2 Learning ObjectivesExplain what aggregate planning is and how it is useful.Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use.Describe some of the graphical and quantitative techniques planners use.Prepare aggregate plans and compute their costs.
3 Planning HorizonAggregate planning: Intermediate-range capacity planning, usually covering 2-3 to months.ShortrangeIntermediate rangeLong rangeNow2 or 3 months12 or 18 months
4 Aggregate Planning Goals Meet demand maximize customer serviceUse capacity efficiently (minimize changes in workforceMeet inventory policy minimize inventoryMinimize cost maximize profitLaborInventoryPlant & equipmentSubcontractBackorder / stockout costsAt this point, we are making the decisions as to “how” we will meet the aggregate schedules, and “when” each major task with be performed.
6 Linkages Marketing: Accounting and Finance: Human resources when will products be available ? Lead times ? Excess inventory (good time for a sale?)Accounting and Finance:cash flows- will we be making more than we are selling?do we have to finance inventory?when will suppliers need to be paid?Human resourcestiming of hiring, firing and trainingInformation Systemswhat to tracklinkages to other supply chain members
8 Aggregate Planning Outputs Total cost of a planProjected levels of inventoryInventoryOutputEmploymentSubcontractingBackordering
9 Aggregate Planning Strategies Level StrategyChase StrategyMixed StrategyProduction equals demandProduction rate is constantIt may be helpful to stress that the extremes depicted above are the opposite ends of a continuum.
10 Examples of Pure Chase and Pure Level Strategies
11 Aggregate Planning Strategies Level capacity strategy:Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.Chase demand strategy:Matching capacity to demand; the planned output for a period is set at the expected demand for that period.
12 Level StrategyMaintain stable machine capacity and workforce levels with a constant output rateShortages and surpluses result in fluctuations in inventory levels over timeInventories that are built up in anticipation of future demand or backlogs are carried over from high to low demand periodsBetter for worker moraleLarge inventories and backlogs may accumulateShould be used when inventory holding and backlog costs are relatively low
13 Techniques for Aggregate Planning Determine demand for each periodDetermine capacities for each periodIdentify policies that are pertinentDetermine units costsDevelop alternative plans and costsSelect the best plan that satisfies objectives. Otherwise return to step 5.
16 Controlling the Cost of Labor in Service Firms Seek:Close control of labor hours to ensure quick response to customer demandOn-call labor resource that can be added or deleted to meet unexpected demandFlexibility of individual worker skills to permit reallocation of available laborFlexibility of individual worker in rate of output or hours of work to meet demandDiscuss how the “control of labor costs” can be linked to measures of efficiency in performance of the overall service.
17 Yield ManagementThe aggregate planning process of allocating resources to customers at prices that will maximize yield (revenue)Used where businesses have:perishable inventoryservice or product can be sold in advancedemand fluctuatescapacity is relatively fixeddemand can be segmentedvariable costs are low and fixed costs are highExamples – airlines, hotels, cruise lines, etc.
18 Making Yield Management Work Multiple pricing structures must be feasible and appear logicalManage forecasts of use and duration of useManage the changes in demand.
19 Disaggregating the aggregate plan Aggregate PlanningDisaggregationMaster ScheduleFor a short planning range 2-4 months:Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon.Rough-cut capacity planning: Approximate balancing of capacity and demand to test the feasibility of a master schedule.
20 Master Scheduling Master schedule: Master Scheduler: Determines quantitiesneeded to meet demandInterfaces withMarketingCapacity planningProduction planningDistribution planningMaster Scheduler:Evaluates impact ofnew ordersProvides delivery dates for ordersDeals with problemsProduction delaysRevising master scheduleInsufficient capacity
21 Master Scheduling Process Beginning inventoryForecastCustomer ordersInputsOutputsProjected inventoryMaster production scheduleUncommitted inventory
22 “slushy” somewhat firm Time Fences in MPSPeriod123456789“frozen” (firm or fixed)“slushy” somewhat firm“liquid” (open)
23 Summary Aggregate planning reconciles conflicting needs and objectives Aggregate plan specifies time-phased production rates, workforce levels and inventory holdingsAggregation:products / services are grouped into familieslabor may be grouped along family lines or by skillstime may be aggregated (quarters, etc.)Two basic planning options: changing capacity and changing demandAggregate planning strategies:Level – constant workforce or production levelChase – vary production to equal demand