Professional Documents
Culture Documents
Planning Horizon
Aggregate planning: Intermediaterange capacity planning, usually covering 2 to 12 months.
Long range
Intermediate range
2 months
1 Year
Long-range plans
Long
Time
Aggregate Planning
term has been coined by companies to refer to the process that helps companies keep demand and supply in balance
Overall terms
Product
families or product lines rather than individual products Big picture approach to planning Aggregate, for example # bicycles to be produced, but would not identify bicycles by colour, size, type etc.
Aggregate Planning
Jan 150,000
Quarter 1 Feb 120,000 Quarter 2 May 130,000 Quarter 3 Aug 150,000
Mar 110,000
Apr 100,000
Jun 150,000
Jul 180,000
Sep 140,000
Disaggregation
In the manufacturing environment the process of breaking down the aggregate plan into greater detail is called disaggregation Disaggregation results in Master Production Schedule (MPS)
MPS
Purchasing Production of
parts or components
Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon.
Disaggregation
Master Schedule
Aggregate Planning
It determines the resource capacity a firm will need to meet its demand over an intermediate time horizon
In this time frame it is too early to determine production level by SKU but too late to arrange additional capacity
Aggregate Planning
Aggregate planning: General plan Combined products = aggregate product Short and long sleeve shirts = shirt Single product Pooled capacities = aggregated capacity Dedicated machine and general machine = machine Single capacity Time periods = time buckets Consider all the demand and production of a given month together Quite a few time buckets
supply
A plan for orderly and systematic change of production capacity to meet peaks and valleys of expected customer demand
Getting the most output for the amount of resources available, which is important in times of scarce production resources
Begin with sales forecast for each product that indicates the quantities to be sold in each time period (usually weeks, months, or quarters) over the planning horizon (3-18 months) Total all the individual product or service forecast into one aggregate demand.
2.
Determine capacities (regular time, OT, Subcontracting) for each period Identify company policy (chase, level)
Determine unit costs for regular time, OT, subcontracting, holding inventories, back orders, layoffs etc.
4.
5.
7.
Develop alternative plans and compute cost for each Select the best alternative that satisfies companys objectives
Proactive
Alter
Reactive
Alter
Mixed
Some
Proactive strategies
Influencing
Demand
Increase
Counter
seasonal products
Reactive Strategies
Changing
inventory levels Vary workforce size (hiring and lay-off) Varying shifts Varying working hours Varying production through overtime or idle time Subcontracting
Inventory
Output
Employment Subcontracting
Inventory Calculations
Inventory Calculations
# Workers Calculations
Graphical Method
Popular techniques Easy to understand and use
Graphical Method
Month Expected Demand
Production Days
Demand / day
Jan
900
22
41
50
Feb
March
700
800
18
21
39
38
50
50
April
May
1200
1500
21
22
57
68
50
50
June
1100
6,200
20
124
55
50
Graphical Method
Level Strategy
and Nissan follow this strategy Finished goods inventory go up or down to buffer the difference between demand and production
Chase Strategy
It attempts to achieve output rates that match demand forecast for that period. This strategy can be accomplished by:
Vary
Level Approach
Advantages
Investment
Advantages
in inventory
is low
Labor
utilization in high
Disadvantages
Greater
Disadvantages
The
Increased
idle time
Mixed Strategy
For most firms, neither a chase strategy nor a level strategy is likely to prove ideal, so a combination of options must be achieved to meet demand and minimize cost More complex than pure ones but typically yield a better strategy
Mixed Strategy
Examples
Do
not hire or lay off workers, adjust the production rate by varying the number of shifts, use inventory and subcontracting to match supply and demand not hire or lay off workers, use subcontracting during periods of high demand and build inventory during periods of low demand
Do
MIXED STRATEGY
Finds minimum cost solution related to regular labour time, overtime, subcontracting, caring inventory, and costs associated with changing the size of workforce
Linear Programming
Optimal
Appropriate when cost and variable relationships are linear Application in industry limited
Transportation Method in AP
Transportation Method in AP
Total Costs
Period
Demand
Regular Production
Overtime
Subcontract
End Inventory
1 2 3 4 Total
Simulation Models in AP
Development of computerized model under variety of conditions to find reasonably acceptable solutions Advantages
Lends
itself to problems that are difficult to solve mathematically Experimenting system behaviour without any risk Compresses time to understand system Understand system behaviour under wide range of conditions
Simulation Models in AP
Limitations
Simulation
does not produce optimal solutions, it merely indicates approximate behaviour for a set of inputs are based on models, and models are only approximation of reality
Simulations
Solution Approach
Heuristic (trial and error) Optimizing
Characteristics
Intuitively appealing, easy to understand, solution not optimal Computerized
Linear Programming
Simulation