Aggregate Planning How many workers are needed each quarter? (each worker works 520 hours per quarter) Labor hrs needed: # workers needed: Labor Standard # units1234 6 hrsPrinters8,00012,00010,0006,000 2 hrsCD drives20,00016,000 12,000 3 hrsDVD drives15,00020,00012,00015,000 Quarter
Aggregate Planning 2 basic strategies: Matching Demand –matching capacity with aggregate demand –carry little inventory –change work force size Level Capacity –stable work force size –use inventory or backlog as buffer
Level Capacity: Produce-to-stock For each period, Beg.Inv. + Production = Demand + End.Inv. Given: beg. inv. in Qtr. 1 = 24; CC = $15 per unit per qtr. QuarterDemandProduceBeg.Inv.End.Inv. 18824 262 345 477
Level Capacity: Produce-to-order For each period, Production - Demand = Beg.Backlog - End.Backlog Given: beg. BL in Qtr. 1 = 31 QuarterDemandProduceBeg.BLEnd.BL 14231 278 384 463
Quarterly demands for the coming year are 145, 150, 226, and 95 for a make-to-stock product. The company uses a level capacity plan. In any quarter that demand cannot be met by production and inventory on hand, a costly stockout will occur. What is the least amount of beginning inventory for the first quarter that can be used without having any stockout during the year? Show what the ending inventory level for each quarter would be. QuarterDemandProduceBeg.Inv.End.Inv.Beg.Inv.End.Inv. 1145 2150 3226 495
Level Capacity Plan or Matching Demand Plan Quarterly demand forecasts: 85, 107, 136, 124 Carrying cost rate: $68 per unit left at end of each qtr. Hiring/training cost rate: $125 per new person Layoff cost rate: $50 per person Initial inventory = 0 Currently 57 employees prior to Quarter 1 Labor standard = 250 hours per unit Each employee works 520 hours per quarter Which costs less, a level capacity plan or a matching demand plan?
Level Capacity Plan QuarterDemandProduceBeg.Inv.End.Inv. 1850 2107 3136 4124
Matching Demand Plan QuarterDemandProduce Lab.Hrs. Needed # of Employ# Hired # Layoffs 185 2107 3136 4124
Rough-Cut Capacity Planning Labor standard = 24 hours per unit Weekly capacity = 5000 labor hours 12345Total Gross # units Requirements 100200 250280 Load (hrs) Capacity (hrs) Underload Overload Week
Straight-time vs. Overtime vs. Outsourcing Straight-time cost rate = $10 per hour Straight-time capacity = 20,000 hours per quarter Labor standard = 4 hours per unit Overtime cost rate = time-and-a-half Overtime capacity = 20% of straight-time capacity Outsourcing capacity = 1,000 units Outsourcing cost = $70 per unit (plus materials) Forecasted demand next quarter = 6,700 units Develop a production plan that minimizes total cost.
Straight-time vs. Overtime vs. Outsourcing Straight-timeOvertimeOutsourcing Unit cost ($) Capacity (units) Produce (units) Total cost ($)