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Chapter 4 Aggregate Planning w5&6
Chapter 4 Aggregate Planning w5&6
Chapter 4 Aggregate Planning w5&6
AGGREGATE PLANNING
1
Planning Horizon
• Aggregate planning:
Intermediate-range capacity planning, usually covering 2 to 12
months. The goal of aggregate planning is to achieve a
production plan that will effectively utilize the organization’s
resources to satisfy expected demand.
Long range
Intermediate
range
Short
range
Economic,
Corporate competitive, Aggregate
strategies and political demand
and policies conditions forecasts
Establishes operations
Business Plan
and capacity strategies
Establishes
Aggregate plan
operations capacity
Aggressive Alternatives
Complementary Competitive
Products Pricing
Reactive Alternatives
Units or dollars
Size of Aggregate Of Backlogs,
Workforce and plan
backorders , or
Workforce Adjustment
stockout
Inventory
Levels Production Units or
per month dollars
(in units or $) subcontracted
Relationships of Aggregate Schedule
Aggregate
Forecast & Resource
Production
Firm Orders Availability
Planning
Work force
Inventory
Material Master Subcontractors
Requirements Production
Planning Scheduling
No, modify CRP, MRP, or MPS
Capacity Shop
Requirements Realistic? Floor
Planning Yes Schedules
Aggregate Level Scheduling
• Aggregate Schedule:
Month Jan Feb Mar Apr May
No. of Chips 600 650 620 630 640
• Chase Strategies
– Match demand during the planning horizon by
either
– Vary workforce or vary output rate
• Level Strategies
– Maintain a constant workforce level or constant
output rate during the planning horizon
– Constant workforce or constant output rate
• Mixed Strategies
– Combined several strategies
PLANNING STRATEGIES
Demand Demand
Production
Production
Units
Units
Time Time
PLANNING STRATEGIES FOR AGGREGATE PLANS
No hiring, depleting
No layoffs, building
3.Level#1: Constant workforce anticipation inventory,
anticipation inventory, under
level overtime, subcontracting,
time, vacations
backorders, stockouts
• Regular-Time Costs
• Overtime Costs
• Hiring and
Layoff Costs
• Inventory
Holding Costs
• Backorder and Stock out Costs
EXAMPLE 1
Production Requirement
(Forecast+SS-Begin Inv) 1,850 1,425 1,000 850 1,150 1,725
Hours needed 9,250 7,125 5,000 4,250 5,750 8,625
Days per month 22 19 21 21 22 20
Hrs/mo/worker 176 152 168 168 176 160
Workers needed 53 47 30 25 33 54
Workers hired 0 0 0 0 8 21
Workers Laid off 0 6 17 5 0 0
Production Labor Cost $ 37,000 $ 28,500 $ 20,000 #### #### ####
Hiring Cost $ - $ - $ - $ - $ 1,600 $ 4,200
Firing Cost $ - $ 1,500 $ 4,250 $ 1,250 $ - $ -
Workers = 25
period 1 2 3 4 5 6 total
Forecast 200 200 300 400 500 200 1800
Cost:
• Regular time = $2 per skateboard
• Overtime = $3 per skateboard
• Subcontract = $6 per skateboard
• Inventory = $1 per skateboard per period on average inventory
• Back orders = $5 per skateboard per period
Solution: Example 2
Period 1 2 3 4 5 6 total
Forecast 200 200 300 400 500 200 1800
Output
Regular 300 300 300 300 300 300 1800
Overtime - - - - - -
Subcontract - - - - - -
Output-forecast 100 100 0 (100) (200) 100 0
Inventory
Beginning 0 100 200 200 100 0
Ending 100 200 200 100 0 0
Average 50 150 200 150 50 0 600
Backlog 0 0 0 0 100 0 100
Cost
Output
Regular $600 600 600 600 600 600 $3600
Overtime - - - - - -
Subcontract - - - - - -
Hire/layoff - - - - - -
Inventory $50 150 200 150 50 0 $600
Back order 0 0 0 0 500 0 $500
Total $650 750 800 750 1150 600 $4700
Aggregate Planning in Services
• The result of disaggregating the aggregate plan is a master schedule showing the
quantity and timing of specific end items for a scheduled horizon, which often
covers about six to eight weeks ahead.
• The master schedule shows the planned output for individual products rather than an
entire product group, along with the timing of production.
• It should be noted that whereas the aggregate plan covers an interval of, say, 12
months, the master schedule covers only a portion of this. In other words, the
aggregate plan is disaggregated in stages , or phases, that may cover a few weeks to
two or three months.
• The master schedule contains important information for marketing as well as for
production. It reveals when orders are scheduled for production and when completed
orders are to be shipped
Aggregate Plan to Master Schedule
Disaggregation
Type Jan. Feb. Mar
21 inch 100 100 100
26 inch 75 150 200
Master Master
schedule 29 inch 25 50 100
Schedule
total 200 300 400
• Master schedule
– Determines quantities needed to meet demand
– Interfaces with
• Marketing: it enables marketing to make valid
delivery commitments to warehouse and final
customers.
• Capacity planning: it enables production to
evaluate capacity requirements
• Production planning
• Distribution planning
Master schedule
• Inputs:
– Beginning inventory; which is the actual inventory on hand
from the preceding period of the schedule
– Forecasts for each period demand
– Customer orders; which are quantities already committed
to customers.
• Outputs
– Projected inventory
– Production requirements
– The resulting uncommitted inventory which is referred to
as available-to-promise (ATP) inventory
REFERENCE