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Lecture 9 - Aggregate Operations Planning
Lecture 9 - Aggregate Operations Planning
Lecture 9 - Aggregate Operations Planning
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Chapter- 12
Aggregate Operations Planning and
Master Scheduling
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Lecture Outline
▪ Introduction to Aggregate Planning
▪ Nature of Aggregate Operations Planning
▪ Techniques for Aggregate Production Planning
▪ Aggregate Service Planning
▪ Disaggregating the Aggregate Production Plan
▪ Performing Master Production Planning
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Canada Post
Canada Post delivers approximately two-thirds of all parcels ordered online in
Canada, and more than one-quarter of these are delivered in November and
December.
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Learning Objectives
• Explain what sales and operations planning
and aggregate operations planning are,
and identify the variables and strategies
used in aggregate operations planning.
• Develop a good aggregate production plan.
• Discuss the differences with aggregate
service planning.
• Explain what master production scheduling
is and how it is performed.
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Planning Horizons
Organizations usually make capacity and production decisions
on three levels: long term, intermediate term, and short term.
Figure 12-1
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Sales and Operations Planning
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Production Planning Hierarchy
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Sales and Operations Planning Process
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Aggregate Operations Planning
Early Back
orders orders
Promotion Exporting
Comple-
Manage
Pricing mentary
Demand products
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Capacity Options
Part-time
workers
Overtime/ Stockpile
idle time inventories
Adjust
Hire temp. Sub-
Capacit
workers contracting
y
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Aggregate Planning Inputs and Outputs
INPUTS
Demand
Resources Policies Costs
forecast
Aggregate
Operations Plans
Inventory
Output/Backorders
Employment
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Aggregate Planning Inputs
Demand
Resources forecast Policies Costs
Overtime
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Aggregate Planning Outputs
Total cost Projected
of a plan levels of:
Inventory
Output
Employment
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Basic Aggregate Strategies
▪ Level output/workforce strategy:
• Maintain steady rate of output
• Meeting variations in demand with inventories
• Only for durable goods
▪ Chase demand strategy:
• Matching capacity to demand
• Planned output set at forecasted demand
• Meeting variations in demand with overtime,
subcontracting & part-time/temporary workers
• Use a Combination (mixed)
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Choosing a Strategy
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Techniques for Aggregate
Production Planning
4. Determine total
1. Determine cost of plan.
product groups to
be aggregated • Repeat step 2&3 to
find lower cost
2. Determine
3. Identify feasible
demand forecast
labour schemes
for each period
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Trial-and-Error
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Procedure for Trial-and-Error
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Aggregate Planning Relationships
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Aggregate Plan to Master Schedule
Disaggregation
Master
Schedule
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Disaggregating the Aggregate Plan
▪ Master production schedule (MPS)
• Result of disaggregating an aggregate plan
• Shows quantity and timing of specific end
items for a scheduled horizon
Inputs Outputs
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Projected On-hand Inventory
Projected
Inventory from Current week’s
on-hand
previous week requirements
inventory
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MPS - Inputs
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MPS – Customer Orders
Figure 12-7
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Example: MPS
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Example: MPS
Figure 12-8
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Example: MPS
Figure 12-10
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Example: MPS
Figure 12-11
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Stabilizing the MPS: Time Fences
Figure 12-12
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Summary (1)
▪ Sales and operations planning (S&OP) is the process of
integrating sales forecasts with operations plans. Done
annually but updated monthly.
▪ Aggregate operations planning establishes general levels of
employment, output, and inventories for the next 12 months or
so. Intermediate-term planning/scheduling.
▪ Consider overall levels of employment, output, and inventories
for a family of products.
▪ Planning variables: using overtime, part-time/-temporary
workers, subcontracting, and carrying inventory.
▪ Planning strategies range from level output/workforce to chase
demand.
▪ Techniques: informal (trial-and-error) graph/table/worksheet
with trade-off analysis, or optimization techniques such as
linear programming and transportation model.
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Summary (2)
▪ Services cannot use inventories and thus rely on chase demand
strategy. They also usually use the amount of workforce (hours or
FTE) as the equivalent unit.
▪ The aggregate plan is disaggregated into specific product production
plans to create a master production schedule (of planned production
quantities and timing).
▪ MPS inputs: on-hand inventory, forecasts of demand, committed
orders.
▪ MPS outputs: planned productions, projected on-hand inventories
and uncommitted inventories (available-to-promise).
▪ Rough-cut capacity planning determines load on the production
process of an MPS, thus checking its feasibility.
▪ Time fences are used to reduce last-minute changes to an MPS.
The near future is frozen unless an emergency occurs.
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Learning Checklist
❑ Explain sales and operations planning and aggregate planning.
❑ Identify aggregate planning strategies and variables.
❑ Outline the inputs and outputs and major steps in the Sales and
Operations Planning Process.
❑ Describe & explain:
❑ Strategies for Adjusting Capacity
❑ Strategies for Managing Demand
❑ Quantitative techniques for aggregate planning and MPS
❑ Basic understanding of what exists
❑ Able to create a simple plan
❑ Explain and perform master production scheduling.
❑ Understand differences in aggregate planning for services:
❑ Yield management
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Next class, we will learn ----
Ch10- Statistical Quality Control
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The end
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