1. Aggregate Planning Chapter 14
Alternatives
Quarter 1 2 3 4
Capacity
Total
Unused
Requirements
Subcontract
Overtime
Regular
time
Beginning
inventory
This presentation covers the material in Chapter 14. The graphic is drawn from the Tru-Rainbow Paint example used in the Chapter.
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2. Planning Relationships
Business
or annual
plan
Figure 14.1
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3. Planning Relationships
Business
or annual
plan
Production
or staffing
Figure 14.1
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4. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Production
or staffing
Figure 14.1
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5. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Production
or staffing
This slide and the next add in the information flows.
Figure 14.1
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6. Planning Relationships
MPS or
workforce
schedule
Business
or annual
plan
Production
or staffing
Figure 14.1
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7. Managerial Inputs Figure 14.2 Aggregate plan
The core process is aggregate planning.
Figure 14.2
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8. Managerial Inputs Figure 14.2 Distribution and marketing
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing
The next set of slides build all the common inputs to the planning process.
Figure 14.2
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9. Managerial Inputs Figure 14.2 Distribution and marketing
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing
Figure 14.2
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10. Managerial Inputs Figure 14.2 Distribution and marketing
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
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11. Managerial Inputs Figure 14.2 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
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12. Managerial Inputs Figure 14.2 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
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13. Managerial Inputs Figure 14.2 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
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14. 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
Following Figure 14.2 this list (from page in the text) builds the typical objectives of a planning process.
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15. Aggregate Planning Strategies
TABLE 14.1 PLANNING STRATEGIES FOR AGGREGATE PLANS
Possible Alternatives Possible Alternatives
Strategy during Slack Season during Peak Season
1. Chase #1: vary workforce Layoffs Hiring 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, building No hiring, depleting workforce level anticipation inventory, anticipation inventory, undertime, vacations overtime, subcontracting, backorders, stockouts
This series of slides builds the table on page 661 in the text that identifies four basic planning strategies.
This slide advances automatically.
4. Level #2: constant Layoffs, building antici- Hiring, depleting antici- output rate pation inventory, pation inventory, over- undertime, vacations time, subcontracting, backorders, stockouts
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16. Determine requirements for planning horizon
Aggregate Planning Process
Determine requirements for planning horizon
This series is a flow chart of the typical planning process.
Figure 14.3
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17. Aggregate Planning Process
Determine requirements for planning horizon
Identify alternatives, constraints, and costs
Figure 14.3
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18. Aggregate Planning Process
Determine requirements for planning horizon
Identify alternatives, constraints, and costs
Prepare prospective plan for
planning horizon
Figure 14.3
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19. 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
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20. 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
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21. 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
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22. 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
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23. Aggregate Planning Costs
Regular-Time Costs
Overtime Costs
Hiring and Layoff Costs
Inventory Holding Costs
Backorder and Stockout Costs
This slide builds the important points from page 664 on the relevant costs in the planning process.
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24. Level Strategy for Services
Dock
Aisle
This series is based on Example 14.1 and describes a level plan for a distribution center. This slide advances automatically.
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25. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
* Number of part-time employees
We are given the labor requirements for 6 weeks. Currently, 10 part-time people are employed.
Example 14.1
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26. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
* Number of part-time employees
No more than 10 new hires in any period
No backorders are permitted
Overtime can not exceed 20% of regular-time capacity
The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
There are several constraints.
Example 14.1
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27. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
Peak Requirement
No more than 10 new hires in any period
No backorders are permitted
Overtime can not exceed 20% of regular-time capacity
The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
First step is to solve for the number of employees required at peak demand.
Example 14.1
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28. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
Peak Requirement
1.20w = 18 employees in peak period
No more than 10 new hires in any period
No backorders are permitted
Overtime can not exceed 20% of regular-time capacity
The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
First step is to solve for the number of employees required at peak demand.
Example 14.1
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29. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
Peak Requirement
1.20w = 18 employees in peak period
w = = 15 employees 18
1.20
No more than 10 new hires in any period
No backorders are permitted
Overtime can not exceed 20% of regular-time capacity
The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
First step is to solve for the number of employees required at peak demand.
Example 14.1
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30. Level Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
Peak Requirement
1.20w = 18 employees in peak period
w = = 15 employees 18
1.20
No more than 10 new hires in any period
No backorders are permitted
Overtime can not exceed 20% of regular-time capacity
The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
This slide presents Figure 14.4, the Solver output from OM Explorer for this example.
Figure 14.4
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31. Chase Strategy for Services
Dock
Aisle
TIME PERIOD
Total
Requirement*
Current employment = 10 part-time clerks
This slide shows the Solver output for this example.
This slide advances automatically.
Figure 14.5
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32. Mixed Strategies in Manufacturing
Figure 14.6
This slide shows the Solver output for revised solution to this example, Figure 14.7.
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33. Production Planning Tableau Figure 14.7 Alternatives Quarter 1 2 3 4
Total
Capacity
Unused
Requirements
Subcontract
Overtime
Regular
time
Beginning
inventory
0 h 2h 3h 4h
r r+h r+2h r+3h u
c c+h c+2h c+3h 0
s s+h s+2h s+3h 0
r+b r r+h r+2h u
c+b c c+h c+2h 0
s+b s s+h s+2h 0
r+2b r+b r r+h u
c+2b c+b c c+h 0
s+2b s+b s s+h 0
r+3b r+2b r+b r u
c+3b c+2b c+b c 0
s+3b s+2b s+b s 0
D1 D2 D3 D4 + I4 U I0 R1 O1 S1 R2 O2 S2 R3 O3 S3 R4 O4 S4
Figure 14.7
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34. Production Planning Tableau Tru-Rainbow Company Example 14.3
Alternatives
Quarter 1 2 3 4
Total
Capacity
Unused
Requirements
Subcontract
Overtime
Regular
time
Beginning
inventory
0 h 2h 3h 4h
r r+h r+2h r+3h u
c c+h c+2h c+3h 0
s s+h s+2h s+3h 0
r+b r r+h r+2h u
c+b c c+h c+2h 0
s+b s s+h s+2h 0
r+2b r+b r r+h u
c+2b c+b c c+h 0
s+2b s+b s s+h 0
r+3b r+2b r+b r u
c+3b c+2b c+b c 0
s+3b s+2b s+b s 0
D1 D2 D3 D4 + I4 U I0 R1 O1 S1 R2 O2 S2 R3 O3 S3 R4 O4 S4
This slide introduces Example 14.4.
This slide advances automatically.
Example 14.3
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35. Production Planning Tableau Tru-Rainbow Company 1 2 3 4 Total
Alternatives
Quarter 1 2 3 4
Total
Capacity
Unused
Requirements
Subcontract
Overtime
Regular
time
Beginning
inventory
0 h 2h 3h 4h
r r+h r+2h r+3h u
c c+h c+2h c+3h 0
s s+h s+2h s+3h 0
r+b r r+h r+2h u
c+b c c+h c+2h 0
s+b s s+h s+2h 0
r+2b r+b r r+h u
c+2b c+b c c+h 0
s+2b s+b s s+h 0
r+3b r+2b r+b r u
c+3b c+2b c+b c 0
s+3b s+2b s+b s 0
D1 D2 D3 D4 + I4 U I0 R1 O1 S1 R2 O2 S2 R3 O3 S3 R4 O4 S4
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
This is the basic data for the problem.
Example 14.3
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36. Production Plan Tru-Rainbow Company 1500 — 1250 — 1000 — 750 — 500 —
| | | |
Quarter
Paint (thousands of gallons)
Requirements
Figure 14.8
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37. Production Plan Tru-Rainbow Company 1500 — 1250 — 1000 — 750 — 500 —
| | | |
Quarter
Paint (thousands of gallons)
Production plan
Requirements
Figure 14.8
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38. Production Plan Tru-Rainbow Company 300 510 1500 — 1250 — 1000 — 750 —
| | | |
Quarter
Paint (thousands of gallons)
510
300
Production plan
Requirements
Inventory
accumulation
Figure 14.8
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39. Production Plan Tru-Rainbow Company 400 110 300 510 1500 — 1250 —
1000 —
750 —
500 —
250 —
0 —
| | | |
Quarter
Paint (thousands of gallons)
510
300
Inventory
consumption
Production plan
Requirements
accumulation
This slide advances automatically to fill in the production area.
Figure 14.8
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102

40. Production Plan Tru-Rainbow Company 400 110 300 510 1500 — 1250 —
1000 —
750 —
500 —
250 —
0 —
| | | |
Quarter
Paint (thousands of gallons)
510
300
Inventory
consumption
Production plan
Requirements
accumulation
Figure 14.8
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103

41. Production Planning Tableau Tru-Rainbow Company Figure 14.9
Figure shows the completed planning tableau with all the production decisions in place. This is the output of the OM Explorer software.
Figure 14.9
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42. Production Planning Tableau Tru-Rainbow Company Total Cost
Quarter Cost
This table presents the total costs for the plan building one quarter at a time.
Example 14.3
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43. Production Planning Tableau Tru-Rainbow Company Total Cost
Quarter Cost
1 250($0) + 30($1.00) + 20($1.90) = $68
Example 14.3
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44. Production Planning Tableau Tru-Rainbow Company Total Cost
Quarter Cost
1 250($0) + 30($1.00) + 20($1.90) = $68
2 420($1.30) + 90($1.80) + 340($1.00) = 1,048
Example 14.3
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45. Production Planning Tableau Tru-Rainbow Company Total Cost
Quarter Cost
1 250($0) + 30($1.00) + 20($1.90) = $68
2 420($1.30) + 90($1.80) + 340($1.00) = 1,048
3 110($1.30) + 90($1.80) + 200($2.20)
+ 750($1.00) + 150($1.50) = 2,100
Example 14.3
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46. Production Planning Tableau Tru-Rainbow Company Total Cost
Quarter Cost
1 250($0) + 30($1.00) + 20($1.90) = $68
2 420($1.30) + 90($1.80) + 340($1.00) = 1,048
3 110($1.30) + 90($1.80) + 200($2.20)
+ 750($1.00) + 150($1.50) = 2,100
4 450($1.00) + 90($1.50) + 110($1.90) = 794
Total $4,010
This table presents the total costs for the plan.
Example 14.3
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47. Anticipation Inventory Quarter Quantity
Regular-Time Overtime Subcon-
Quarter Production Production tracting Total
Anticipation Inventory
Quarter Quantity
We can also analyze this plan using this table. Space requirements suggested breaking this table into two parts.
Example 14.3
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48. Anticipation Inventory Quarter Quantity
,100
Totals 2, ,050
Regular-Time Overtime Subcon-
Quarter Production Production tracting Total
Anticipation Inventory
Quarter Quantity
Example 14.3
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49. Anticipation Inventory Quarter Quantity 1 250 + 560 – 300 = 510
,100
Totals 2, ,050
Regular-Time Overtime Subcon-
Quarter Production Production tracting Total
Anticipation Inventory
Quarter Quantity
– 300 = 510
– 850 = 400
,100 – 1,500 = 0
– 350 = 300
Example 14.3
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50. Solved Problem 1
This series of slides presents the OM Explorer output for Solved Problem 1. The first is Figure
Figure 14.10
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51. Solved Problem 1
This series of slides presents the OM Explorer output for Solved Problem 1. This is Figure
Figure 14.11
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52. Solved Problem 1
This series of slides presents the OM Explorer output for Solved Problem 1. This is Figure
Figure 14.12
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53. Solved Problem 2
This slide presents the solution for Solved Problem 2 as shown in Figure
Figure 14.13
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