1. PRODUCTION AND OPERATIONS MANAGEMENT
Ch. 14: Aggregate Scheduling
POM - J. Galván

2. Learning Objectives Describe planning Distinguish the types of plans
Define aggregate scheduling
Relate aggregate scheduling to the overall planning process
Explain aggregate scheduling options
Develop aggregate schedules
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3. Aggregate Planning Requires
Logical overall unit for measuring sales and outputs
Forecast for intermediate planning period in these aggregate units
Method for determining costs
Model that combines forecasts and costs so that scheduling decisions can be made
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4. Planning Setting goals & objectives
Example: Meet demand within the limits of available resources at the least cost
Determining steps to achieve goals
Example: Hire more workers
Setting start & completion dates
Example: Begin hiring in Jan.; finish, Mar.
Assigning responsibility
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5. Planning Horizons Planning Horizon 1 year 5 years Today 3 Months
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
Responsible: Operations managers, supervisors, foremen
Responsible: Operations managers
Responsible: Top executives
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6. Types of Plans Today 3 months 1 year 5 years Long-Range
Management Level
Today
3 months
1 year
5 years
Long-Range
Facility location
Intermediate-Range Aggregate plans
Short-Range
Dispatching
High
Low
Top Executives
Supervisors
Operations Managers
18 months
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7. Relationships of the Aggregate Plan
Plan for
Production
Priority
Planning &
Scheduling
Demand
Forecasts,
orders
Master
Schedule
Detailed Work
Schedules
Plant
Capacity
External
Inventory On
Hand
Raw Materials
Available
Work Force
Marketplace
and Demand
Research and
Technology
Product
Decisions
Process
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8. What’s Needed for Aggregate Planning
A mathematically based aggregate planning model requires considerable:
time
problem definition
model development
model verification
model application
expertise
people who understand the problem
people who understand both the modeling process, and the specific model
money
money to pay for all of the above
often requires funding for several people for several months!
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9. Aggregate Scheduling
Provides the quantity and timing of production for intermediate future
Usually 3 to 18 months into future
Combines (‘aggregates’) production
Often expressed in common units
Example: Hours, dollars, equivalents (e.g., FTE students)
Involves capacity and demand variables
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10. Aggregate Scheduling Goals
Meet demand
Use capacity efficiently
Meet inventory policy
Minimize cost
Labor
Inventory
Plant & equipment
Subcontract
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11. Aggregate Planning Strategies Pure Strategies
Capacity Options — change capacity:
changing inventory levels
varying work force size by hiring or layoffs
varying production capacity through overtime or idle time
subcontracting
using part-time workers
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12. Aggregate Planning Strategies Pure Strategies
Demand Options — change demand:
influencing demand
backordering during high demand periods
counterseasonal product mixing
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13. Aggregate Planning Options - Advantages and Disadvantages
Some Comments
Changing INVENTORY levels
Changes in inventories are gradual, not abrupt production changes
Inventory holding costs; shortages resulting in lost sale may occur if demand increases
Applies mainly to production, not service settings
Varying WORKFORCE SIZE by hiring or layoffs
Avoids use of other alternatives
Hiring, layoff, and training costs
Used where many unskilled people seek extra income
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14. Advantages/Disadvantages - continued
Option
Advantage
Disadvantage
Some Comments
Varying PRODUCTION RATES through overtime or idle time
Matches seasonal fluctuations without hiring/training costs
Overtime premiums, tired workers, may not meet demand
Allows flexibility within the aggregate plan
SUBCONTRACTING
Permits flexibility and smoothing of the firm's output
Loss of quality control; reduced profits; loss of future business
Applies mainly in production settings
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15. Advantages/Disadvantages - continued
Option
Advantage
Disadvantage
Some Comments
Using PART-TIME WORKERS
Less costly and more flexible than full-time workers
High turnover/training costs; quality suffers; scheduling difficult
Good for unskilled jobs in areas with large temporary labor pools
Influencing DEMAND
Tries to use excess capacity. Discounts draw new customers.
Uncertainty in demand. Hard to match demand to supply exactly.
Creates marketing ideas. Overbooking used in some businesses.
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16. Advantage/Disadvantage - continued
Option
Advantage
Disadvantage
Some Comments
BACK ORDERING during high-demand periods
May avoid overtime. Keeps capacity constant
Customer must be willing to wait, but goodwill is lost.
Many companies backlog.
COUNTER SEASONAL products and service mixing
Fully utilizes resources; allows stable workforce.
May require skills or equipment outside a firm's areas of expertise.
Risky finding products or services with opposite demand patterns.
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17. Aggregate Scheduling Strategies
Mixed strategy
Combines 2 or more aggregate scheduling options
Level scheduling strategy
Produce same amount every day
Keep work force level constant
Vary non-work force capacity or demand options
Often results in lowest production costs
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18. Aggregate Scheduling Methods
Graphical & charting techniques
Popular & easy-to-understand
Trial & error approach
Mathematical approaches
Transportation method
Linear decision rule
Management coefficients model
Simulation
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19. The Graphical Approach to Aggregate Planning
Forecast the demand for each period
Determine the capacity for regular time, overtime, and subcontracting, for each period
Determine the labor costs, hiring and firing costs, and inventory holding costs
Consider company policies which may apply to the workers or to stock levels
Develop alternative plans, and examine their total costs
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20. Comparison of Aggregate Planning Methods
Techniques Approaches Aspects
Charting/graphical methods
Transportation method
Management coefficient model
Trial and error
Optimization
Heuristic
Simple to understand, easy to use. Many solutions; one chosen may not be optimal
LP software available;permits sensitivity analysis and constraints. Linear function may not be realistic
Simple, easy to implement; tries to mimic manager’s decision process; uses regression
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21. Controlling the Cost of Labor in Service Firms
Close control of labor hours to ensure quick response to customer demand
Some form of-on-call labor resource that can be added or deleted to meet unexpected demand
Flexibility of individual worker skills to permit reallocation of available labor
Individual worker flexibility in rate of output or hours of work to meet demand
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