To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Alternatives Quarter Total Capaci ty Unuse d Capaci ty Requirements Quarter Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Beginning inventory Aggregate Planning Chapter 14

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Planning Relationships Figure 14.1 Business or annual plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Planning Relationships Figure 14.1 Business or annual plan Production or staffing plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Planning Relationships Figure 14.1 MPS or workforce scheduleBusiness or annual plan Production or staffing plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Planning Relationships Figure 14.1 MPS or workforce schedule Business or annual plan Production or staffing plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Planning Relationships Figure 14.1 MPS or workforce schedule Business or annual plan Production or staffing plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Figure 14.2 Aggregate plan

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Cost data Financial condition of firm Accounting and finance Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Labor-market conditions Training capacity Human resources Cost data Financial condition of firm Accounting and finance Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs New products Product design changes Machine standards Engineering Labor-market conditions Training capacity Human resources Cost data Financial condition of firm Accounting and finance Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Supplier capabilities Storage capacity Materials availability Materials New products Product design changes Machine standards Engineering Labor-market conditions Training capacity Human resources Cost data Financial condition of firm Accounting and finance Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Managerial Inputs Supplier capabilities Storage capacity Materials availability Materials Current machine capacities Plans for future capacities Workforce capacities Current staffing level Operations New products Product design changes Machine standards Engineering Labor-market conditions Training capacity Human resources Cost data Financial condition of firm Accounting and finance Aggregate plan Customer needs Demand forecasts Competition behavior Distribution and marketing Figure 14.2

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Objectives  Minimize Costs/Maximize Profits  Maximize Customer Service  Minimize Inventory Investment  Minimize Changes in Production Rates  Minimize Changes in Workforce Levels  Maximize Utilization of Plant and Equipment

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Strategies TABLE 14.1PLANNING STRATEGIES FOR AGGREGATE PLANSPossible Alternatives Strategyduring Slack Seasonduring Peak Season 4.Level #2: constantLayoffs, building antici-Hiring, depleting antici- output rate pation inventory, pation inventory, over- undertime, vacations time, subcontracting, backorders, stockouts 1.Chase #1: vary workforceLayoffsHiring level to match demand 2.Chase #2: vary output Layoffs, undertime,Hiring, overtime, rate to match demand vacations subcontracting 3.Level #1: constant No layoffs, buildingNo hiring, depleting workforce level anticipation inventory, anticipation inventory, undertime, vacations overtime, subcontracting, backorders, stockouts

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Figure 14.3 Determine requirements for planning horizon

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon Is the plan acceptable? Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon Is the plan acceptable? No Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon Implement and update the plan Is the plan acceptable? No Yes Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Process Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon Move ahead to next planning session Implement and update the plan Is the plan acceptable? No Yes Figure 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Aggregate Planning Costs  Regular-Time Costs  Overtime Costs  Hiring and Layoff Costs  Inventory Holding Costs  Backorder and Stockout Costs

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle Example 14.1 TIME PERIOD Total Requirement* Current employment = 10 part-time clerks * Number of part-time employees

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle TIME PERIOD Total Requirement* Current employment = 10 part-time clerks 1.No more than 10 new hires in any period 2.No backorders are permitted 3.Overtime can not exceed 20% of regular-time capacity 4.The following costs can be assigned: Regular-time wage$2,000/period at 20 hours/week Overtime wages150% of regular-time Hiring$1,000/person Layoffs$500/person * Number of part-time employees Example 14.1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle TIME PERIOD Total Requirement* Current employment = 10 part-time clerks 1.No more than 10 new hires in any period 2.No backorders are permitted 3.Overtime can not exceed 20% of regular-time capacity 4.The following costs can be assigned: Regular-time wage$2,000/period at 20 hours/week Overtime wages150% of regular-time Hiring$1,000/person Layoffs$500/person Peak Requirement Example 14.1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle TIME PERIOD Total Requirement* Current employment = 10 part-time clerks 1.No more than 10 new hires in any period 2.No backorders are permitted 3.Overtime can not exceed 20% of regular-time capacity 4.The following costs can be assigned: Regular-time wage$2,000/period at 20 hours/week Overtime wages150% of regular-time Hiring$1,000/person Layoffs$500/person Peak Requirement 1.20 w = 18 employees in peak period Example 14.1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle TIME PERIOD Total Requirement* Current employment = 10 part-time clerks 1.No more than 10 new hires in any period 2.No backorders are permitted 3.Overtime can not exceed 20% of regular-time capacity 4.The following costs can be assigned: Regular-time wage$2,000/period at 20 hours/week Overtime wages150% of regular-time Hiring$1,000/person Layoffs$500/person Peak Requirement 1.20 w = 18 employees in peak period w = = 15 employees Example 14.1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Level Strategy for Services DockAisle Figure 14.4 TIME PERIOD Total Requirement* Current employment = 10 part-time clerks 1.No more than 10 new hires in any period 2.No backorders are permitted 3.Overtime can not exceed 20% of regular-time capacity 4.The following costs can be assigned: Regular-time wage$2,000/period at 20 hours/week Overtime wages150% of regular-time Hiring$1,000/person Layoffs$500/person Peak Requirement 1.20 w = 18 employees in peak period w = = 15 employees

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Chase Strategy for Services DockAisle TIME PERIOD Total Requirement* Current employment = 10 part-time clerks Figure 14.5

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Mixed Strategies in Manufacturing Figure 14.6

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Planning Tableau Figure 14.7 Alternatives Quarter Total Capacity Unused Capacity Requirements Quarter Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Beginning inventory h2h3h4h0h2h3h4h rr+hr+2hr+3hu cc+hc+2hc+3h0 ss+hs+2hs+3h0 r+brr+hr+2hu c+bcc+hc+2h0 s+bss+hs+2h0 r+2br+brr+hu c+2bc+bcc+h0 s+2bs+bss+h0 r+3br+2br+bru c+3bc+2bc+bc0 s+3bs+2bs+bs0 D 1 D 2 D 3 D 4 + I 4 U I0R1O1S1R2O2S2R3O3S3R4O4S4I0R1O1S1R2O2S2R3O3S3R4O4S4

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Planning TableauTru-RainbowCompany Example 14.3 Alternatives Quarter Total Capacity Unused Capacity Requirements Quarter Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Beginning inventory h2h3h4h0h2h3h4h rr+hr+2hr+3hu cc+hc+2hc+3h0 ss+hs+2hs+3h0 r+brr+hr+2hu c+bcc+hc+2h0 s+bss+hs+2h0 r+2br+brr+hu c+2bc+bcc+h0 s+2bs+bss+h0 r+3br+2br+bru c+3bc+2bc+bc0 s+3bs+2bs+bs0 D 1 D 2 D 3 D 4 + I 4 U I0R1O1S1R2O2S2R3O3S3R4O4S4I0R1O1S1R2O2S2R3O3S3R4O4S4

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Planning TableauTru-RainbowCompany Alternatives Quarter Total Capacity Unused Capacity Requirements Quarter Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Subcontract Overtime Regular time Beginning inventory h2h3h4h0h2h3h4h rr+hr+2hr+3hu cc+hc+2hc+3h0 ss+hs+2hs+3h0 r+brr+hr+2hu c+bcc+hc+2h0 s+bss+hs+2h0 r+2br+brr+hu c+2bc+bcc+h0 s+2bs+bss+h0 r+3br+2br+bru c+3bc+2bc+bc0 s+3bs+2bs+bs0 D 1 D 2 D 3 D 4 + I 4 U I0R1O1S1R2O2S2R3O3S3R4O4S4I0R1O1S1R2O2S2R3O3S3R4O4S4 Quarter Total Demand Capacities Regular time Overtime Subcontracting Current inventory = 250,000 Ending inventory = 300,000 Regular time = $1.00/unit Overtime = $1.50/unit Subcontracting = $1.90/unit Inventory holding cost = $0.30/gallon/quarter Maximum overtime = 20% of regular time Maximum subcontract = 200,000 No back orders or stockouts Example 14.3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Plan Tru-RainbowCompany — — — — — — 0 0 — |||| |||| Quarter Paint (thousands of gallons) Requirements Figure 14.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Plan Tru-RainbowCompany — — — — — — 0 0 — |||| |||| Quarter Paint (thousands of gallons) Production plan Requirements Figure 14.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Plan Tru-RainbowCompany — — — — — — 0 0 — |||| |||| Quarter Paint (thousands of gallons) Production plan RequirementsInventoryaccumulation Figure 14.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Plan Tru-RainbowCompany — — — — — — 0 0 — |||| |||| Quarter Paint (thousands of gallons) Inventoryconsumption Production plan RequirementsInventoryaccumulation Figure 14.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Plan Tru-RainbowCompany — — — — — — 0 0 — |||| |||| Quarter Paint (thousands of gallons) Inventoryconsumption Production plan RequirementsInventoryaccumulation Figure 14.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Production Planning TableauTru-RainbowCompany Figure 14.9

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Production Planning TableauTru-RainbowCompany Total Cost QuarterCost

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Production Planning TableauTru-RainbowCompany Total Cost QuarterCost 1250($0) + 30($1.00) + 20($1.90) =$68

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Production Planning TableauTru-RainbowCompany Total Cost QuarterCost 1250($0) + 30($1.00) + 20($1.90) =$ ($1.30) + 90($1.80) + 340($1.00) =1,048

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Production Planning TableauTru-RainbowCompany Total Cost QuarterCost 1250($0) + 30($1.00) + 20($1.90) =$ ($1.30) + 90($1.80) + 340($1.00) =1, ($1.30) + 90($1.80) + 200($2.20) + 750($1.00) + 150($1.50) =2,100

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Production Planning TableauTru-RainbowCompany Total Cost QuarterCost 1250($0) + 30($1.00) + 20($1.90) =$ ($1.30) + 90($1.80) + 340($1.00) =1, ($1.30) + 90($1.80) + 200($2.20) + 750($1.00) + 150($1.50) =2, ($1.00) + 90($1.50) + 110($1.90) =794 Total$4,010

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example 14.3 Regular-Time Overtime Subcon- QuarterProductionProduction tracting Total Anticipation Inventory QuarterQuantity

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example , Totals2, ,050 Regular-Time Overtime Subcon- QuarterProductionProduction tracting Total Anticipation Inventory QuarterQuantity

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Example , Totals2, ,050 Regular-Time Overtime Subcon- QuarterProductionProduction tracting Total Anticipation Inventory QuarterQuantity – 300 = – 850 = ,100 – 1,500 = – 350 =300

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Solved Problem 1 Figure 14.10

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Solved Problem 1 Figure 14.11

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Solved Problem 1 Figure 14.12

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Solved Problem 2 Figure 14.13