© 1997 Prentice-Hall, Inc Principles of Operations Management Aggregate Scheduling Chapter 12

© 1997 Prentice-Hall, Inc Learning Objectives n Describe planning n Distinguish the types of plans n Define aggregate scheduling n Relate aggregate scheduling to the overall planning process n Explain aggregate scheduling options n Develop aggregate schedules

© 1997 Prentice-Hall, Inc Thinking Challenge You’ve started a new company. You’ve developed 2 production plans: MonthForecastPlan 1Plan 2 Jan Feb Mar 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? AloneGroupClass

© 1997 Prentice-Hall, Inc PlanningPlanning n Setting goals & objectives l Example: Meet demand within the limits of available resources at the least cost n Determining steps to achieve goals l Example: Hire more workers n Setting start & completion dates l Example: Begin hiring in Jan.; finish, Mar. n Assigning responsibility

© 1997 Prentice-Hall, Inc Types of Plans Today 3 months 1 year 5 years Long-Range Facility location Long-Range Facility location Intermediate-Range Aggregate plans Intermediate-Range Aggregate plans Short-Range Dispatching Short-Range Dispatching Mgt Level High Low Top Executives Supervisors Operations Managers 18 months

© 1997 Prentice-Hall, Inc Aggregate Scheduling n Provides the quantity & timing of production for intermediate future l Usually 3 to 18 months into future n Combines (‘aggregates’) production l Often expressed in common units s Example: Hours, dollars, equivalents (e.g., FTE students) n Involves capacity & demand variables

© 1997 Prentice-Hall, Inc Relationships of Aggregate Schedule

© 1997 Prentice-Hall, Inc Aggregate Schedule Example Aggregate Schedule: MonthJanFebMarAprMay No. of Chips Master Production Schedule: MonthJanFebMarAprMay Pentium DX

© 1997 Prentice-Hall, Inc Aggregate Scheduling Goals n Meet demand n Use capacity efficiently n Meet inventory policy n Minimize cost l Labor l Inventory l Plant & equipment l Subcontract

© 1997 Prentice-Hall, Inc n Promotion & price n Back ordering n Counterseasonal product mixing Aggregate Scheduling Options CapacityDemand n Inventory n Hire or layoff n Overtime or idle time n Subcontract n Part-time workers

© 1997 Prentice-Hall, Inc Aggregate Scheduling Strategies n Mixed strategy l Combines 2 or more aggregate scheduling options Overtime Sub- contract Inventory Price Mixed Strategy

© 1997 Prentice-Hall, Inc Aggregate Scheduling Strategies n Mixed strategy l Combines 2 or more aggregate scheduling options n Level scheduling strategy l Produce same amount every day l Keep work force level constant l Vary non-work force capacity or demand options l Often results in lowest production costs

© 1997 Prentice-Hall, Inc Aggregate Scheduling Example 1 (Level with Overtime) You’re an aggregate planner for GE. You want to develop a plan that meets average daily demand with a constant work force. Each worker produces 5 units per day. There is no beginning inventory. Besides regular production, you decide to use inventory & overtime.

© 1997 Prentice-Hall, Inc Plan 1 Solution Production/day: No. workers: MonthDaysUnits ProducedInventory RegOTSubcnHeldChg Jan Feb Mar Total $/Unit $8.00 $11.20 $5.00 Tot $ Forc $10.00 Given information

© 1997 Prentice-Hall, Inc Plan 1 Solution Production/day: 40 No. workers: 8.0 Total cost = = $19,

© 1997 Prentice-Hall, Inc Aggregate Scheduling Thinking Challenge 2 (Level with Subcontracting) You’re an aggregate planner for GE. You want to develop a plan that meets lowest daily demand (March), about 38/day, with a constant work force. All other demand will be met by subcontracting. Each worker produces 5 units per day. There is no beginning inventory. AloneGroupClass

© 1997 Prentice-Hall, Inc Plan 2 Solution* Production/day: 38 No. workers: MonthDaysUnits ProducedInventory RegOTSubcnHeldChg Jan Feb Mar Total $/Unit $8.00 $11.20 $5.00 Tot $ Forc $10.00 Given information

© 1997 Prentice-Hall, Inc Plan 2 Solution* Production/day: 38 No. workers: 7.6 Total cost = = $19,

© 1997 Prentice-Hall, Inc Aggregate Scheduling Example 3 (Chase with Hiring and Layoffs) You’re an aggregate planner for GE. You want to develop a plan that meets exactly monthly demand. To do this, you decide to hire & layoff workers. The number of workers will vary each month. Each worker produces 5 units per day. There is no beginning inventory.

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan Feb Mar $8.00 $10.00 $15.00 $5.00 Given information

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan Feb Mar $8.00 $10.00 $15.00 $ Production matches forecast demand

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: Varies No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan Feb Mar $8.00 $10.00 $15.00 $ Production per day varies. Jan: 900/22 = 40.9 units/day Feb: 700/18 = 38.9 units/day

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: Varies No. workers: Varies MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan Feb Mar $8.00 $10.00 $15.00 $ Workers per day varies. Jan: (40.9 units/day)/(5 units/worker/day) = 8.2 Feb: (38.9 units/day)/(5 units/worker/day) = 7.8

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: Varies No. workers: Varies MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan Feb Mar $8.00 $10.00 $15.00 $ = : decrease in production due to layoffs

© 1997 Prentice-Hall, Inc Plan 3 Solution Production/day: Varies No. workers: Varies Total cost = = $23,200

© 1997 Prentice-Hall, Inc Thinking Challenge: Compare & Contrast AloneGroupClass

© 1997 Prentice-Hall, Inc ConclusionConclusion n Described planning n Distinguished the types of plans n Defined aggregate scheduling n Related aggregate scheduling to the overall planning process n Explained aggregate scheduling options n Developed aggregate schedules