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Aggregate Planning Aggregate Planning

Aggregate Planning - PowerPoint Presentation

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Aggregate Planning - PPT Presentation

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

scheduling aggregate cost production aggregate scheduling production cost workers planning amp inventory demand level plan month 000 costs plans safety hire units

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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