Aggregate PlanningIntermediate range planning Production, workforce, inventory Apply improvement strategies

The Role of the Aggregate Plan

Aggregate Planning

(simplified calculations) demand (3-18 ) Production, workforce, inventory (Goal)

() Minimize Costs (Over planning horizon) () Minimize fluctuations workforce, inventory

Aggregate Planning

Given Demand Forecast, Production Capacity, Inventory Levels, Size Of Work , Force, ( Select (Rate Of Output) 3-18 (combination) ...

(Production rate) pieces/unit of time (Workforce level) number of workers required to meet a specific level of output. (Inventory on hand) (carry over)

Relationships Of Aggregate Plan

Aggregate Planning Objectives and Approaches

(Objectives)

Match Demand and Supply (Effectiveness) Minimize Costs (Efficiency) Reactive approach (5 strategies):

(Approaches 8 Pure Strategies)

demand forecast demand Marketing & Production plans

Proactive approach (3 strategies):

13-5

Matching Aggregate Demand and Aggregate CapacityForecast demand10000 10000 8000 8000 6000 4000 5500 4500 7000 6000

20000 Jan Feb Mar 9000 8000 6000 Apr May Jun

(Aggregate capacity)10000

production rate workforce levels inventory match up

8000

60004000 2000 0

4500

4000

4000

Jan

Feb

Mar

Apr

May

Jun

Pure Strategies in APP Reactive approach (5 strategies) (Changing Inventory Levels) 1. demand 2. (varying Work Force) (Hiring Or Layoffs) 3. (varying production rate) (Overtime) (Idle Time) (Using 4. Subcontractor) (Using Part 5. Time Workers)

Pure Strategies in APP Proactive approach (3 strategies)6. (Influencing Demand) Advertising, Promotion, And Price Cuts. 7. demand Back Order (Back ordering) 8. (Counter-seasonal Product Mixing)

Reactive vs. Proactive approach 1.

2.

Reactive vs. Proactive approach 3. 4.

5.

Reactive vs. Proactive approach 6.

7. 8.

Reactive vs. Proactive approach 8 Pure Approaches (Cost-Effective Aggregate Plan) ...

(Optimal Plan)

Improvement Strategies in APP

(Chase strategy)

demand (hiring/firing) demand rate demand fluctuations Minimize inventory and backorders peaks and valley demand

(Level strategy)

Improvement Strategies

Chase Strategy Plan

Period 1 = (500 units x .64 std.)/160 = 2 workforce, 16 workforce

Level Strategy Plan

Level production rate= 28,000 units/7 periods= 4000 units Level workforce= (4000 units x .64 std.)/160 = 16 wf

Comparison of Chase vs. Level StrategyLevel of labor skill required Job discretion Compensation rate Working conditions Training required per employee Labor turnover Hire-fire cost E rror rate Amount of supervision required Type of budgeting and forecasting required Low Low Low S weatshop Low High High High High S hort-run High High High Pleasant High Low Low Low Low Long-run 19

Chase Demand Level Capacity

Hybrid Strategies

chase/level strategies :

(work rate - overtime/undertime) (subcontract) part-time workers short-term peak demand

Methods For Aggregate Planning1. Graphical And Charting Methods70 60

50 40 30

0

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Graphing the Aggregate Plan

Step Step Step Step

1234-

strategy: level, chase, or Hybrid (Agg P rate) (workforce rate) :

Inventory, expected hiring/firing, overtime needs total cost of plan

: cost, service Step 5- level, human resources, and operations

Mathematical Methods Linear Programming APP ( ) .. .. .. 800 700 50 150 100 1,000 700 50 150 750 700 $ 40 50 $ 50 130 $ 70

$ 2

Linear Programming APP

Linear Programming Form