Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Aggregate Planning Operations Management - 5 th Edition Chapter 13 Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.13-2 Lecture Outline  Aggregate Planning Process  Strategies for Adjusting Capacity  Strategies for Managing Demand  Aggregate Planning for Services

Copyright 2006 John Wiley & Sons, Inc.13-3 Aggregate Planning   Determine the resource capacity needed to meet demand over an intermediate time horizon Aggregate refers to product lines or families Aggregate planning matches supply and demand   Objectives Establish a company wide game plan for allocating resources Develop an economic strategy for meeting demand

Copyright 2006 John Wiley & Sons, Inc.13-4 Aggregate Planning Process

Copyright 2006 John Wiley & Sons, Inc.13-5 Meeting Demand Strategies  Adjusting capacity Resources necessary to meet demand are acquired and maintained over the time horizon of the plan Resources necessary to meet demand are acquired and maintained over the time horizon of the plan Minor variations in demand are handled with overtime or under-time Minor variations in demand are handled with overtime or under-time  Managing demand Proactive demand management Proactive demand management

Copyright 2006 John Wiley & Sons, Inc.13-6 Strategies for Adjusting Capacity  Level Strategy Producing at a constant rate and using inventory to absorb fluctuations in demand Producing at a constant rate and using inventory to absorb fluctuations in demand  Chase Strategy Hiring and firing workers to match demand Hiring and firing workers to match demand  Mixed Strategy

Copyright 2006 John Wiley & Sons, Inc.13-7 Alternatives for Meeting Demand  Changing workforce level Hiring and firing workers to adapt to demand Hiring and firing workers to adapt to demand  Overtime and under-time Increasing or decreasing working hours Increasing or decreasing working hours Vacation schedule Vacation schedule  Changing inventory Anticipated inventory Anticipated inventory Backorders, backlogs, stock-out Backorders, backlogs, stock-out  Subcontracting Let outside companies complete the work Let outside companies complete the work

Copyright 2006 John Wiley & Sons, Inc.13-8 Level Production Demand Units Time Production

Copyright 2006 John Wiley & Sons, Inc.13-9 Chase Demand Demand Units Time Production

Copyright 2006 John Wiley & Sons, Inc Strategies for Managing Demand   Shifting demand into other time periods Incentives Sales promotions Advertising campaigns   Offering products or services with counter- cyclical demand patterns   Partnering with suppliers to reduce information distortion along the supply chain

Copyright 2006 John Wiley & Sons, Inc Aggregate Planning for Services 1.Most services can’t be inventoried 2.Demand for services is difficult to predict 3.Capacity is also difficult to predict 4.Service capacity must be provided at the appropriate place and time 5.Labor is usually the most constraining resource for services