x © + @ Q OM/TOM: Operations Management and TQM Aggregate Planning & Master Scheduling C Group 9 )Introduction © > G Q Whats aggregate planning? Aggregate Planning + Intermediate-range capacity planning that typically covers a tie horizon of 2 to 18 months + Useful for organizations that experience seasonal, or other variations in demand + Goal: Achieve a production plan that will effectively utilize the organization's resources to satisfy in demand Sales & operations planning (S&OP) intermediate-range decisions to balance supply and demand, integrating financial and operations planning.Introduction © + QQ The Planning Sequence eel ee Pole conditions STTSINSSRM EME establishes operations & capacity strategies Aggregate Plan establishes operations capacity WER Cclmsteritete[8[t29) establishes schedules for specific products eer Beene! teers Aggregate demand Soler igAggregate Planning © 2 C Q Why Use Aggregate Planning Why do organizations need to do aggregate planning? ¢ Planning -it takes time to implement plans « Strategic -aggregation is important because it is not possible to predict with accuracy the timing and volume of demand for individual items + It is connected to the budgeting process « It can help synchronize flow throughout the supply chain; it affects costs, equipment utilization; employment levels; and customer satisfaction‘Aggregation © > QQ Insert your topic here Aggregation -The plan must be in units of measurement that can be understood by the firm's non-operations personnel + Aggregate units of output per month ¢ Dollar value of total monthly output « Total output by factory « Measures that relate to capacity such as labor hoursDeating with Variation © > QQ Insert your topic here Dealing with Variation ¢ Most organizations use rolling 3,6,9 and 12 month forecast « Forecast are updated periodically, rather than relying ona once-a-year forecast + This allows planners to take into account any changes in either expected demand or expected supply and to develop revised plansDeating with Variation © > QQ Insert your topic here Dealing with Variation ¢ Strategies to countervariation: + Maintain a certain amount of excess (buffer) capacity to handle increases in demand * Maintain a degree of flexibility in dealing with changes * Hiring temporary/ retired workers + Using overtime/ under (idle) time « Wait as long as possible before committing to a certain level of supply capacity * Schedule products or services with known demands first * Wait to schedule other products until their demands become less uncertainTa) Overview of AgaregatX fam © C Q Insert your topic here Overview of Aggregate Planning Forecast of aggregate peveiche Update the demand for the Corer pao aggregate plan intermediate Poee comane periodically requirements (eg., monthly) range© > @ Q BASIC STRATEGIES FOR MEETING UNEVEN DEMAND. 11.2 BASIC STRATEGIES FOR MEETING UNEVEN DEMANDS < © > @ Q BASIC STRATEGIES FOR MEETING UNEVEN DEMAND. (41.2 BASIC STRATEGIES FOR MEETING UNEVEN DEMAND) List of the main strategies for meeting uneven demand: 1. Maintain a level workforce (level capacity). 2. Maintain a steady output rate (level capacity). 3. Match demand period by period (chase demand). 4. Use a combination of decision variables.Strategy «© > C Q Aggregate Planning Pure Strategies LEVEL CAPACITY STRATEGY « Leveling capacity means fixing capacity (production) at a constant level (generally the average demand) throughout a period regardless of fluctuations in forecast demand. + With the level strategy, production remains at a constant level in spite of demand variations. The use of a level strategy means that a company will produce at a constant rate regardless of the demand level. CHASE DEMAND STRATEGY * Matching capacity to demand; the planned output for a period is set at the expected demand for that period.ee < © G Q Choosing a Strategy Whatever strategy an organization is considering three important factors, which are the: COMPANY POLICY a> d=]Riae COSTSee > < «© > @ Q Choosing a Strategy Aggregate planning pure strategy Level Production Chase Demand LEVEL APPROACH Advantages: + Stable output rates and workforce Disadvantages: + Greater inventory costs + Increased overtime and idle time + Resource utilizations vary overtime CHASE APPROACH Advantages: + Investment in inventory is low + Labor utilization in high Disadvantages: +The cost of adjusting output rates or workforce levels© > CG Q TECHNIQUES FOR AGGREGATE PLANNING 11.3 TECHNIQUES FOR AGGREGATE PLANNING@ cee ne craerts x © + G Q TECHNIQUES FOR AGGREGATE PLANNING C 11.3 TECHNIQUES FOR AGGREGATE PLANNING ») ¢ INFORMAL TRIAL-AND-ERROR TECHNIQUES ¢ MATHEMATICAL TECHNIQUESChapter 13 a + © + G Q TECHNIQUES FOR AGGREGATE PLANNING A general procedure for aggregate planning consists of the following steps: 4. Determine demand for each period. 2. Determine capacities (regular time, overtime, subcontracting) for each period. 3. Identify company or departmental policies that are pertinent 4. Determine unit costs for regular time, overtime, subcontracting, holding inventories, back orders, layoffs, and other relevant costs. 5. Develop alternative plans and compute the cost for each 6. If satisfactory plans emerge, select the one that best satisfies objectives. Otherwise, return to step 5.Chapter 13 xs © + G Q TECHNIQUES FOR AGGREGATE PLANNING s[ateledeLee © > @ Q Trial-and-Error Techniques Trial-and-Error Techniques Using Graphs and Spreadsheets Trial-and-error approaches consist of developing simple tables or graphs that enable planners to visually compare projected demand requirements with existing capacity. Alternatives are usually evaluated in terms of their overall costs. The chief disadvantage of such techniques is that they do not necessarily result in the optimal aggregate plan.Tritand Error © > © Q Trial-and-Error Techniques Trial-and-Error Techniques Using Graphs and Spreadsheets Pe ee er er ict 20 20 S00 eo) eo0 a) om amet pn een i -ewanas Soon = Soper ey ~ Speen petite ean : ‘Back orders $5 per skateboard per period : ee ‘SPREADSHEET ‘CUMULATIVE GRAPHMathematical Technique [aw © > Q Mathematical Techniques Mathematical Techniques LINEAR PROGRAMMING MODELS + Linear programming (LP) models are methods for obtaining optimal solutions to problems involving the allocation of scarce resources in terms of cost minimization or profit maximization SIMULATION MODELS +A number of simulation models have been developed for aggregate planning The essence of simulation is the development of computerized models that can be tested under a variety of conditions in an attempt to identify reasonably acceptable (although not always optimal) solutions to problemsMathematical Technique X [ium <> @ Q Mathematical Techniques SUMMARY OF PLANNING TECHNIQUES Ty RT yea) Pole ta og tiy Spreadsheet Heuristic (rial and error) Intuitively appealing, easy to understand; solution not necessarily optimal Linear programming Optimizing Computerized; near assumptions not always valid ‘Simulation ‘Heuristic (trial and error) Computerized models can be examined under a variety of conditionsTitle Page x © + @ Q OM/TOM: Operations Management and TQM 11.4 Aggregate Planning in Services and Disaggregating the Aggregate PlanTitle Page © > CQ Where we can use aggregate planning in services Aggregate Planning in Services Hospitals + Aggregate planning used to allocate funds, staff, and supplies to meet the demands of patients for their medical services. Airlines + Aggregate planning in this environment is complex due to the number of factors involved. * Capacity decisions must take into account the percentage of seats to be allocated to various fare classes in order to maximize profit or yield. Restaurants + Aggregate planning in high-volume businesses is directed toward smoothing the service rate, determining workforce size, and managing demand to match a fixed capacity.Title Page © > © Q Aaggregate Planning in Services Aggregate Planning in Services « The resulting plan in services is a time-phased projection of service staff requirements. + Aggregate planning in manufacturing and services is similar, but there are some key differences related to: 1. Demand for service can be difficult to predict. 2. Capacity availability can be difficult to predict. 3. Labor flexibility can be an advantage in services. 4. Services occur when they are rendered.Title Page © 3 C Q Yield Management Yield Management -An approach to maximizing revenue by using a strategy of variable pricing; prices _—_ are set relative to capacity availability. + During periods of low demand, price discounts are offered + During periods of peak demand, higher prices are charged « Users of yield management include; (Airlines, Restaurants, hotels)Title Page «© — QQ Disaggregation process Disaggregation Aggregate —»> Deen Master ela) ScheduleTitle Page © ~ C Q Disaggregating the aggregate plan Disaggregating the Aggregate Plan For example, a lawn mower manufacturer may have an aggregate plan that calls for 200 riding mowers in January, 300 in February, and 400 in March. Aggregate Plan Month Planned Out Jan Feb March 200 300 400 Master Schedule Month Planned Out SS cS RMa | 100 | 100 | 100 RMb 75 | 150 | 200 RMc. 25 50 | 100 Total | 200 | 300 | 400@ _westerscneouunc x © + @ Q OM/TOM: Operations Management and TQM Master Scheduling C Reporter: Julia Renee T. Nagtalone@ Detinton x © + Q Q MASTER SCHEDULING Master Schedule + the result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon.e@ x © + Q Q MASTER SCHEDULING Master Schedule + determines quantities needed to meet demand. + may not be the same as the forecast due to inventory plans. + interfaces with marketing, capacity planning, production planning, and distribution planning.ek oe Master Scheduler X © + @ Q MASTER SCHEDULING Master Scheduler + evaluates impact of new orders + provides delivery dates for orders + deals with problems: a. production delays b. Revising master schedule c. insufficient capacity© + @ Q OM/TOM: Operations Management and TQM 11. 7 - The Master Scheduling Process C Reporter: Victo, Jose Antonio B. )Msp © + @ Q The Master Scheduling Process * the process that helps manufacturers plan which products and related quantities to produce during certain periods INPUTS OUTPUTS Beginning Inventory. ——+ MASTER ——+ Projected Inventory Forecast —* SCHEDULING 9 —— Mester Production Schedule Customer Orders = ——* —— Uncommitted Inventory + Rough-cut Capacity Planning - approximate balancing of capacity and demand to test the feasibility of a master schedule.a © @ Q The Master Scheduling Process TIME FENCE FROZEN - near-term phase that is so soon that delivery of a new order would be impossible, or only possible using very costly or extraordinary options ‘SLUSHY - Order entry in this phase necessitates trade-offs, but is less costly or disruptive than in the frozen phase |< —trozen slushy > liquid | (fim orfixed) (somewhat (open) LIQUID - New orders or cancellations can be entered firm) with ease, Order promise dates are tentative, and will be firmed up with the passage of time when orders are * points in time that separate phases of amaster schedule jr tne fim phase of the schedule horizon, planning horizonInputs & Outputs <> © Q The Master Scheduling Process OUTPUTS Available-to-promise (ATP) inventory - uncommitted inventories usomeranee |S, | alow | as] o (cones ete or | ee Irvertry } wes. 70 7 | 7 ‘hatte 7 + ¢ +] fram wvertny | % o nln {Creare}Decca Inputs and Outputs >< fm <> © Q The Master Scheduling Process TABLE 2: od from a Previous Cy (ors) De A a i 1 64 3 31 3t 2 3 x 1 1 3 1 x 29 + mM = 4 4 a x 1 " 5 " “0 2 oe | ai 6 a “ 1 1 7 1 “ 29 + mM = 3 8 a1 “ 9 7 6