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CHAPTER TWELVE AGGREGATE PLANNING Chapter 12 Aggregate Planning.

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Presentation on theme: "CHAPTER TWELVE AGGREGATE PLANNING Chapter 12 Aggregate Planning."— Presentation transcript:

1 CHAPTER TWELVE AGGREGATE PLANNING Chapter 12 Aggregate Planning

2 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Overview of Planning Levels Long-range plans –Long term capacity –Location/layout Intermediate plans (General levels) –Employment –Output Short-range plans (Detailed plans) –Machine loading –Job assignments

3 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Corporate strategies and policies Economic, competitive, and political conditions Aggregate demand forecasts Business Plan Production plan Master schedule Establishes production and capacity strategies Establishes production capacity Establishes schedules for specific products Figure 12-1 Planning Sequence

4 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Conditions Favoring the Use of Aggregate Planning The market demand for the output of the operations system is forecasted to be fluctuating or changing over an intermediate planning horizon (6-18 months) The firm has some alternatives available to change the intermediate- or short-term capacity of the operations system The planner can model the relevant relationships and costs

5 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Description of Aggregate Planning Management selects the alternative or set of alternatives the firm plans to use to cope with the forecasted changing or fluctuating market demand The typical objective is to select the plan (a set of alternatives) which minimizes related costs over the planning horizon The result is the quantity and scheduling of aggregate production over the planning horizon

6 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Inputs to the Aggregate Planning Process A forecast of aggregate demand covering an intermediate-term planning horizon (6-18 months) The alternative means available to adjust short-to medium-term system capacity, the costs of using each alternative and the extent each alternative impacts capacity The current status of the system in terms of workforce level, inventory level and production rate

7 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Outputs of the Aggregate Planning Process A production plan: aggregate decisions for each period in the planning horizon about –workforce level –inventory level –production rate Projected costs of the production plan over the planning horizon

8 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management An Overview of Aggregate Planning Aggregate plan Demand forecasts, orders (Chapter 3) Master production schedule & MRP systems (Chapter 14) Master production schedule & MRP systems (Chapter 14) Detailed Work Schedules (Chapter 17) External capacity (subcontractors) Inventory on hand Raw materials available Work Force Market Demand Research and Technology Product decisions (Chapter 4) Process planning & capacity decisions (Chapter 5)

9 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Demand Options in Aggregate Planning Alternatives that may reduce the forecasted demand fluctuations –pricing –promotion –backordering during high demand periods –new demand, e.g., counter seasonal product mixing

10 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Capacity Options in Aggregate Planning Alternatives that may be available to change intermediate- or short-term capacity –varying work force size by hiring or layoffs –varying capacity through the use of overtime or idle time –using part-time workers –using contract workers –changing inventory levels –subcontracting

11 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Summary of Planning Techniques

12 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Graphic or Informal Approach Provides a framework for evaluating an aggregate plan Easy to use and understand Graphs of forecasted demand may assist planner in generating a plan Model is flexible No optimization Static - relies on the planner to generate a plan

13 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Forecast and Average Forecast Demand Forecast Demand Production Rate/Working Day Average of Forecast Demand

14 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Cumulative Forecast Forecast Demand Cumulative Demand

15 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Cumulative Forecast Forecast Demand Cumulative Demand Cumulative Forecasted Demand Production Plan

16 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Cumulative Forecast Forecast Demand Cumulative Demand Cumulative Forecasted Demand Production Plan

17 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Basic Strategies for Meeting Uneven Demand Maintain a level workforce Maintain a steady output rate Match demand period by period Use a combination of decision variables

18 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Basic Strategies Examined Level output or capacity: –Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options. Chase demand: –Matching capacity to demand; the planned output for a period is the expected demand for that period.

19 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Basic Relationships Period-ending inventories or backlogs are determined using the inventory balance equation A shortfall between the amount available to the market [output during the period plus beginning inventory] and the market demand is made up (buffered) by inventory, backlog, overtime, part- time labor and/or subcontracting

20 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Cost Calculations Output Regular Overtime Subcontract Hire/Layoff Hire Layoff Inventory Back orders regular cost/unit x regular output quantity overtime cost/unit x overtime quantity subcontract cost/unit x subcontract quantity cost/hire x number hired cost/ layoff x number laid off carrying cost/unit x average inventory back order cost/ unit x number of backorder units

21 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Total Cost for a Period Output cost + Hire/Lay off cost + Inventory cost + Back-order cost Regular + Overtime + subcontract

22 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Aggregate Planning in Services Services occur when they are rendered Demand for service can be difficult to predict Capacity available can be difficult to predict Labor flexibility can be an advantage in services

23 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Disaggregating the Aggregate Plan Breaking down the aggregate plan into specific product requirements in order to determine labor requirements, materials, and inventory requirements The result is a master schedule –quantity and timing of specific end items for a scheduled horizon –used to do rough-cut capacity planning

24 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Master scheduling Beginning inventory Forecast Customer orders Inputs Outputs Projected inventory Master production schedule Uncommitted inventory Figure 12-5 Master Scheduling Process

25 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Beginning Inventory Customer orders are larger than forecast in week 1; projected on-hand is = 31 Forecast is larger than customer orders in week 2; projected on-hand inventory is = 1 Forecast is larger than customer orders in week 3; projected on-hand inventory is 1-30 = -29 Projected On-hand Inventory Figure 12-8

26 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Projected On-hand Inventory with MPS Figure 12-10

27 CHAPTER TWELVE AGGREGATE PLANNING MTSU Management Available-to-Promise Inventory Figure 12-11


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