1. Chapter 12
Aggregate Planning

2. Overview of Planning Levels
Long-range plans
Long term capacity
Location/layout
Intermediate plans (General levels)
Employment
Output
Short-range plans (Detailed plans)
Machine loading
Job assignments
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3. Establishes schedules
Figure 12-1
Planning Sequence
Corporate
strategies
and policies
Economic,
competitive,
and political
conditions
Aggregate
demand
forecasts
Business Plan
Production plan
Master schedule
Establishes production
and capacity strategies
Establishes
production capacity
Establishes schedules
for specific products
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4. Conditions Favoring the Use of Aggregate Planning
The market demand for the output of the operations system is forecasted to be fluctuating or changing over an intermediate planning horizon (6-18 months)
The firm has some alternatives available to change the intermediate- or short-term capacity of the operations system
The planner can model the relevant relationships and costs
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5. Description of Aggregate Planning
Management selects the alternative or set of alternatives the firm plans to use to cope with the forecasted changing or fluctuating market demand
The typical objective is to select the plan (a set of alternatives) which minimizes related costs over the planning horizon
The result is the quantity and scheduling of aggregate production over the planning horizon
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6. Inputs to the Aggregate Planning Process
A forecast of aggregate demand covering an intermediate-term planning horizon (6-18 months)
The alternative means available to adjust short-to medium-term system capacity, the costs of using each alternative and the extent each alternative impacts capacity
The current status of the system in terms of workforce level, inventory level and production rate
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7. Outputs of the Aggregate Planning Process
A production plan: aggregate decisions for each period in the planning horizon about
workforce level
inventory level
production rate
Projected costs of the production plan over the planning horizon
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8. An Overview of Aggregate Planning
Product
decisions
(Chapter 4)
Market
Demand
Research and
Technology
Work Force
Process planning &
capacity decisions
(Chapter 5)
Raw materials
available
Demand
forecasts,
orders
(Chapter 3)
Inventory on
hand
Aggregate
plan
External
capacity
(subcontractors)
Master production
schedule &
MRP systems
(Chapter 14)
Detailed Work
Schedules
(Chapter 17)
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9. Demand Options in Aggregate Planning
Alternatives that may reduce the forecasted demand fluctuations
pricing
promotion
backordering during high demand periods
new demand, e.g., counter seasonal product mixing
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10. Capacity Options in Aggregate Planning
Alternatives that may be available to change intermediate- or short-term capacity
varying work force size by hiring or layoffs
varying capacity through the use of overtime or idle time
using part-time workers
using contract workers
changing inventory levels
subcontracting
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11. Summary of Planning Techniques
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12. Graphic or Informal Approach
Provides a framework for evaluating an aggregate plan
Easy to use and understand
Graphs of forecasted demand may assist planner in generating a plan
Model is flexible
No optimization
Static - relies on the planner to generate a plan
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13. Forecast and Average Forecast Demand
Production Rate/Working Day
Average of Forecast Demand
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14. Cumulative Forecast Forecast Demand Cumulative Demand
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15. Cumulative Forecast Production Plan Cumulative Forecasted Demand
Forecast Demand
Cumulative Demand
Production
Plan
Cumulative
Forecasted
Demand
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16. Cumulative Forecast Production Plan Cumulative Forecasted Demand
Forecast Demand
Cumulative Demand
Production
Plan
Cumulative
Forecasted
Demand
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17. Basic Strategies for Meeting Uneven Demand
Maintain a level workforce
Maintain a steady output rate
Match demand period by period
Use a combination of decision variables
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18. Basic Strategies Examined
Level output or capacity:
Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.
Chase demand:
Matching capacity to demand; the planned output for a period is the expected demand for that period.
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19. Basic Relationships
Period-ending inventories or backlogs are determined using the inventory balance equation
A shortfall between the amount available to the market [output during the period plus beginning inventory] and the market demand is made up (buffered) by inventory, backlog, overtime, part-time labor and/or subcontracting
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20. Cost Calculations Output Hire/Layoff Inventory Back orders Regular
Overtime
Subcontract
Hire/Layoff
Hire
Layoff
Inventory
Back orders
regular cost/unit x regular output quantity
overtime cost/unit x overtime quantity
subcontract cost/unit x subcontract quantity
cost/hire x number hired
cost/ layoff x number laid off
carrying cost/unit x average inventory
back order cost/ unit x number of backorder units
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21. Total Cost for a Period Output cost + Hire/Lay off cost
+ Inventory cost
+ Back-order cost
Regular
+ Overtime
+ subcontract
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22. Aggregate Planning in Services
Services occur when they are rendered
Demand for service can be difficult to predict
Capacity available can be difficult to predict
Labor flexibility can be an advantage in services
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23. Disaggregating the Aggregate Plan
Breaking down the aggregate plan into specific product requirements in order to determine labor requirements, materials, and inventory requirements
The result is a master schedule
quantity and timing of specific end items for a scheduled horizon
used to do rough-cut capacity planning
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24. Master Scheduling Process
Figure 12-5
Master Scheduling Process
Inputs
Outputs
Beginning inventory
Projected inventory
Master
scheduling
Forecast
Master production schedule
Customer orders
Uncommitted inventory
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25. Projected On-hand Inventory
Figure 12-8
Projected On-hand Inventory
Beginning Inventory
Customer orders are larger than forecast in week 1; projected on-hand
is = 31
Forecast is larger than customer orders in week 2;
projected on-hand inventory is = 1
Forecast is larger than customer orders in week 3;
projected on-hand inventory
is 1-30 = -29
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26. Projected On-hand Inventory
Figure 12-10
Projected On-hand Inventory
with MPS
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27. Available-to-Promise Inventory
Figure 12-11
Available-to-Promise Inventory
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