 50
O2 ≤ 75
O3 ≤ 35

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 National Institute of Technology Calicut Department of Mechanical Engineering

R1 + O1 - I1 = 150
R2 + O2 + I1 - I2 = 200
R3 + O3 + I2 - I3 = 300

R1 - 150 ≤ H1
R2 - R1 ≤ H2
R3 - R2 ≤ H3

R1 + F1 ≥ 150
R2 - R1 + F2 ≥ 0
R3 - R2 + F3 ≥ 0 and

Rt, Ot, Ht, Ft, It ≥ 0 for t =1, 2, 3.

The results are as given below

.
Period 1 Period 2 Period 3
R1 = 170 R2 = 170 R3 = 150
O1 = 50 O2 = 75 O3 = 35
I1 = 70 I2 = 115 I3 = 0
H1 = 20 H2 = 0 H3 = 0
F1 = 0 F2 = 0 F3 = 20

Minimum cost = Rs.8725

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 National Institute of Technology Calicut Department of Mechanical Engineering

The above results are shown diagrammatically

R1 = 170 O1 = 50 R2 = 170 O2 = 75 R3 = 150 O1 = 35

I0 = 0 I1 = 70 I2 = 115 I3 = 0

Period 1 Period 2 Period 3

D1 = 150 D2 = 200 D3 = 300

Final Solution of Aggregate Planning

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