AGGREGATE PRODUCTION PLANNING

Basic Concepts

WHAT IS APP DEFINATION

Concerned with planning overall production of all products combined (in tonnes of steel, litres of paint etc.) Over a planning horizon (generally next 3 to 6 months) for a given (forecast) demand schedule

Aggregation refers to the idea of focusing on overall capacity, rather than individual products or services.
Aggregation is done according to: Products Labor Time

Production Planning Environment

EXTERNAL
COMPETITION RAW MATERIAL SUPPLY DEMAND

EXTERNAL CAPACITY

ECONOMIC CONDITIONS

PRODUCTION PLANNING
CAPACITY PRODUCTION

WORK FORCE

INVENTORY

INTERNAL

Strategies In Aggregate Planning

1. Changing Inventory Levels This is to Increase Inventory During Periods Of Low Demand To Meet High Demand in Future Periods. However, By doing this, Costs Of Storage and Handling Increases.

Strategies In Aggregate Planning

2. Varying Work Force Size By Hiring Or Layoffs This is to Hire Or Lay Off Workers To Meet Production Rates. In this option, Often New Employees Need To Be Trained.

Strategies In Aggregate Planning

3. Varying Production Rates Through Overtime Or Idle Time. There is always a Limit For Overtime. Costs also Increase.

Strategies In Aggregate Planning

4. Subcontracting

Strategies In Aggregate Planning

5. Using Part Time Workers e.g., Fast Food Restaurants

Strategies In Aggregate Planning

6. Influencing Demand Through Advertising, Promotion, And Price Cuts. For example, Weekend Discounts At Hotels and Airlines.

Strategies In Aggregate Planning

7. Back Ordering at High Demand Periods. Back ordering means That A Firm Promises To Deliver a Product In A Later Date. Many Auto Dealers Purposely Back Order.

Strategies In Aggregate Planning

8. Counterseasonal Product Mixing This is To Develop A Product Mix Of Counterseasonal Items. For example, Companies That Make Both Furnaces And Air Conditioners.

Methods For Aggregate Planning

1. Graphical And Charting Methods 2. Mathematical Approaches A) Linear Programming B) Linear Decision Rules C) Management Coefficient Model D) Simulation E) Search Decision Rules

Objectives of Aggregate Planning

Objective of aggregate planning frequently is to minimize total cost over the planning horizon. Other objectives should be considered: maximize customer service minimize inventory investment minimize changes in workforce levels minimize changes in production rates maximize utilization of plant and equipment

DisAggregation
The Output of Aggregate Planning is a Production Schedule for family groupings of products. For example, It tells us how many cars to make, But it does not indicate how many of them Should be two-doors, and how many will be four doors.

DisAggregation
A manufacturer firm needs more information to operate. We must know what quantities will be produced for each type of product AND what time. The process of Breaking the Aggregate Plan down into Greater Detail is called DisAggregation.

references
1 production management by buffa 2 production management by martand telsang 3 http://www.google.co.in/search?q=crisil+india +building&hl=en&source=lnms&ei=QcpoT7uJYjzrQfArMXjBw&sa=X&oi=mode_link