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  • H Dangi, FMS
    1
    Aggregate Planning Lecture No 5
    Hamendra Dangi
    hkdangi@fms.edu
    9968316938
  • H Dangi, FMS
    2
    Session Break Up
    Aggregate Planning
    Master Production Schedule
  • H Dangi, FMS
    3
    Long range
    Intermediate range
    Short
    range
    Now
    2 months
    1 Year
    Planning Horizon
    Aggregate planning: Intermediate-range capacity planning, usually covering 2 to 12 months.
  • H Dangi, FMS
    4
    Economic,
    competitive,
    and political
    conditions
    Corporate
    strategies
    and policies
    Aggregate
    demand
    forecasts
    Establishes operations
    and capacity strategies
    Business Plan
    Establishes
    operations capacity
    Aggregate plan
    Establishes schedules
    for specific products
    Master schedule
    Planning Sequence
    Figure 13.1
  • H Dangi, FMS
    5
    Aggregate Planning
    Begin with forecast of aggregate demand
    Forecast intermediate range
    General plan to meet demand by setting
    Output levels
    Employment
    Finished goods inventory level
    Production plan is the output of aggregate planning
    Update plan periodically – rolling planning horizon always c overs the next 12 – 18 months
  • H Dangi, FMS
    6
    Aggregate Planning Inputs
    Costs
    Inventory carrying
    Back orders
    Hiring/firing
    Overtime
    Inventory changes
    Subcontracting
    Resources
    Workforce
    Facilities
    Demand forecast
    Policies
    Subcontracting
    Overtime
    Inventory levels
    Back orders
  • H Dangi, FMS
    7
    Aggregate Planning Strategies
    Maintain a level workforce
    Maintain a steady output rate
    Match demand period by period
    Use a combination of decision variables
  • H Dangi, FMS
    8
    Basic Strategies
    Level capacity strategy:
    Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.
    Chase demand strategy:
    Matching capacity to demand; the planned output for a period is set at the expected demand for that period.
  • H Dangi, FMS
    9
    Chase Approach
    Advantages
    Investment in inventory is low
    Labor utilization in high
    Disadvantages
    The cost of adjusting output rates and/or workforce levels
  • H Dangi, FMS
    10
    Level Approach
    Advantages
    Stable output rates and workforce
    Disadvantages
    Greater inventory costs
    Increased overtime and idle time
    Resource utilizations vary over time
  • H Dangi, FMS
    11
    Cumulative output/demand
    Cumulative
    production
    Cumulative
    demand
    6
    7
    1
    2
    3
    4
    5
    8
    9
    10
    Cumulative Graph
  • H Dangi, FMS
    12
    Average
    inventory
    Beginning Inventory + Ending Inventory
    =
    2
    Average Inventory
  • H Dangi, FMS
    13
    Example
    In a textile firm , a worker is capable of tailoring 3 garments per day. Assume time taken for each garment is same
    Given
    Hiring Cost : Rs 3000
    Layoff Cost : Rs 4000
    Current employee strength: 40
  • H Dangi, FMS
    14
    Aggregate demands for next four month is given in the following table :
    Month Jun July Aug Sep
    Demand 3170 3000 2900 2660
    Working Days 24 23 23 24
    Based on given information generate production plan following varying workforce strategy
  • H Dangi, FMS
    15
    Production Plan
  • H Dangi, FMS
    16
    Example ; Varying the Size of Inventory
    Aggregate Demand for product X for next four month is given below
    Demand 5000 4600 5200 4800
    W.Days 23 24 22 23
    Given : Opening Stock = 500 units
    Inventory holding cost = Rs 40
    Worker productivity = 20 units /day
    Worker strength = 10
    Shortage Cost : Rs 30/Units
    Generate production plan with varying inventory levels
  • H Dangi, FMS
    17
    Production Plan
  • H Dangi, FMS
    18
    Planners for a company that makes several models of skateboards are about to prepare the aggregate plan that will cover six periods. Theyhave assembled the following information:
    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 (skateboards) per period with regular time (i.e., 1,800÷6 = 300). Note that the planned ending inventory is zero. There are 15 workers, and each can produce 20 skateboards per period.
    18
    http://www.baskent.edu.tr/~kilter
    Example
  • H Dangi, FMS
    19
  • H Dangi, FMS
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    20
    http://www.baskent.edu.tr/~kilter
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    21
    http://www.baskent.edu.tr/~kilter
    Example
    After reviewing the plan developed in the preceding example, planners have decided to develop an alternative plan. They have learned that one person is about to retire from the company. Rather than replace that person, they would like to stay with the smaller workforce and use overtime to make up for the lost output. The reduced regular-time output is 280 units per period. The maximum amount of overtime output per period is 40 units. Develop a plan and compare it to the previous one.
  • H Dangi, FMS
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    22
    http://www.baskent.edu.tr/~kilter
  • H Dangi, FMS
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    23
    http://www.baskent.edu.tr/~kilter
    Aggregate Planning in Services
    • Services occur when they are rendered.
    • Demand for service can be difficult to predict.
    • Capacity availability can be difficult to predict.
    • Labor flexibility can be an advantage in services.
  • H Dangi, FMS
    24
    24
    http://www.baskent.edu.tr/~kilter
    Master Scheduling
    • The duties of the master scheduler generally include
    • Evaluating the impact of new orders.
    • Providing delivery dates for orders.
    • Dealing with problems:
    Evaluating the impact of production delays or late deliveries of purchased goods.
    Revising the master schedule when necessary because of insufficient supplies or capacity.
    Bringing instances of insufficient capacity to the attention of production and marketing personnel so that they can participate in resolving conflicts.
  • H Dangi, FMS
    25
    25
    http://www.baskent.edu.tr/~kilter
    The Master Scheduling Process
  • H Dangi, FMS
    26
    Weekly forecast requirements for industrial pumps.
    Eight-week schedule showing forecasts, customer orders, and beginning inventory
    26
    http://www.baskent.edu.tr/~kilter
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    27
    http://www.baskent.edu.tr/~kilter
    Projected on-hand inventory is computed week by week until it becomes negative
  • H Dangi, FMS
    28
    28
    Determining the MPS and projected on-hand inventory
  • H Dangi, FMS
    29
    29
    Projected on-hand inventory and MPS are added to the master schedule
  • H Dangi, FMS
    30
    Discussion on Minor Test
    No of Questions : 20
    Weight age : 10 Marks
    Time : 45 Min
    (6.45 PM to 7.30 PM)
  • H Dangi, FMS
    31
    Syllabus
    Site Selection and Facility Location
    Scheduling
    Work Measurement
    Scheduling
    Quality Management
    Aggregate Planning