Aggregate Planning and Master Scheduling McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

You should be able to: 1. Explain what aggregate planning is and how it is useful 2. Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use 3. Describe some of the graphical and quantitative techniques planners use 4. Prepare aggregate plans and compute their costs 5. Describe the master scheduling process and explain its importance 11-2 Student Slides

Aggregate planning Intermediate-range capacity planning that typically covers a time horizon of 2 to 18 months Useful for organizations that experience seasonal, or other variations in demand Goal: Achieve a production plan that will effectively utilize the organization’s resources to satisfy demand 11-3 Student Slides

Forecast of aggregate demand for the intermediate range Develop a general plan to meet demand requirements Update the aggregate plan periodically (e.g., monthly) 11-4 Student Slides

Level capacity strategy: Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options: inventories, overtime, part-time workers, subcontracting, and back orders Chase (match) demand strategy: Matching capacity to demand; the planned output for a period is set at the expected demand for that period Student Slides

Capacities are adjusted to match demand requirements over the planning horizon Advantages Investment in inventory is low Labor utilization in high Disadvantages The cost of adjusting output rates and/or workforce levels 11-6 Student Slides

Capacities are kept constant over the planning horizon Advantages Stable output rates and workforce Disadvantages Greater inventory costs Increased overtime and idle time Resource utilizations vary over time 11-7 Student Slides

General procedure: 1. Determine demand for each period 2. Determine capacities for each period 3. Identify company or departmental policies that are pertinent 4. Determine unit costs 5. Develop alternative plans and costs 6. Select the plan that best satisfies objectives Student Slides

Master schedule: The result of disaggregating an aggregate plan Shows quantity and timing of specific end items for a scheduled horizon 11-9 Student Slides

Beginning inventory Forecast Customer orders Inputs Outputs Projected inventory Master production schedule Uncommitted inventory Master Production Schedule Master Production Schedule Student Slides

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Week Inventory from Previous WeekRequirements Inventory before MPS (70) MPS Projected Inventory = = = = Student Slides

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