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Module 009 Aggregate and Operations Scheduling

At the end of this module you are expected to:

1. Identify terms related to aggregate and operations scheduling

2. Analyze different methods of aggregate planning and the four
approaches which can be considered to develop aggregate plan
3. Examine the principles of yield management
4. Determine the steps to follow in aggregate planning and scheduling

Aggregate and Operations Scheduling

Nature and Strategies of Aggregate Planning

What is aggregate planning? According to Aggregate Planning (n.d.) Retrieved August

13, 2018 from https://en.wikipedia.org/wiki/Aggregate_planning, aggregate planning
refers to a marketing activity which include doing an aggregate plan for the process of
production in advance for about 6 to 18 months for the management to have an idea on what
and when number of materials and other materials will be bought. It’s purpose is to ensure
that the cost of operation of an organization is kept to the minimum. In this process,
deciding on the quantity of outsourcing, subcontracting of times, labor overtime, numbers
to be hired and fired in each period the inventory amount to be held in stock and to be
backlogged for each period is done. The said activities are done within the company
policies, ethics and long term commitment to the community, society and the country of
operation framework.

From the same source, certain pre-required inputs which are inevitable are cited
and these are the following :
 Data and information about the available facilities and resources.
 Demand forecasting for the period wherein planning will be done
 Different alternative costs and financial resources – cost of ordering cost,
holding inventory, production cost through various production options like
backordering, subcontracting and overtime.
 Policies in the organization regarding the utilization of above options

Supply and demand matching over the medium time range up to approximately 1
year into the future is the concerned of aggregate planning. To set the overall output levels
in the near to medium future in the face of fluctuation or uncertain demands is the aim of
aggregate planning. To influence demand as well as supply is the target of aggregate
planning.

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 Moreover, the strategies done in the aggregate planning according to the same
source are the following:
A. Level Plans
1. Utilizing a constant manpower and produce the same quantities each time
period
2. To absorb demand peaks and valleys, utilizing inventories and back-orders
3. Better way of utilization of inventories so as to absorb the peak of valleys
and demand

B. Chase Plans
1. By trying to keep pace with the fluctuation of demands, minimize finished
good inventories
2. Matching demands varying either output rate or level of work force .

C. Hybrid Plans
1. Building up inventory ahead of rising demand and to level extreme peaks,
use back-orders.
2. Lay offing workers during breaks.
3. Subcontracting production or to cover up short term peaks, hire temporary
workers to cover short-term peaks
4. During breaks, reassigning workers to preventive maintenance

Methods of Aggregate Planning

According to Aggregate Planning Using Transportation Method: A Case Study In Cable

Industry (n.d.) Retrieved August 13, 2018 from
http://airccse.org/journal/mvsc/papers/5314ijmvsc02.pdf , to help in the assignment of
aggregate planning, numerous techniques may be done. These techniques are usually
categorized into two: the informal trial-error and the mathematical techniques. Frequently
used are the informal techniques while mathematical techniques often serve as the basis for
comparing for alternative technique effectiveness for aggregate planning.

Methods of aggregate planning was also given by the same source and these are the
following:
1. Determining demand for each period.
2. Determining capacities (regular time, overtime) for each period.
3. Identifying organization policies that are important
4. Determining unit cost for regular time, overtime, holding inventories, back order and
other relevant cost.
5. Create and improve optional procedures and determine the total cost for each
procedure indidually.
6. If acceptable plans appear, the one that satisfies objective the most should be
chosen. Otherwise, returning to step 5 is advisable.
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Likewise, according to Teaching aggregate planning in operations management

(2015) Retrieved August 13, 2018 from
https://www.coastal.edu/media/2015ccuwebsite/contentassets/documents/wallcollege/
cbj/Teaching%20Aggregate%20Planning%20in%20Operations%20Management.pdf ,
there are four approaches that can be considered to develop aggregate plan and these are
the following:
A. Trial and Error Approaches
Developing several aggregate plans are included here and these are based
on the intuition and experience of the planner and /or as the result of analyzing
an aggregate plans and modifying it so as to try to produce a better alternative
aggregate plans. This enables the planner to evaluate visually and have an overall
cost comparison of the different plans as well as to contrast projected demand
requirements with the existing capacity.

The three basic strategies to develop in this approaches are

1. Constant workforce (Pure level)

Number of workers in variant are maintained in this strategy

throughout the planning horizon. The reason for this is for the
production rates using regular time will be constant. By means of
overtime production, subcontracting, inventory and backorders,
fluctuations in demand are met. Hiring and laying-off workers is not
allowed in this strategy. Inventory holding and shortage costs are the
largest associated costs.

2. Zero inventory (Pure chase)

To match demand period using regular time production is the
objective of the zero inventory or pure chase strategy. Overtime,
subcontracting inventories or stock outs are not allowed in this
strategy. Usually, the highest costs for this strategy are incurred
because of changes in the workforce.

3. Mixed – combination of the first two strategies

Features from the first two are the contents of a mixed strategy.
For instance, an aggregate planner is allowed to hire and lay-ff workers
and at the same time, use of inventories and stock outs are also allowed.

B. The Transportation Method of Linear Programming

To develop plans relatively different from constant workforce, zero
inventory or mixed strategies, borrowing ideas from this approach is advisable.
In developing this approach , aggregate planning is usually more complex than
regular ones.

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 C. Linear Programming
It is an optimization technique that can be utilized to solve problems
related to aggregate planning.

D. Linear Decision Rule

Quadratic approximations for all relevant costs are applied here and obtains
linear equations of the optimal policies.

Yield Management

What is yield management all about? According to Castillejos, C. J. (2017, March 10).
What is Yield Management ? - Hotel and Business. Retrieved August 13, 201 from
https://www.slideshare.net/CarlJeraldCastillejo/what-is-yield-management-hotel-and-
business, yield management refers to the process of the right capacity type to the right kind
of customer at the right price at the right time with the purpose of maximizing yield or
revenue.

Likewise, according to Yield Management (n.d.) Retrieved August 13, 2018 from
https://nptel.ac.in/courses/110106046/Module%208/Lecture%202.pdf , yield
management is also called as revenue management. It is applied by service organization
so as to maximize the yield or revenue from revenue generating, perishable and relatively
fixed capacity. In the early 1980’s, it was originated in airline industries. Yield management
is usually applied in hotels, rentals, freight transport and telecommunications.

Where does yield management applicable? According to the same source, it is

applicable in service industries with the following characteristics or conditions:
1. Relatively fixed capacity or fixed resource amount
2. Compared to high marginal capacity change cost, lower marginal cost of serving
additional customer.
3. Service demand can be portioned. Market segmentation can be made on the
following basis:
 Price sensitive consumers versus time sensitive consumers
 Market segmentation based on the arrival of customers at different times
to buy the service.
4. Service capacity is perishable
5. Service product can be sold in advance or can be reserved for customers with
different price charging.
6. Service organization faces competition from a “discount competitor”

According to to Castillejos, C. J. (2017, March 10). What is Yield Management ? - Hotel

and Business. Retrieved August 13, 201 from
https://www.slideshare.net/CarlJeraldCastillejo/what-is-yield-management-hotel-and-
business, yield management includes

 Variable pricing strategies

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These strategies are based on understanding, anticipating and

influencing behavior of consumers in order to maximize profits or revenue
from a fixed, time- limited source.

 Inventory strategies
These are inventory-focused branch. Strategic inventory control so as
to sell it to the right customer at the right time for the right price is involved
in these strategies.

 Several aspects of management control

Rate management, distribution channel management and revenue
streams management are included here.

 Multidisciplinary handling strategies

These blend elements of operations, marketing and financial
management into a highly successful new approach.

According to the same source, the three essential conditions so as yield management will
be applicable are the following:

1. There is a fixed resource amount available for sale

2. The resources sold are perishable
3. The different customers are willing to pay a different price for utilizing the same resource
amount.

Likewise, pros and cons were enumerated by the same source and these are the following:

PROS OF YIELD MANAGEMENT:

1. There is a wide price options
2. There are important solutions for companies in maximizing revenues.
3. Competitive advantages are increased through different price factor utilization
4. Sales are improved through price optimization.

CONS OF YIELD MANAGEMENT

1. For majority of customers who likes low constant prices within different time
periods, a sense of unfairness is present
2. Opportunistic behavior on the part of customers can be created.
3. Presence of perception problems from discounts to service quality.

Purpose of Operations Scheduling

Before discussing about the purpose of operations scheduling, let us define first the
term, scheduling. According to Subedi, K. (2016, July 17). Presentation on operation
scheduling. Retrieved August 13, 2018, from
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https://www.slideshare.net/kamalsubediletters/presentation-on-operation-scheduling ,
scheduling refers to prescribing of where and when each operation necessary to produce
the products is to be performed. It may also be defined as the process of establishing time
at which to start and complete each event or operation comprising a procedure. The
principal aim and objectives of operations scheduling were also given by the same source
and these are:
PRINCIPAL AIM:
For the purpose of making the production systematically arranged toward the
end of completion of all products by due date, plan the sequence of work.

OBJECTIVES:
1. Meet due date
2. Minimize WIP inventory
3. Minimize the average flow time through the systems
4. Provide for high worker/machine (time) utilization ( ideal time
minimization)
5. Reduce cost related to set up
6. Minimize costs related to production and manpower costs

Factors considered in scheduling

According to Anand, P. (n.d.). LESSON 8 PRODUCTION PLANNING AND CONTROL.

Retrieved August 13, 2018, from
http://www.academia.edu/4679944/LESSON_8_PRODUCTION_PLANNING_AND_CONTRO
L, the main aim of production schedule is to make sure that the amount of work can be
handled easily by plant and equipment without hindrance and the factors to consider are

1. Facilities of physical plant of the required type for processing the scheduled
materials.
2. The personnel or the worker who has the experience and skills in operating the
equipment and in performing the involved work type.
3. Needed purchased parts and materials

Scheduling Strategies and Activities

Scheduling is relevant tools for manufacturing where it can have a major effect on
the process productivity. Different strategies were presented in Modern Methods for
Manufacturing, Planning and Scheduling (n.d.) Retrieved August 13, 2018 from
http://www.mmscience.eu/content/file/MM_Science_201519.pdf and these are as follows:

1. Production scheduling using “Lekin”

LEKIN is a scheduling system which was developed at the Stem School of
Business, NYU. As an educational tool, it was design to introduce students in
scheduling theory and its application. Aside from it, the extensibility of the
system which allows using it algorithm development.

2. Production planning and scheduling using spreadsheets

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Production order scheduling using spreadsheets can be done with the use of
“Excel or similar. The approach utilized here is creating with the heading at the
top of each column in the form of and with universal formulas which can be copied
and pasted down a column, and work on every row.

3. Production planning and scheduling using “Asprova”

At the beginning of planning and scheduling, the production with Asprova,
a type of production module has to be picked up by the the manufacturer. The
software product “ Asprova” is divided into different modules. In each module,
there are different modules. To schedule production, the module, “Advance
Planning and Scheduling (APS) is to be used . Inputting the data which Asprova
requires for scheduling can be done directly . The said data are then imported
from an external system or text files or copied and pasted from “Microsoft Excel”.

Approaches and methodology in scheduling

According to Anand, P. (n.d.). LESSON 8 PRODUCTION PLANNING AND CONTROL.

Retrieved August 13, 2018, from
http://www.academia.edu/4679944/LESSON_8_PRODUCTION_PLANNING_AND_CONTRO
L, production scheduling process involves the following steps:

1. Preparation of master schedule

Usually this is the first step in scheduling. For each product requirement, it is
a weekly or monthly break-down for a definite time period. With this which serve as
the running total production requirement record, the entrepreneur is in better
position to shift the production from one product to another whenever there is a
change of production requirements. The master schedule serves as the basis for all
subsequent activities related to scheduling. It is followed by operator schedule. He
is the one who fixes the required time in doing work piece with the given machine
or which shows the required time to do each detailed job operation with a given
process or machine.

2. Preparation of manufacturing schedule

Manufacturing schedule is prepared in this step. It is prepared based on the

involved type of production process. When a single or few products are produced
repeatedly at regular intervals, manufacturing schedule is very useful. What will
be shown by the said schedule is the quality required of each product and the
order in which the same to be operated.

3. Scheduling of job order manufacturing

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 Through scheduling, greater importance in job order manufacturing is
acquired . Speedy execution of job at each center point is enabled through this
scheduling. Scheduling is of utmost importance to small scale industry because it
brings out operations’ efficiency and at the same tie reduces cost price. Four types
of schedules should be maintained by the small entrepreneur so as to have a close
stage scrutiny and these are the production schedule, enquiry schedule, shop
schedule and an arrears schedule . Among the four, a shop schedule is the most
relevant and most suited to the small scale industry’s needs as it enables a foremen
to see at a glance the following:

 Section’s total load

 Sequence of operation
 The stage which any job has reached

4. Loading

In this step, the execution of the schedule plan as per the route chalked out.
It includes the giving of work assignments to the operators at their machines or
workplaces. Who will do the work is determined by loading while routing
identifies where and when it shall be done is determined by scheduling.

5. Production control

It is the process in small industries wherein planning of production

operations, the exact route establishment of each individual item part or assembly,
setting, item starting and finishing, assembly or the finishing production and
releasing the necessary orders as well as initiating complicated nature are done in
advance . When the work manager, personnel manager, purchase manager and
financial controller assist in planning production activities, the production planning
and control department can function at its best.

6. Dispatching

Issue on production orders for starting the operation is involved in

dispatching. Necessary authority and conformation is given for the following
activities:
 Material movement to different work stations.
 Movement of tool and fixture which is a must for each operation.
 Starting of work on each operation
 Cost and time recording of those who involved in each operation
 In accordance with the route sheet, work movement from one
operation to another .
 Work inspection and supervision.

It is an important step because it converts production plans into production.

7. Follow-up
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In accordance with the plan, it involves the determination of the progress of

work, removal of bottlenecks in the work flow and assurance giving that the
productive operations are taking place. Production delays or deviations from the
plans are spotted through follow-up. Through this, detects in scheduling and routing
are revealed as well as the misunderstanding of orders and instructions and
underloading and overloading of work and others. In this phase, all deviations or
problems are investigated and remedial measures are undertaken so as to ensure the
work completion by the planned date.

8. Inspection

This process is done so as to ensure the quality of goods. It can be required

as effective agency of production control.

9. Corrective measures

Corrective action may involve any of the following:

 Adjusting the route
 Repairs and maintenance of machinery and equipment
 Rescheduling of work
 Control over inventories of the cause of deviation
 Poor performance of employees

In this phase, certain personnel decisions like transfer, training, demotions

and etc may have to be taken. To handle peak loads, alternate methods may be
suggested.

Service scheduling

According to Operations Management for Service Providers (n.d.) Retrieved August

13, 2018 from http://open.lib.umn.edu/exploringbusiness/chapter/11-6-operations-
management-for-service-providers/, scheduling the activities needed to transform raw
materials into finished goods in manufacturing is the focus of managers while in the service
organization, manager’s focus is on worker scheduling so that they are available to handle
customer demand which is a fluctuating one.

According to Employee Scheduling in Service Industries with Flexible Employee

Availability and Demand (n.d.) Retrieved August 13, 2018 from
https://pdfs.semanticscholar.org/2e17/77762d73da7f830a17ae353ba4295488b9c
7.pdf, one of the most relevant concerns in both service and manufacturing organizations is
the efficient workforce management. It has direct effect on the day -to-day operation’s
productivity and the service quality provided. Because of employee utilization which has
high costs, problem in scheduling employee has attracted considerable amount of research.

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 Employee satisfaction is a significant sustainability factor and high service quality.
Because of this, the same source proposed a scheduling program which will solve
problems with the following characteristics:

 Employees have flexible contracts. Strict shift will not be imposed instead
each individual employee has contract with specified available working day
in a week or month. However, the said flexibility in one’s working pattern will
constrains the availability of employees throughout the planning horizon.

 With the use of service requirements, demand for services is given. In each
requirement, start and completion service time, the skill level which is needed
to give the said service and the weight which will determine the level
requirement priority are included.
 There are restrictions that are derived from the laws and regulations like rest
time between work assignments, maximum time which a jobholder can work
within a week and others will be given to employee contracts.
 Fairness between the needs of employees to be determined and observed.

The scheduling model proposed by the same source has the following objectives:

 Run down the service demand number that is not satisfied

 Utilization of total contracted hours
 Emphasizing the employee satisfaction by assigning tasks which are most
applicable to the employee skill level by minimizing overtime assignments
 Emphasizing fairness between and among employees by making work
assignments which are fair and balanced during holidays.

References and Supplementary Materials

Books and Journals

1. Aggregate Planning (n.d.) Retrieved August 13, 2018 from
https://en.wikipedia.org/wiki/Aggregate_planning
2. Aggregate Planning Using Transportation Method: A Case Study In Cable Industry
(n.d.) Retrieved August 13, 2018 from
http://airccse.org/journal/mvsc/papers/5314ijmvsc02.pdf
3. Teaching aggregate planning in operations management (2015) Retrieved August
13, 2018 from
https://www.coastal.edu/media/2015ccuwebsite/contentassets/documents/wallc
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ollege/cbj/Teaching%20Aggregate%20Planning%20in%20Operations%20Manage
ment.pdf
4. Castillejos, C. J. (2017, March 10). What is Yield Management ? - Hotel and Business.
Retrieved August 13, 201 from
https://www.slideshare.net/CarlJeraldCastillejo/what-is-yield-management-hotel-
and-business
5. Yield Management (n.d.) Retrieved August 13, 2018 from
https://nptel.ac.in/courses/110106046/Module%208/Lecture%202.pdf
6. Subedi, K. (2016, July 17). Presentation on operation scheduling. Retrieved August 13,
2018, from https://www.slideshare.net/kamalsubediletters/presentation-on-
operation-scheduling
7. Anand, P. (n.d.). LESSON 8 PRODUCTION PLANNING AND CONTROL. Retrieved
August 13, 2018, from
http://www.academia.edu/4679944/LESSON_8_PRODUCTION_PLANNING_AND_CO
NTROL,
8. Operations Management for Service Providers (n.d.) Retrieved August 13, 2018
from http://open.lib.umn.edu/exploringbusiness/chapter/11-6-operations-
management-for-service-providers/
9. Modern Methods for Manufacturing, Planning and Scheduling (n.d.) Retrieved August
13, 2018 from http://www.mmscience.eu/content/file/MM_Science_201519.pdf
10. Employee Scheduling in Service Industries with Flexible Employee Availability and
Demand (n.d.) Retrieved August 13, 2018 from
https://pdfs.semanticscholar.org/2e17/77762d73da7f830a17ae353ba4295488b9c
7.pdf
Online Supplementary Reading Materials

1. Aggregate Planning and Forecasting. (2018, February 15). Retrieved August

12, 2018, from https://online.ben.edu/programs/mba/resources/aggregate-
planning-and-forecasting
2. Aggregate Planning and SOP (n.d.) Retrieved August 12, 2018 from
http://fac.ksu.edu.sa/sites/default/files/app_ch13_print.pdf
3. Yield Management (n.d.) Retrieved August 13, 2018 from
http://shodhganga.inflibnet.ac.in/bitstream/10603/41504/11/11_chapter%2
01.pdf

Online Instructional Videos

1. W. (2015, April 07). Aggregate Planning. Retrieved August 13, 2018, from
https://www.youtube.com/watch?v=i8Hb9nqoBGk
2. What is AGGREGATE PLANNING? What does AGGREGATE PLANNING mean?
AGGREGATE PLANNING meaning. (2017, March 15). Retrieved August 13, 2018,
from https://www.youtube.com/watch?v=rZxqdHhZMBw
3. Y. (2016, November 01). SCM 2 1 Aggregate Production Planning Strategies.
Retrieved August 13, 2018, from
https://www.youtube.com/watch?v=T7dxyEeswVw

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