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Planning Tasks and Responsibilities

Aggregate Planning

Types of Planning Over a Time Horizon

Long Range Planning Intermediate Range Planning Short Range Planning
*Limited options exist

The Production Planning Process

Top Management Planning

Business Planning Sales Planning Production Planning

Objectives Demands Resources no

FEED DBACK

Add Facilities Add long lead time equipment Sub Contract Sub-Contract Add Equipment Add Shifts

Operations management Planning

Resource OK? yes

Add Personnel Build or Use Inventory Schedule Jobs Schedule Personnel Allocate Machinery

Bill of Materials Inventory status Routings

Master Scheduling Materials Planning Capacity Planning

Planning OK? yes no

Products Materials Capacity

* Modify Capacity

Use Capacity
3

Operations Management Execution

Purchasing Shop Floor control Performance Measurement

Parts Hours
4

Accountability

Relationships of the Aggregate Plan

Marketplace and Demand Demand Forecasts, orders Product Decisions Process Planning & Capacity Decisions Aggregate Plan for Production Master Production Schedule, and MRP systems Detailed Work Schedules Research and Technology

Aggregate Planning Goals

Meet demand Use capacity efficiently Match capacity to demand Meet inventory policy
Minimize cost Labor Inventory Plant & equipment
5

Work Force

Raw Materials Available External Capacity Subcontractors

Inventory On Hand

Subcontract

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Inputs and Outputs to APP

Capacity Constraints Strategic Objectives Company Policies

Pure Strategies - The Extremes

Level gy Strategy
Demand Forecasts Aggregate Production Planning Financial Constraints

Chase Strategy gy Production equals demand

Chase demand - change workforce levels so that production matches demand 8

Production rate is constant

Units or dollars subcontracted, backordered, or lost
7

Size of Workforce

Production per month (in units or $)

Inventory Levels

Level production - produce at constant rate & use inventory as needed to meet demand

Level Production
Demand Production
Units Units

Chase Demand
Demand Production

Time
9

Time
10

Aggregate Planning Strategies Pure Strategies

Capacity Options change capacity:
changing inventory levels varying work force size by hiring or layoffs varying production capacity through overtime or idle time subcontracting using part-time workers part11

Aggregate Planning Strategies Pure Strategies

Demand Options change demand:
influencing demand pricing, promotion backordering during high demand periods counterseasonal product mixing
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APP Using Pure Strategies

Solved example:
QUARTER Spring Summer Fall Winter Hiring cost Firing cost Inventory carrying cost Production per employee Beginning work force SALES FORECAST (LB) 80,000 50,000 120,000 150,000 = $100 per worker = $500 per worker = $0.50 pound per quarter = 1,000 pounds per quarter = 100 workers

APP Using Pure Strategies

QUARTER Spring Summer Fall Winter SALES FORECAST (LB) 80,000 50,000 120,000 150,000

Level production Hiring cost = $100 per worker Firing cost = $500 per worker (50,000 + 120,000 + 150,000 + 80,000) Inventory carrying cost = $0.50 pound per quarter 4 Production per employee = 1,000 pounds per quarter Beginning = 100,000 poundsworkers work force = 100
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Level Production Strategy

SALES FORECAST 80,000 50,000 120,000 120 000 150,000 PRODUCTION PLAN INVENTORY 100,000 100,000 100,000 100 000 100,000 400,000 20,000 70,000 50,000 50 000 0 140,000
QUARTER

Chase Demand Strategy

SALES PRODUCTION FORECAST PLAN WORKERS NEEDED WORKERS WORKERS HIRED FIRED

QUARTER Spring Summer Fall Winter

Spring Summer Fall Winter

80,000 50,000 120,000 150,000

80,000 50,000 120,000 150,000

80 50 120 150

0 0 70 30 100

20 30 0 0 50

Cost = 140,000 pounds x 0.50 per pound = $70,000

Cost = (100 workers hired x $100) + (50 workers fired x $500) = $10,000 + 25,000 = $35,000

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APP Using Mixed Strategies

MONTH January February March April May June J DEMAND (CASES) 1000 400 400 400 400 400 MONTH July August September October November December D b DEMAND (CASES) 500 500 1000 1500 2500 3000

Production per employee= 100 cases per month Wage rate = $10 per case for regular production = $15 per case for overtime = $25 for subcontracting Hiring cost = $1000 per worker Firing cost = $500 per worker Inventory carrying cost = $1.00 case per month Beginning work force = 10 workers
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