Professional Documents
Culture Documents
Chapter 16
Planning Horizon
Aggregate planning: Intermediate-range
capacity planning, usually covering 2 to 12 months.
Long range
Intermediate range
2 months
1 Year
Aggregate Planning
Also called Sales and Operation Planning
The term has been coined by companies to refer to
the process that helps companies keep demand and supply in balance
individual products Big picture approach to planning Aggregate, for example # bicycles to be produced, but would not identify bicycles by colour, size, type etc.
Disaggregation
In the manufacturing environment the process
of breaking down the aggregate plan into greater detail is called disaggregation Schedule (MPS)
Aggregate Planning
It determines the resource capacity a firm will need
aggregate demand
Optimize balance between demand and supply
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)
2.
Total all the individual product or service forecast into one aggregate demand.
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.
Develop alternative plans and compute cost for each Select the best alternative that satisfies companys objectives
Reactive
Alter capacity to match demand
Mixed
Some of each
Changing inventory levels Vary workforce size (hiring and lay-off) Varying shifts Varying working hours Varying production through overtime or idle time Subcontracting
Subcontracting
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
strategies
Level Production Maintain constant workforce and adjust inventory Chase Demand Hiring and Firing people Part Time employees Mixed Strategy
Level Strategy
It is an aggregate planning in which daily or
Chase Strategy
It attempts to achieve output rates that match
demand forecast for that period. This strategy can be accomplished by:
Vary workforce levels (hiring and firing) Part time employees
Overtime or subcontracting
Level Approach
Advantages
low
Labor utilization in high
Disadvantages
The cost of adjusting
Disadvantages
Greater
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
Do not hire or lay off workers, use subcontracting
during periods of high demand and build inventory during periods of low demand
MIXED STRATEGY
labour time, overtime, subcontracting, caring inventory, and costs associated with changing the size of workforce
are linear
Application in industry limited
Transportation Method in AP
Total Costs
Period
Demand
Regular Production
Overtime
Subcontract
End Inventory
1 2 3 4 Total
Transportation Method in AP
Problem 8
Total Costs
Period Demand Regular Production Overtime Subcontract End Inventory
50 50 50 150
150 50
200 0 0 200
200
Simulation Models in AP
Development of computerized model under
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
approximation of reality
Solution Approach
Heuristic (trial and error) Optimizing
Characteristics
Intuitively appealing, easy to understand, solution not optimal Computerized
Linear Programming
Simulation