Operations Fall 2015 Bruce Duggan Providence University College

Summary Sales and operations planning and the aggregate plan translate corporate strategic plans into broad categories of workforce size, inventory quantity, and production levels. Demand variations are a fact of life, so the planning system must include sufficient flexibility to cope with such variations. 6-20

Know The Answers To These Questions 1.What exactly is sales and operations planning? 2.What is the difference between the chase, variable hours, and level production planning strategies? 3.What are some things that can be done to avoid laying off full-time employees when demand fluctuates? 4.How is aggregate planning different for services- versus goods- producing organizations? 6-21

Sales and Operations Planning Sales and operations planning the process that helps companies keep demand and supply in balance requires an integrated effort with cooperation from o sales o distribution and logistics o operations o finance o product development

Sales and Operations Planning Long-range planning done annually, focusing on a horizon greater than one year. Intermediate-range planning usually covers a period from 3 to 18 months with weekly, monthly, or quarterly time increments Short-range planning covers a period from 1 day to 6 months with daily or weekly time increments

Sales and Operations Planning

Aggregate Operations Plan translates annual and quarterly business plans into labour and production plans for the intermediate term

Aggregate Operations Plan purpose: to specify the optimal combination of: o production rate :  # of units completed per unit of time. o workforce level  # of people needed for production production = production rate x workforce level inventory on hand unused inventory carried forward from previous period

Production Planning Environment 9-8

Production Planning Strategies 1.chase strategy matches the production rate to the order rate by hiring and laying off employees as the order rate varies. vary workforce size to meet demand 2.stable workforce with variable work hours varies the output by varying the number of hours worked through flexible work schedules or overtime. work overtime and part-time

Production Planning Strategies 3.level strategy maintains a stable workforce at a constant output rate shortages & surpluses absorbed by fluctuating inventory levels 4.subcontracting similar to chase strategy, but hiring and laying off are translated into subcontracting and not subcontracting subcontract to accommodate demand fluctuations

Production Planning Strategies pure strategy a production plan when just 1 of the above strategies are used to absorb demand fluctuations mixed strategy a production plan that combines two or more strategies available for meeting demand

Aggregate Planning Techniques cut and try approach costing out various production planning alternatives selecting the one that is best sophisticated approaches involve linear programming and/or simulation

A Cut-and-Try Example

Formulate alternative production plans for JCBS Company: Plan 1: o produce to exact monthly production requirements o use regular 8-hour day by varying workforce size Plan 2: o produce to meet expected average demand over the next six months o maintain constant workforce

A Cut-and-Try Example Formulate alternative production plans for JCBS Company: Plan 3: o produce to meet minimum expected deman o using a constant workforce on regular time o subcontract out to meet additional output requirements Plan 4: o produce to meet expected demand for all but the first two months o use a constant workforce on regular time o use overtime to meet additional output requirements

A Cut-and-Try Example

Level Scheduling A level schedule holds production constant over a period of time. for each period, it keeps the workforce constant and inventory low depends on demand to pull products through backbone of JIT production o “Just In Time”

Level Scheduling Advantages advantages entire system can be planned to minimize inventory and work-in-process. product modifications are up-to-date because of low amount of work-in- process. a smooth flow throughout the production system purchased items from vendors can be delivered when needed, and, in fact, often to directly to the production line

Aggregate Planning in Practice

Aggregate Planning Applied to Services The City of Calgary's Parks and Recreation Department

Aggregate Planning Applied to Services

End of Chapter 9