Professional Documents
Culture Documents
Aggregate Planning
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Learning Objectives
Review
planning
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Phases of Decisions
Strategy
actual demands differs from forecasts so does the execution from the plans.
E.g. Supply Chain concentration plans 40 students per year whereas the actual is ??.
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Characteristics of forecasts
Forecasts are always wrong. Should include expected value and measure of error. Long-term forecasts are less accurate than short-term forecasts. Too long term forecasts are useless: Forecast horizon
Forecasting to determine
Raw material purchases for the next week Annual electricity generation capacity in TX for the next 30 years
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Firm Orders
Forecasts
Frozen Zone
Flexible Zone
Time
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liquid (open)
Time Fences divide a scheduling time horizon into three sections or phases, referred as frozen, slushy, and liquid.
Strict adherence to time fence policies and rules.
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Planning Horizon
Aggregate planning: Intermediate-range capacity planning,
usually covering 2 to 12 months. In other words, it is matching the capacity and the demand.
Short range
Now
2 months
1 Year
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Long-range plans
Long term capacity Location / layout Product/Process design
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Need more space in 2005 to expand the store Allocate 25% of the floor space to fresh produce During the winter months employ 6 cashiers during rush hours On Wed before Thanksgiving, employ 12 cashiers throughout the day In the next two weeks, no Italian parsley will be delivered. Shelve Dill instead of parsley
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If there is variability why bother making detailed plans, inputs will change anyway
Instead make plans that carry a lot of flexibility Flexibility and aggregation go hand in hand
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Aggregate Planning
Single product
Single capacity
Quite a few time buckets When does the demand or production take place in a time bucket?
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Planning Sequence
Economic, competitive, and political conditions
Business Plan
Production plan
Master schedule
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Resources
Workforce Facilities
Costs
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Strategies
Proactive
Alter demand to match capacity
Reactive
Mixed
Some of each
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Not necessarily via pricing Free delivery, free after sale service
Some Puerto Rico hotels pay for your flight
Back
orders
demand
Hire and layoff workers, unions are pivotal Layoff: Emotional stress
Fired Moulinex (appliances producer in France) workers start fire at the plant
Overtime/slack time How too use slack time constructively? Training. Overtime is expensive, low quality, prone to accidents Part-time workers 35 hour work week of Europe Inventories, To smooth demands Subcontracting. Low quality. Reveals technological secrets
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Capacity (regular time, over time, subcontract) Inventory Backlog / lost sales: Customer patience?
Basic Strategies
Chase (the demand) strategy; Matching capacity to demand; the planned output
Demand
Demand
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Level Approach
Advantages
Stable output rates and workforce
Disadvantages
The cost of adjusting output rates and/or workforce levels
Disadvantages
Greater inventory costs Increased overtime and idle time Resource utilizations vary over time
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Determine demand for each period Determine capacities for each period Identify policies that are pertinent Determine units costs
Analysis
Develop alternative plans and costs Select the best plan that satisfies objectives
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Cumulative output/demand
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Solution
Trial and error Optimizing Trial and error
Characteristics
Intuitively appealing, easy to understand; solution not necessarily optimal. Computerized; linear assumptions not always valid. Computerized models can be examined under a variety of conditions.
Workforce
Example - Relationships
=
Basic Relationships
Number of new workers at start of the period
Number of laid off workers at start of the period
Inventory
Inventory at end of the previous period Amount used to satisfy demand in current period
Cost
Cost for a period Output Cost (Reg+OT+Sub) Hire/Lay Off Cost Back-order Cost
Inventory Cost
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Regular
Overtime Inventory Back Orders Total Cost of Plan
$560
$0 $40 $0 $600
$560
$0 $120 $0 $680
$560
$120 $170 $0 $850
$560
$120 $50 $0 $730
$560
$120 $0 $400 $1,080
$560
$0 $0 $0 $560
$3,360
$360 $520 $400 $4,640
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Capacity availability can be difficult to predict Labor flexibility can be an advantage in services
Human is more flexible than a machine, well at the expense of low efficiency.
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Disaggregation
Master Schedule
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For a short planning range 2-4 months: 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.
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Master Scheduling
Master schedule
Determines quantities needed to meet demand Interfaces with
Marketing Capacity planning Production planning Distribution planning
Master Scheduler
Evaluates impact of new orders Provides delivery dates for orders Deals with problems
Production delays Revising master schedule Insufficient capacity
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Inputs
Beginning inventory Forecast Committed Customer orders
Outputs
Projected inventory
Master Scheduling
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JUNE 2 3 30 1 30 -29
4 30
5 40
JULY 6 7
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July
5 40 2 6 40 7 40 8 40
70 41
70 11 41
70 1 31
70 61
11
57
79
71
???
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Summary
Aggregate planning: conception, demand and capacity option Basic strategy: level capacity strategy, chase demand strategy Techniques: Trial and Error, mathematical techniques Master scheduling
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Practice Questions
1. The goal of aggregate planning is to achieve a production plan that attempts to balance the organization's resources and meet expected demand. Answer: True Page: 541 2. A chase strategy in aggregate planning would attempt to match capacity and demand. Answer: True Page: 548 3. Ultimately the overriding factor in choosing a strategy in aggregate planning is overall cost. Answer: True Page: 550
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Practice Questions
1. Which of the following best describes aggregate planning? A) the link between intermediate term planning and short term operating decisions B) a collection of objective planning tools C) make or buy decisions D) an attempt to respond to predicted demand within the constraints set by product, process and location decisions E) manpower planning Answer: D Page: 541
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Practice Questions
2.Which of the following is an input to aggregate planning? A) beginning inventory B) forecasts for each period of the schedule C) customer orders D) all of the above E) none of the above Answer: D Page: 561
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Practice Questions
3.Which of the following is not an input to the aggregate planning process: A) resources B) demand forecast C) policies on work force changes D) master production schedules E) cost information Answer: D Page: 545
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Practice Questions
4. Which one of the following is not a basic option for altering demand? A) promotion B) backordering C) pricing D) subcontracting E) All are demand options. Answer: D Page: 545
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Practice Questions
5. Which of the following would not be a strategy associated with adjusting aggregate capacity to meet expected demand? A) subcontract B) vary the size of the workforce C) vary the intensity of workforce utilization D) allow inventory levels to vary E) use backorders Answer: E Page: 546-547
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Practice Questions
6. Moving from the aggregate plan to a master production schedule requires: A) rough cut capacity planning B) disaggregation C) sub-optimization D) strategy formulation E) chase strategies Answer: B Page: 559
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