Welcome to OPMT 620

Operations management
 Week 8
Important Assessment Information

Chapters 12: Aggregate Planning & Master Scheduling

Chapter 6S: Linear Programming

Connect Quizzes
Quiz 6 (Ch 7 & 5S) is out of 13 (instead of 14).
• One unsolvable question is removed from the mix.

Quiz 7 (Ch 11)

• Complete on Sunday, Aug 27.

Quiz 8 (Ch 12 & 6S)

• Complete on Sunday, Sep 3.

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Individual Case Study 2
Due date extended from August 27 to September 3.

Tips for a better case study report:

1. Answer the questions. Don’t go off on tangents.

2. This is a case study. Use case information to back up your answer.
3. Don’t make generalized statements without references.

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Final Exam Information
Chapter Topic
Emphasis on these
1 Introduction to Operations Management chapters.
2 Competitive, Strategic Planning and Productivity
3 Demand Forecasting • Final Exam on Friday, Sep 15.

5 Strategic Capacity Planning • 30 Multiple Choice Questions

7 Work/Job Design (6 Calculations)
9 Management of Quality
• 90 Minutes time limit
10 Statistical Quality Control
12 Aggregate Operations Planning and Master Scheduling • One cheat sheet permitted
14 Just-in-Time and Lean (letter size, double sided only)

15 Supply Chain Management

16 Job and Staff Scheduling
18 Waiting-Line Analysis
Chapter 12 Key Topics
1. Aggregate Planning
2. MPS Planning
3. Yield Management
4. Available to Promise (ATP)
Planning Horizons
Organizations usually make capacity and production decisions on three levels: long term,
intermediate term, and short term.

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Figure 12-1
Production Planning Hierarchy

Figure 12-2
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Sales and Operations Planning (S&OP)
Integrate sales forecasts with operations plans.

Reconcile supply, demand, and new product plans and tie

them to strategic plan.

Consider detail & aggregate (product family) level.

Usually once a year with monthly updates

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Aggregate Operations Planning
Monthly planning for all the products in same family (and facility) for
the next 12 months.

Goal: to achieve a production plan that will satisfy total demand at

minimum cost

Focus on group of similar products or product line.

Example: planners in an ice cream plant would not focus on

flavours and brands of ice cream. Plan lump all tubs of the same
size together.

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Demand Options

Early Back
orders orders

Promotion Exporting

Comple-
Pricing
Manage mentary
Demand products

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Capacity Options

Part-time
workers
Overtime/ Stockpile
idle time inventories

Hire temp. Adjust Sub-

workers Capacity contracting

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Aggregate Planning Inputs

Demand
Resources forecast Policies Costs

Production Overtime
rates Inventory holding

Inventory Max. pt Backorders

capacity workers
Hiring
Inventory
levels Wage rates

Overtime

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Aggregate Planning Outputs
Total cost Projected
of a plan levels of:

Inventory

Output

Employment

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Basic Aggregate Strategies
• Level output/workforce strategy:
• Maintain steady rate of output
• Meeting variations in demand with inventories
• Only for durable goods
• Chase demand strategy:
• Matching capacity to demand
• Planned output set at forecasted demand
• Meeting variations in demand with overtime,
subcontracting & part-time/temporary workers
• Use a Combination (mixed)

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Chase demand vs Level ouput Strategy

Figure 12-3 16
Aggregate Services Planning
Services occur when they are rendered.

No inventory or backorder options.

Service capacity is perishable.

For labour intensive services:

• Measure the aggregate plan in terms of time
• Use Full Time Equivalent (FTE)

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Yield Management
Use variable (dynamic) pricing to manage service
pricing.

Prices set relative to capacity availability

• Price discounts during periods of low demand

• Higher prices during peak periods

What are some dynamic pricing examples?

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Aggregate Plan to Master Schedule
Master Production Schedule (MPS): The anticipated build schedule
stating which end items are to be produced, when, and in what
quantities.
Aggregate
Planning
Breaking down the aggregate
production plan into specific
product production schedules.
Disaggregation

Master
Schedule
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Aggregate Plan to Master Schedule
Master Production Scheduling Process

Inputs Outputs

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Projected On-hand Inventory
Use the larger
amount of
forecast and
customer order

Projected
Inventory from Current week’s
on-hand
previous week requirements
inventory

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MPS - Inputs

Figure 12-6
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MPS – Customer Orders

Figure 12-7

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Example: MPS

Figure 12-8
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Example: MPS

Figure 12-10 26
Example: MPS

Figure 12-11

Available-to-Promise (ATP) = Planned Production Quantity – Look ahead customer orders

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Stabilizing the MPS: Time Fences
Points in time that separate zones or phases of a master
production schedule (planning horizon)

 Changes  Trade-off (vs.  Changes

discouraged sacrifice) managed
 Need top mgmt  Middle mgmt without mgmt
approval approval approval

Figure 12-12
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Chapter 6S Key Topics
1. Introduction to Linear Programming (LP)
What is Linear Programming (LP)?
A quantitative method to obtain optimal solutions to problems
that involve limited resources.
Example 1: How should a farmer allocate his land among several crops to
maximize profit, considering factors like soil suitability, labor constraints, and
expected market prices for each crop?
Example 2: What is the optimal mix of products a factory should produce to
maximize its profit, given constraints on raw materials, labor, and production
capacity?
Example 3: How can a shipping company best route its vehicles to minimize fuel
costs, given a set of delivery locations and distances between them?

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Linear Programming Model
Feasible solution space: set of all feasible combinations of decision
variables as defined by the constraints.
Parameters: coefficients of decision variables.

Example 6S-1 31
Linear Programming Assumptions
1. Linearity:
• The impact of decision variables is linear in constraints and
objective function
2. Divisibility:
• Non integer values of decision variables are acceptable
3. Certainty:
• Values of parameters are known and constant
4. Non negativity:
• Negative values of decision variables are unacceptable

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Plotting Constraints

Figure 6S-1
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Plotting Constraints

Figure 6S-2
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Feasible Solution Space

Figure 6S-3 Figure 6S-4

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Feasible Solution Space

Figure 6S-6

Figure 6S-5

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Plot an Objective Function Line

Figure 6S-7
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Plot an Objective Function Line

Figure 6S-9
Figure 6S-8
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Optimal Solution at Corner Point

Figure 6S-10
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Redundant Constraints
Redundant constraint: does not form a unique
boundary of feasible solution space
Binding constraint: forms optimal corner point of
feasible solution space

Figure 6S-11
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Multiple Optimal Solutions
• When the objective function line is parallel to one of the constraint
lines that is a boundary of the feasible space.
• Every combination of x1 and x2 on the segment represents an optimal
solution.

Figure 6S-12
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