Aggregate planning

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  • 25 Following Figure 14.2 this list (from page 656 - 657 in the text) builds the typical objectives of a planning process.
  • 17 This series is a flow chart of the typical planning process.
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  • Aggregate planning

    1. 1. The Aggregate Operations Plan• An aggregate plan links strategic goals and objectives of the organization with the plans for individual products, services and their various components.• Aggregate Production Planning is planning about how many units of the product are to be produced on a weekly or monthly basis for the coming Six to Eighteen Months ensuring the plan to be in line with the overall business plan of the company.• Main purpose is to specify the optimal combination of – production rate (units completed per unit of time) – workforce level (number of workers) – inventory on hand (inventory carried from previous period) with a view to minimize the overall production costs.
    2. 2. Aggregate Planning Objectives To Maximize Customer Service and ProfitsTo Minimize Costs:• Minimize Investment in Inventory• Minimize Changes in Production Rates• Minimize Changes in Workforce Levels and• Maximize Utilization of Plant and Equipment
    3. 3. Aggregate Planning Process Determinerequirements forplanning horizon
    4. 4. Aggregate Planning Process Determine Identify alternatives,requirements for constraints, and costsplanning horizon
    5. 5. Aggregate Planning Process Determine Prepare prospective Identify alternatives,requirements for plan for constraints, and costsplanning horizon planning horizon
    6. 6. Aggregate Planning Process Determine Prepare prospective Identify alternatives,requirements for plan for constraints, and costsplanning horizon planning horizon Is the plan acceptable?
    7. 7. Aggregate Planning Process Determine Prepare prospective Identify alternatives,requirements for plan for constraints, and costsplanning horizon planning horizon No Is the plan acceptable?
    8. 8. Aggregate Planning Process Determine Prepare prospective Identify alternatives,requirements for plan for constraints, and costsplanning horizon planning horizon No Is the plan acceptable? Yes Implement and update the plan
    9. 9. Aggregate Planning Process Determine Prepare prospective Identify alternatives,requirements for plan for constraints, and costsplanning horizon planning horizon No Is the plan acceptable? Yes Move ahead Implement and to next update the planplanning session
    10. 10. An Overview of Aggregate Production Planning SystemCorporate Cap.Installed FundsPlan / Utilized Avail.External Manpowercapacity Aggregate available Production Sub contract Planning plan Sales Plan y acit Cap an Pl Aggregate Investment Manpower Hiring/ Prodn Plan Plan Lay off Plan
    11. 11. Strategies for Aggregate Planning• Chase• Level• Minimum Manpower• Mixed
    12. 12. Strategies for Aggregate Planning (contd.)Chase Strategy - As demand changes, hire andlayoff work force to produce the units required.Some inventory also has to be accounted for,because of rounding errors.Level Strategy - Constant Work Force. As demandchanges inventory build-up & stock outs occur.Minimum Manpower Strategy - Use of minimummanpower based upon minimum demand duringthe plan period and meeting the additional demandthrough overtime and or subcontract.Mixed Strategy - Use any or all of the productionvariables to determine the lowest cost plan.
    13. 13. The Chase Strategy
    14. 14. The Level Strategy Cont….
    15. 15. Example on Aggregate Planning M/s ABC Ltd. has projected sales of 300, 500, 400, 100, 200 and 300 for the six months Jan to June and the number of working days in the corresponding month are 22, 19, 21, 21, 22 & 20 respectively. The company at present employs 20 workers and each unit requires 10 labour hours for its production. The hiring costs are Rs 300 and layoff costs are Rs 400 per person. Company policy is to retain a safety stock equal to 20% of the monthly forecast. There are currently 50 units in stock carried at Rs 2/- per unit - month. Stock outs have been assigned a cost of Rs.20/- per unit – month. Labour cost /hr is Rs 6/- and Rs 9/- on regular & O.T. basis respectively. Suggest an aggregate plan based upon the following strategies:-1. Chase2. Constant Work force of 20 & using O.T. & Idle times to meet the demand3. Constant Workforce of 20 & build inventory /occur stock out cost.
    16. 16. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 ?FEB 19 500 100MAR 21 400APR 21 100MAY 22 200JUN 20 300
    17. 17. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 ?FEB 19 500 100MAR 21 400APR 21 100MAY 22 200JUN 20 300
    18. 18. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310FEB 19 500 100 60 540MAR 21 400APR 21 100MAY 22 200JUN 20 300
    19. 19. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310FEB 19 500 100 60 540MAR 21 400 80 100APR 21 100 20 80MAY 22 200 40 20JUN 20 300 60 40
    20. 20. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Retrench- Stock Reqd reqd ment StockJAN 22 300 60 50 310 ?FEB 19 500 100 60 540MAR 21 400 80 100 380APR 21 100 20 80 40MAY 22 200 40 20 220JUN 20 300 60 40 320
    21. 21. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 (310x10)÷ (22x8)= 18FEB 19 500 100 60 540MAR 21 400 80 100 380APR 21 100 20 80 40MAY 22 200 40 20 220JUN 20 300 60 40 320
    22. 22. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 18 (310x10)÷176FEB 19 500 100 60 540 (540x10)÷ 152=36MAR 21 400 80 100 380APR 21 100 20 80 40MAY 22 200 40 20 220JUN 20 300 60 40 320
    23. 23. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 18 (310x10)÷176 ?FEB 19 500 100 60 540 36MAR 21 400 80 100 380 23APR 21 100 20 80 40 3MAY 22 200 40 20 220 13JUN 20 300 60 40 320 20
    24. 24. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 18 (310x10)÷176 (2)FEB 19 500 100 60 540 36MAR 21 400 80 100 380 23APR 21 100 20 80 40 3MAY 22 200 40 20 220 13JUN 20 300 60 40 320 20
    25. 25. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 18 (310x10)÷176 (2)FEB 19 500 100 60 540 36 18MAR 21 400 80 100 380 23APR 21 100 20 80 40 3MAY 22 200 40 20 220 13JUN 20 300 60 40 320 20
    26. 26. Solution to the problem on Aggregate Planning – Chase StraegyMonth Days DJ Safety Op. Prodn Man Hiring/ Stock Retrench- (20%) Reqd reqd ment StockJAN 22 300 60 50 310 18 (310x10)÷176 (2)FEB 19 500 100 60 540 36 18MAR 21 400 80 100 380 23 (13)APR 21 100 20 80 40 3 (20)MAY 22 200 40 20 220 13 10JUN 20 300 60 40 320 20 7
    27. 27. Solution to the problem on Aggregate Planning-Chase Strategy (contd.) RUPEESCost of Hiring ManpowerCost of RetrenchmentCost of Regular ProdnTOTAL COST OF CHASE STRATEGY 1,33,100
    28. 28. Solution to the problem on Aggregate Planning-Chase Strategy (contd.) RUPEESCost of Hiring Manpower (18+10+7)x300/- 10,500Cost of RetrenchmentCost of Regular ProdnTOTAL COST OF CHASE STRATEGY 1,33,100
    29. 29. Solution to the problem on Aggregate Planning-Chase Strategy (contd.) RUPEESCost of Hiring Manpower (18+10+7)x300/- 10,500Cost of Retrenchment (2+13+20)x400/- 14,000Cost of Regular ProdnTOTAL COST OF CHASE STRATEGY 1,33,100
    30. 30. Solution to the problem on Aggregate Planning-Chase Strategy (contd.) RUPEESCost of Hiring Manpower (18+10+7)x300/- 10,500Cost of Retrenchment (2+13+20)x400/- 14,000Cost of Regular Prodn 1810x10x6/- 1,08,600TOTAL COST OF CHASE STRATEGY 1,33,100
    31. 31. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avai* Hrs HrsJAN 310 3100 22 3520 420FEB 540 5400 19 3040 2360MAR 380 21APR 40 21MAY 220 22JUN 320 20 - - -- *Hours Available=Days*Manpower*Working Hrs./Day
    32. 32. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avai* Hrs HrsJAN 310 3100 22 3520 420FEB 540 5400 19 3040 2360MAR 380 3800 21 3360 440APR 40 400 21 3360MAY 220 2200 22 3520JUN 320 3200 20 3200 - -*Hours Available=Days*Manpower*Working Hrs./Day
    33. 33. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avail Hrs HrsJAN 310 3100 22 3520 420 ?FEB 540 5400 19 3040 2360MAR 380 3800 21 3360 440APR 40 400 21 3360 2960MAY 220 2200 22 3520 1320JUN 320 3200 20 3200 - - --
    34. 34. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avail Hrs HrsJAN 310 3100 22 3520 420 2,520 (Rs6)FEB 540 5400 19 3040 2360MAR 380 3800 21 3360 440APR 40 400 21 3360 2960MAY 220 2200 22 3520 1320JUN 320 3200 20 3200 - - --Total cost of strategy=?
    35. 35. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avail Hrs HrsJAN 310 3100 22 3520 420 2,520 (Rs6)FEB 540 5400 19 3040 2360 7,080 (Rs3)MAR 380 3800 21 3360 440APR 40 400 21 3360 2960MAY 220 2200 22 3520 1320JUN 320 3200 20 3200 - - --Total cost of strategy=?
    36. 36. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avail Hrs HrsJAN 310 3100 22 3520 420 2,520FEB 540 5400 19 3040 2360 7,080MAR 380 3800 21 3360 440 1,320APR 40 400 21 3360 2960 17,760MAY 220 2200 22 3520 1320 7,920JUN 320 3200 20 3200 - - --Total cost of strategy=?
    37. 37. Solution to the problem on Aggregate Planning- constant work force with O.T./ Idle time strategyMonth Prodn Hrs Days Hrs O.T. Idle Cost Reqd Reqd Avail Hrs HrsJAN 310 3100 22 3520 420 2,520FEB 540 5400 19 3040 2360 7,080MAR 380 3800 21 3360 440 1,320APR 40 400 21 3360 2960 17,760MAY 220 2200 22 3520 1320 7,920JUN 320 3200 20 3200 - - --Total cost of strategy=18100x6 + 8400 +28200= 1,45,200
    38. 38. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Actual Cum Cum Excess/ Prodn Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352FEB 540 19 3040 304MAR 380 21APR 40 21MAY 220 22JUN 320 20Total cost of strategy=?
    39. 39. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Actual Cum Cum Excess/ Prodn Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352FEB 540 19 3040 304MAR 380 21 3360 336APR 40 21 3360 336MAY 220 22 3520 352JUN 320 20 3200 320Total cost of strategy=?
    40. 40. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Prodn Cum Cum Excess/ Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352 352FEB 540 19 3040 304 656MAR 380 21 3360 336 992APR 40 21 3360 336 1328MAY 220 22 3520 352 1680JUN 320 20 3200 320 2000Total cost of strategy=?
    41. 41. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Prodn Cum Cum Excess/ Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352 352 310FEB 540 19 3040 304 656 850MAR 380 21 3360 336 992 1230APR 40 21 3360 336 1328 1270MAY 220 22 3520 352 1680 1490JUN 320 20 3200 320 2000 1810Total cost of strategy=?
    42. 42. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Prodn Cum Cum Excess/ Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352 352 310 42FEB 540 19 3040 304 656 850 194MAR 380 21 3360 336 992 1230 238APR 40 21 3360 336 1328 1270 58MAY 220 22 3520 352 1680 1490 190JUN 320 20 3200 320 2000 1810 190Total cost of strategy=?
    43. 43. Solution to the problem on Aggregate Planning- constant work force with Invy/stock out strategyMonth Prodn Days Hrs Prodn Cum Cum Excess/ Reqd Avail Prodn Reqd (Short)JAN 310 22 3520 352 352 310 42FEB 540 19 3040 304 656 850 194MAR 380 21 3360 336 992 1230 238APR 40 21 3360 336 1328 1270 58MAY 220 22 3520 352 1680 1490 190JUN 320 20 3200 320 2000 1810 190Total cost of strategy=20000x6 + 432x20 +480x2= 1,29,600

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