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Aggregate  Planning
 

Aggregate Planning

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Aggregate Planning

Aggregate Planning

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Aggregate  Planning Aggregate Planning Presentation Transcript

  • AGGREGATE PLANNING (Ch. 14)
    • Intermediate-range production and capacity planning, usually covering 6 to 18 months.
    Part of a Hierarchical Planning System Planning Horizon Long range Short range Intermediate range Now 2 months 1 Year
  • Hierarchical Planning System Business Plan Sales Plan Marketing Finance Operations Master Production Schedule (M PS) Aggregate Plan Material Requirement Planning (M RP) Resource Plan
  • Marketing, Financial and Operations Planning
    • Medium to long term functional plans designed to operationalize the long-term strategic (business) plan:
      • Marketing plan: defines the target customers
      • – demand side
      • Financial plan: identifies the source of funds, cash flows, & sets budgets
      • – resource side
      • Operations plan: identifies the desired production, outsourcing, inventory levels & staffing
            • – balancing between demand and resource side
  • Aggregate Production Planning
    • Matches market demand to company resources (sales and resource plans)
    • Plans production 6 months to 18 months in advance
    • Expresses demand, resources, and capacity in general, aggregate terms
    • Develops a strategy for economically meeting demand
    • Establishes a companywide game plan for allocating resources
  • Aggregate Planning
    • Based on composite (representative) products:
      • Simplifies calculations
      • Forecasts for grouped items are more accurate
    • Considers trade-offs between holding inventory & short-term capacity based on workforce
  • Planning Approaches
    • Proactive approach:
      • Coordinate Marketing & Production plans to level demand using advertising & price incentives
    • Reactive approach:
      • Allow volume forecasts based on Marketing plan to drive production planning
  • Strategies for Managing Demand Proactive Strategies
    • Create demand for idle resources
      • advertising,
      • pricing,
      • promotions.
    • Shift demand into other periods
      • backorder (lost case),
      • appointments
  • Basic (Pure) Reactive Strategies
    • Level capacity:
      • Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.
    • Chase demand:
      • Matching capacity to demand; the planned output for a period is the expected demand for that period.
  • Pure Strategies for Meeting Demand (a) Level Production - inventory, backorder/lost sales Units Time Production Demand (Sales Plan) Production Demand
  • Time Units Demand Production (b) Chase Demand: hire/fire, overtime, part-time, subcontract
  • Evaluating Alternative Plans
    • Level strategy plan
    • Chase strategy plan
  • Level Strategy
  • Chase Strategy
  • Basic Reactive Strategies
    • Level plans:
      • Use a constant workforce & produce similar quantities each time period.
      • Use inventories & backorders to absorb demand peaks & valleys
    • Chase plans:
      • Minimize finished good inventories by trying to keep pace with demand fluctuations
  • Hybrid Reactive Strategies
    • Use a combination of options:
      • Build-up inventory ahead of rising demand & use backorders to level extreme peaks
      • Layoff or furlough workers during lulls
      • Subcontract production or hire temporary workers to cover short-term peaks
      • Reassign workers to preventive maintenance during lulls
  • Mixed Strategies for Meeting Demand
    • Overtime/Undertime
    • Hiring/Firing
    • Inventory/Backordering
    • Subcontracting Out/In
    • Part-time/Full-Time
  • Inputs and Outputs to Aggregate Production Planning Aggregate Production Planning Demand Forecasts Company Policies Financial Constraints Strategic Objectives Capacity Constraints Size of Workforce Production per month (in units or $) Inventory Levels Units or dollars subcontracted, back ordered, or lost
  • Demand-based Options
    • Finished goods inventories:
      • Anticipate demand
    • Back orders & lost sales:
      • Delay delivery or allow demand to go unfilled
    • Shift demand to off-peak times:
      • Proactive marketing
  • Capacity-based Options
    • Overtime: Short-term option
      • Pay workers a premium to work longer hours
    • Undertime: Short-term option
      • Slow the production rate or send workers home early (lowers labor productivity, but doesn’t tie up capital in finished good inventories)
    • Subcontracting: Medium-term option
    • Hire & fire workers: Long-term option
      • Change the size of the workforce
  • Developing Aggregate Plan
    • Choose the basic strategy:
      • Level, chase, or hybrid
    • Determine the production rate:
      • Level plan with back orders: rate = average demand over the planning horizon
      • Level plan without back orders: rate is set to meet all demand on time
      • Chase plan: assign regular production, amount of overtime & subcontracted work to meet demand
  • Developing the Aggregate Plan
    • Calculate the size of the workforce needed
    • Calculate period-to-period inventory levels, shortages, expected hiring & firings, and overtime
    • Calculate period-by-period costs, then sum for total costs of the plan
    • Evaluate the plan’s impact on customer service and human resource issues
  • Summary of Planning Techniques
  • Service Planning Issues
    • Intangible products can’t be inventoried
    • Possible approaches:
      • Try to proactively shift demand away from peaks
      • Use overtime or subcontracting to handle peaks
      • Allow lost sales
    • 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.
    Disaggregating
  • Master Scheduling Process Master Scheduling Beginning inventory Forecast Customer orders Inputs Outputs Projected inventory Master production schedule Uncommitted inventory