1. © 1997 Prentice-Hall, Inc. 12 - 1 Principles of Operations Management Aggregate Scheduling Chapter 12

2. © 1997 Prentice-Hall, Inc. 12 - 2 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

3. © 1997 Prentice-Hall, Inc. 12 - 3 Thinking Challenge You’ve started a new company. You’ve developed 2 production plans: MonthForecastPlan 1Plan 2 Jan900 900800 Feb700 700800 Mar800800800 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

4. © 1997 Prentice-Hall, Inc. 12 - 4 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

5. © 1997 Prentice-Hall, Inc. 12 - 5 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

6. © 1997 Prentice-Hall, Inc. 12 - 6 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

7. © 1997 Prentice-Hall, Inc. 12 - 7 Relationships of Aggregate Schedule

8. © 1997 Prentice-Hall, Inc. 12 - 8 Aggregate Schedule Example Aggregate Schedule: MonthJanFebMarAprMay No. of Chips600650620630640 Master Production Schedule: MonthJanFebMarAprMay Pentium300200310300340 486DX2300450310330300

9. © 1997 Prentice-Hall, Inc. 12 - 9 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

10. © 1997 Prentice-Hall, Inc. 12 - 10 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

11. © 1997 Prentice-Hall, Inc. 12 - 11 Aggregate Scheduling Strategies n Mixed strategy l Combines 2 or more aggregate scheduling options Overtime Sub- contract Inventory Price Mixed Strategy

12. © 1997 Prentice-Hall, Inc. 12 - 12 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

13. © 1997 Prentice-Hall, Inc. 12 - 13 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.

14. © 1997 Prentice-Hall, Inc. 12 - 14 Plan 1 Solution Production/day: No. workers: MonthDaysUnits ProducedInventory RegOTSubcnHeldChg Jan 22 900 Feb 18 700 Mar 20 800 Total $/Unit $8.00 $11.20 $5.00 Tot $ Forc $10.00 Given information

15. © 1997 Prentice-Hall, Inc. 12 - 15 Plan 1 Solution Production/day: 40 No. workers: 8.0 Total cost = 19200 + 224 + 200 = $19,624 0 0 0 0

16. © 1997 Prentice-Hall, Inc. 12 - 16 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

17. © 1997 Prentice-Hall, Inc. 12 - 17 Plan 2 Solution* Production/day: 38 No. workers: MonthDaysUnits ProducedInventory RegOTSubcnHeldChg Jan 22 900 Feb 18 700 Mar 20 800 Total $/Unit $8.00 $11.20 $5.00 Tot $ Forc $10.00 Given information

18. © 1997 Prentice-Hall, Inc. 12 - 18 Plan 2 Solution* Production/day: 38 No. workers: 7.6 Total cost = 18240 + 1200 = $19,440 0 0 0 0 0 0 0 0 0 0 0 0

19. © 1997 Prentice-Hall, Inc. 12 - 19 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.

20. © 1997 Prentice-Hall, Inc. 12 - 20 Plan 3 Solution Production/day: No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan 22 900 Feb 18 700 Mar 20 800 $8.00 $10.00 $15.00 $5.00 Given information

21. © 1997 Prentice-Hall, Inc. 12 - 21 Plan 3 Solution Production/day: No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan 22 900 Feb 18 700 Mar 20 800 $8.00 $10.00 $15.00 $5.00 60 2400 90 0 0 0 0 0 0 70 0 0 Production matches forecast demand

22. © 1997 Prentice-Hall, Inc. 12 - 22 Plan 3 Solution Production/day: Varies No. workers: MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan 22 900 Feb 18 700 Mar 20 800 $8.00 $10.00 $15.00 $5.00 60 2400 90 0 0 0 0 0 0 70 0 0 Production per day varies. Jan: 900/22 = 40.9 units/day Feb: 700/18 = 38.9 units/day

23. © 1997 Prentice-Hall, Inc. 12 - 23 Plan 3 Solution Production/day: Varies No. workers: Varies MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan 22 900 Feb 18 700 Mar 20 800 $8.00 $10.00 $15.00 $5.00 60 2400 90 0 0 0 0 0 0 70 0 0 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

24. © 1997 Prentice-Hall, Inc. 12 - 24 Plan 3 Solution Production/day: Varies No. workers: Varies MonthDaysForcUnits ProducedInventory RegIncDecHeldChg Total $/Unit Tot $ Jan 22 900 Feb 18 700 Mar 20 800 $8.00 $10.00 $15.00 $5.00 60 2400 90 0 0 0 0 0 0 70 0 0 200 200 = 900 - 700: decrease in production due to layoffs

25. © 1997 Prentice-Hall, Inc. 12 - 25 Plan 3 Solution Production/day: Varies No. workers: Varies Total cost = 19200 + 1000 + 3000 = $23,200

26. © 1997 Prentice-Hall, Inc. 12 - 26 Thinking Challenge: Compare & Contrast AloneGroupClass

27. © 1997 Prentice-Hall, Inc. 12 - 27 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