1 1 Slide Aggregate Planning Professor Ahmadi

2 2 Slide Planning Tasks and Responsibilities

3 3 Slide n Provides the quantity and timing of production for intermediate future Usually 3 to 18 months into futureUsually 3 to 18 months into future n Combines (‘aggregates’) production Often expressed in common unitsOften expressed in common units  Example: Hours, dollars, equivalents (e.g., FTE students) n Involves capacity and demand variables Aggregate Planning

4 4 Slide n Meet demand n Use capacity efficiently n Meet inventory policy n Minimize cost LaborLabor InventoryInventory Plant & equipmentPlant & equipment SubcontractSubcontract Aggregate Planning Goals

5 5 Slide Aggregate Planning Strategies Pure Strategies n Capacity Options — change capacity: changing inventory levelschanging inventory levels varying work force size by hiring or layoffsvarying work force size by hiring or layoffs varying production capacity through overtime or idle timevarying production capacity through overtime or idle time subcontractingsubcontracting using part-time workersusing part-time workers

6 6 Slide Aggregate Planning Strategies Pure Strategies n Demand Options — change demand : influencing demandinfluencing demand backordering during high demand periodsbackordering during high demand periods counterseasonal product mixingcounterseasonal product mixing

7 7 Slide The Extremes Level Strategy Chase Strategy Production equals demand Production rate is constant

8 8 Slide n Mixed strategy Combines 2 or more aggregate scheduling optionsCombines 2 or more aggregate scheduling options n Level scheduling strategy Produce same amount every dayProduce same amount every day Keep work force level constantKeep work force level constant Vary non-work force capacity or demand optionsVary non-work force capacity or demand options Often results in lowest production costsOften results in lowest production costs Aggregate Planning Strategies

9 9 Slide n Graphical & charting techniques Popular & easy-to-understandPopular & easy-to-understand Trial & error approachTrial & error approach n Mathematical approaches Transportation methodTransportation method Linear decision ruleLinear decision rule Management coefficients modelManagement coefficients model SimulationSimulation Aggregate Planning Methods

10 Slide The Graphical Approach to Aggregate Planning n Forecast the demand for each period n Determine the capacity for regular time, overtime, and subcontracting, for each period n Determine the labor costs, hiring and firing costs, and inventory holding costs n Consider company policies which may apply to the workers or to stock levels n Develop alternative plans, and examine their total costs