Presentation on theme: "Aggregate Planning FAISAL FARIS BIN RAHIM"— Presentation transcript:
1Aggregate Planning FAISAL FARIS BIN RAHIM MOHD HANEESYAH BIN CHE HASSANNOR SYAKIRA BT ZAUKIFLIANISAH BT ABD LATIFF
2Outline Costs in aggregate planning Solving in aggregate planning problemLinear decision rule (LDR)Modeling management behavior
3Costs in Aggregate Planning Smoothing CostsHolding CostsShortage CostsRegular CostsOvertime & Subcontracting CostsIdle Time Costs
4Issues in Aggregate Planning Smoothing – refer to the cost of changing production and workforce level between periods. (Firing & Hiring Costs)Bottleneck Problem – Inability to respond to sudden changes in demand as a result of capacity restrictions (High demand in one period & breakdown of a vital piece of equipment)
5Issues in Aggregate Planning Planning Horizon- Number of periods for which the demand forecast and aggregate planning are done.If it is too small ( current aggregate plan may lead into not meeting the demand beyond planning horizon)If it is too large ( forecasts into far future will be less accurate)End-of-horizon effect
6Cost in Aggregate Planning Smoothing CostHiring costs (advertising, interviewing & training)Firing costs ( lack of labor force in future)Assumed to be a linear function of the number of workers
7Cost in Aggregate Planning Cost of Changing the Size of the WorkforceFiring costs Hiring costs
8Cost in Aggregate Planning Holding CostsOccurs as a result of having capital tied up in inventory.Assumed to be linear in the level of inventoryFor aggregate planning, it is expressed in terms of dollars per unit held per planning period; (e.g. 100 $/month for one item)
10Cost in Aggregate Planning Shortage CostsShortage occurs when demands are higher than anticipatedFor aggregate planning, it is assumed that excess demand is backlogged and filled in a future period.In a highly competitive situation, the excess demand may be lost---lost sales.
11Cost in Aggregate Planning Regular Time CostsInvolve the cost of producing one unit of output during regular working hoursOvertime or Subcontracting CostsCosts of production units not produced on regular time.Overtime-production by regular-time employees beyond work day;Subtracting-the production of items by an outside supplier;
12Cost in Aggregate Planning Idle Time CostsUnder utilization of workforce
14BASIC RELATIONSHIPS Workforce Number of workers in a period = Number of workers at end of previous period + Number of new workers at the start of the period- Number of laid off workers at start of the periodInventoryInventory at the end of a period = Inventory at end of the previous period + production in current period – Amount used to satisfy demand in current periodCostCost for a period = Output Cost( Reg + OT+ Sub) +Hire/Lay off Cost +Inventory Cost +Back-order Cost
15PROBLEM 1A firm producing one product is scheduling (allocating) its January-March production capabilities. Part of the decision involves scheduling overtime work.A unit produced on overtime costs an extra $300. Similarly, a unit made one month before it is needed incurred an inventory carrying cost of $100; two months costs $200 per unit.The units delivered according to this schedule follows:January - 80 units.February units.March units.Production capacities are:Formulate the production scheduling problem as a transportation problem and solve it by the Northwest Corner Rule.Regular TimeOvertimeJanuary10050February40March30
16SOLUTION: Demand for Supply from January February March Unused capacity (dummy)Total capacity available (Supply)Regular8020100Overtime50406030Demand12015070420
17PROBLEM 2 Period Demand forecast Planned production The production planner of Omega Research, a maker of industrial lenses, devised the following level output aggregate plan for the next 4 periods. Calculate the projected beginning and ending inventory for each period. Possible backorders may be shown by a negative number.PeriodDemand forecastPlanned productionBeginning inventoryEnding inventory140,00048,0009,000270,000330,000455,000
18SOLUTION: Period Demand forecast Planned production Beginning inventoryEnding inventory140,00048,0009,00017,000270,000-5,000330,00013,000455,0006,000Note that ending inventory = beginning inventory + planned production - demand forecast
19Develop a chase demand strategy that gradually increases the inventory level to 14,000 units by the end of period 4. Show the effect of the plan on inventory level for each period.Inventory is increased by 1250 units in each period: (14, ,000)/4PeriodDemand forecastPlanned productionBeginning inventoryEnding inventory140,00041,2509,00010,250270,00071,25011,500330,00031,25012,750455,00056,25014,000
20Assume that the company currently has 10 employees and each employee, on average, can produce 4,000 units per period. Develop a staffing plan showing the number of employees that should be hired or laid off at the beginning period, using the following worksheet format.PeriodRequired work forceRequired number of employeesAvailable at the end of previous periodHireLayoff1234
21SOLUTION: Period Required work force Required number of employees Available at the end of previous periodHireLayoff141,250/4,000= 10.310271.250/4,000= 17.8188331,250/4,000= 7.8456,250/4,000= 14.1146
26a) Compute the values of the aggregate production level and the number of workers that the company should be using in the current period:Solution:Pt= 0.463(150) (164) (185) (193) (180)– 0.464(45)+ 153Ans:………………..W t = 0.010D t D t D t D t W t-1 – 0.01I t-1 – 2.09Ans:………………….
27The result is optimal production in period t will be form. THE ADVANTAGESThe result is optimal production in period t will be form.
28convincing argument to justify such cost curves. THE DRAWBACKSThe main weakness of the method is that it requires symmetric cost functions and there is noconvincing argument to justify such cost curves.The quadratic lead to LDR there is no guarantee that the solution will be non-negative.
29Modeling Management Behavior Created by Bowman (1963)Construct model for controlling production levelAvoids problem arise when using traditional modeling methodExp : Avoids determine values of parameter that difficult to measureExp : determining the accuracy of assumption that required by model.
30Pt = Dt + α(Pt-1 – Dt) + β(IN – It-1) Pt = Dt for 1 ≤ t ≥ T1Pt = Dt + α(Pt-1 – Dt)Not given : β, IN , α and a2Not given : aPt = Dt + α(Pt-1 – Dt) + β(IN – It-1)3D = forecast demand P = production levelα = smoothing factor / exponential smoothingIN = Smoothing for inventory level β = Relative weighta = for determination of P
31ExampleUsing the following values of management coefficient for Bowman smoothed production model, determine the production level should plan in the coming year with demand of 100,000 packages. Assume current production level is 150,000 packagesGiven :Pt-1 = 150,000 a1 = a2 =a3 = a4 = a5 =α = 0.6 β = 0.3 IN = 40,000Dt = 130,000 It-1 = 20,000