Assigning orders to specific Departments, Shifts, Personnel, Equipments etc.
Size of work-force
Sequencing of orders
Aggregate production plan
Desired delivery times
To ensure customer satisfaction through prompt delivery times
To achieve maximum effectiveness from the use of production factors
Short-term plan Planning outputs Decision variables Planning horizon Planning inputs Planning objectives Type of plans
Planning Sequence Business Plan Establishes operations and capacity strategies Aggregate plan Establishes operations capacity Master schedule Establishes schedules for specific products Corporate strategies and policies Economic, competitive, and political conditions Aggregate demand forecasts
Given the demand forecast for each period in the planning horizon, determine the production level, inventory level, and the capacity level for each period that maximizes the firm’s profit over the planning horizon
Specify the planning horizon (typically 1-18 months)
Specify the duration of each period
Specify key information required to develop an aggregate plan
Planners of a company have obtained information regarding the forecasted demand of a product as follows:
Period 1 2 3 4 5 6 Total
Forecast 200 200 300 400 500 200 1800
Regular time: $2/unit
They now want to evaluate a plan that calls for a steady rate of regular-time output, mainly using inventory to absorb the uneven demand but allowing some backlog. Overtime and subcontracting are not used because they want steady output. They intend to start with zero inventory on hand in the first period. Prepare an aggregate plan and determine its cost using the preceding information. Assume a level output rate of 300 units per period with regular time. Note that the planned inventory is zero. There are 15 workers, each can produce 20 units per period.
Suppose that the regular output rate will drop to 290 units per period due to an expected change in production requirements. Costs will not change. Prepare an aggregate plan and compute its total cost for each of these alternatives:
Use overtime at a fixed rate of 20 units per period as needed. Plan an ending inventory of zero for period 6. Backlogs cannot exceed 90 units per period.
Use subcontracting at a maximum rate of 50 units per period; the usage need not be the same in every period. Have an ending inventory of zero in the last period. Again backlogs cannot exceed 90 units in any period. Compare these two plans.