Operations Management Dr Ron Lembke Learning Objectives Describe planning Distinguish the types of plans Define aggregate scheduling Relate aggregate scheduling to the overall planning process ID: 589968
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Slide1
Aggregate Planning
Operations Management
Dr. Ron
LembkeSlide2
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 schedulesSlide3
Example
You’ve started a
new
company. You’ve developed 2 production plans:
Month Forecast Plan 1 Plan 2
Jan 900 900 800
Feb 700 700 800
Mar 800 800 800
You estimate 1 worker can make 100 units per month. Which plan do you use? How many workers do you hire? How do you meet demand? Slide4
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 Slide5
Types of Plans
Today
3 months
1 year
5 years
Long-Range
Facility location
Short-Range
Dispatching
Management Level
High
Low
Top Executives
Supervisors
Operations Managers
18 months
Intermediate-Range
Aggregate plansSlide6
Aggregate Scheduling
Production quantity & timing of production for intermediate future
Usually 3 to 18 months into future
Combines (‘aggregates’) production
Expressed in common units
Example: Hours, dollars, equivalents
(e.g., FTE students)
Time to make ‘average’ product Slide7
Relationships of Aggregate Schedule
Forecast &
Firm Orders
Material
Requirements
Planning
Aggregate
Production
Planning
Resource
Availability
Master
Production
Scheduling
Shop
Floor
Schedules
Capacity
Requirements
Planning
Realistic?
Yes
No, modify CRP, MRP, or MPS
Work force
Inventory
SubcontractorsSlide8
Aggregate Level Scheduling
Aggregate Schedule:
Month Jan Feb Mar Apr May
No. of Chips 600 650 620 630 640
© 1995 Corel Corp.Slide9
Aggregate Schedule Example
Aggregate Schedule:
Month Jan Feb Mar Apr May
No. of Chips 600 650 620 630 640
Master Production Schedule:
Month
Jan Feb Mar Apr May
P4 1.5 ghz 300 200 310 300 340
P4 1.7 ghz 300 450 310 330 300Slide10
Aggregate Scheduling Goals
Meet demand
Use capacity efficiently
Meet inventory policy
Minimize cost
Labor
Inventory
Plant & equipment
SubcontractSlide11
Promotion & price
Back ordering
Counterseasonal product mixing
Aggregate Scheduling
Options
Capacity
Demand
Inventory
Hire or layoff
Overtime or idle
Subcontract
Part-time workers
OutsourceSlide12
Costs
“Smoothing” costs:
Hiring: advertise, interview, train
Firing: severance, bad morale, future hiring
Holding costs - charged on inv At end
Shortage costs
Labor costs / overtime, materials
Subcontracting / outsourcing Slide13
Aggregate Scheduling Strategies
Level scheduling strategy
Produce same amount every
day
Keep work force level constant
Vary non-work force capacity or demand
Often results in lowest production costs
Chase strategy
Hire / Fire workers to make production capacity meet necessary productionSlide14
Aggregate Scheduling Strategies
Mixed strategy
Combines 2 or more aggregate scheduling options
Overtime
Sub-contract
Inventory
Price
Mixed
StrategySlide15
Aggregate Scheduling Methods
Graphical & charting techniques
Popular & easy-to-understand
Trial & error approach
Mathematical approaches
Linear Programming
Simulation
More involved, but usually better answersSlide16
JC Company p. 292
Materials Cost: $100/unit
Labor: 5 hours per unit, $4/hr RT, $6/hr OT
Subcontract $20/unit ($120 - $100 matl savings)
Holding cost $1.5/unit/mo
Stockout cost $5/unit/mo
Hiring cost $200
Firing cost $250
Starting inventory 400 units, safety stock 25%Slide17
Exhibit 11.3
Goal of 25% of sales as “safety stock”
For planning, assume safety stock never usedSlide18
Hire and Fire, no OT: Plan 1
Start with workers needed for month 1
May have too many at endSlide19
Constant Workforce: Plan 2
Total D = 8,000 units
5*8,000 = 40,000 hours
125 days total = 1,000 hrs
40,000/1,000 = 40 workers
No penalty missing safety stockSlide20
Subcontract: Plan 3
April has lowest demand
21 days * 8 hrs = 168
850*5/168 = 25.3 workers
Subcontract restSlide21
Constant Workers with OT: 4
Find # workers to do all except biggest mos in RT
Trial and error
Not enough safety stockSlide22
Linear Programming Parameters
C
H
= hiring cost C
F
= firing cost
C
I
= Inv. Cost C
R = reg productionCO = Ovt. Cost CI = idle cost
CS = subcontract nt = days in period tK = daily prod. I0 = Inventory to start
W0 = workers to startDt = Demand for tSlide23
Variables
I
t
= Inventory for t O
t
= Overtime
W
t
= workers for t U
t = idle timeHt = hired in t St = subcontracted
Ft = fired in tPt= production for t
All must be >= 0Slide24
Constraints
Workforce conservation
W
t
= W
t-1
+ H
t
- F
tUnits Conervation It = It-1 + Pt + St - Dt
Production and workforce level Pt= K*nt*Wt + Ot
- UtEach of these must be satisfied for all tSlide25
LP FormulationSlide26
LP Considerations
LP can be modified to include minimum inv. level each period
Negative inventory can be allowedCare needed when roundingSlide27
Conclusion
Described role of aggregate planning
Described types of plans
Explained aggregate scheduling options
Developed aggregate schedules
Chase, Level, and Hybrid
Linear Programming