PROJECT ON AGGREGATE PLANNING IN TATA MOTORS Presented to : Prof.

Shilpa Shinde

GROUP MEMBERS
NAME Sneha Adivarekar Prathamesh Deo Mayur Gharat Shrutika Madan Tanuj PaTidar Nayantara Sable

ROLL NO. 01 11 21 31 41 51

Theoretical Aspects of Aggregate planning

INTRODUCTION
Process of developing, analyzing, and maintaining a preliminary, approximate schedule of the overall operations of an organization. In simple terms, It is an attempt to balance capacity and demand in such a way that costs are minimized. The term "aggregate" is used because planning at this level includes all resources "in the aggregate. Aggregate planning is considered to be intermediate-term (as opposed to long- or short-term) in nature that is 3-18 months.

AGGREGATE PLANNING

The Planning Process

Long-range plans (over one year)
Research and Development New product plans Capital investments Facility location/expansion Top executives

Intermediate-range plans (3 to 18 months)

Sales planning Production planning and budgeting Setting employment, inventory, subcontracting levels Analyzing operating plans

Operations managers

Short-range plans (up to 3 months)

Operations managers, supervisors, foremen Responsibility Job assignments Ordering Job scheduling Dispatching Overtime Part-time help Planning tasks and horizon

DEFINITION

Type of medium range capacity planning that typically covers a 3 to 18 month period of time. Used in a manufacturing environment and determines overall output levels planned as well as appropriate resource input mix to be used for related groups of products.
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OBJECTIVES
Minimize Costs/Maximize Profits Maximize Customer Service Minimize Inventory Investment Minimize Changes in Production Rates (Setup cost) Minimize Changes in Workforce Levels Maximize Utilization of Plant and Equipment

IMPORTANCE
Achieving financial goals by reducing overall variable cost and improving the bottom line. Maximum utilization of the available production facility. Provide customer delight by matching demand and reducing wait time for customers. Reduce investment in inventory stocking. Able to meet scheduling goals there by creating a happy and satisfied work force.

ADVANTAGES AND DISADVANTAGES OF AP

Option

Advantages

Disadvantages

Changing Inventory levels

Changes in Human resources are Inventory holding cost may increase. gradual or none; no abrupt production Shortages may result in changes. Lost sales.

Varying Workforce size by hiring or layoffs Using part-time workers

Avoids the use other alternatives . Less costly and more flexible than full-time workers Tries to use excess capacity. Discounts draw new customers.

Hiring, layoff, and training costs.

High turnover/training costs; quality suffers; scheduling difficult Uncertainty in demand. Hard to match demand to supply exactly

Influencing demand

Uncertainty in demand. Hard to match demand to supply exactly Counter seasonal products and service mixing

May avoid overtime. Keeps capacity constant

Customer must be willing to wait, but goodwill is lost.

Fully utilizes resources; allows stable workforce.

May require skills or Equipment outside a firm's areas of expertise.

AGGREGATE PLANNING STRATEGIES

LEVEL STRATEGY CHASE STRATEGY

Daily production is uniform. Use inventory or idle time as buffer. Stable production leads to better quality and productivity.

Match output rates to demand forecast for each period. Vary workforce levels or vary production rates. Favored my many service organizations.

COSTS INVOLVED IN A.P

Procurement Cost Regular-Time Costs (production Cost) Overtime Cost Hiring and Layoff Costs Inventory Holding Cost Backorder and Stock out Costs Production rate changing cost

STEPS IN AP
Determine demand for each period. Determine capacity for each period. Identify company, departmental, or union policies that are pertinent. Determine unit costs for units produced. Develop alternative plans and compute the cost for each. If satisfactory plans emerge, select the one that best satisfies objectives.

SITUATIONS IN WHICH DEMAND NEEDS TO BE INCREASED IN ORDER TO MATCH CAPACITY

Pricing Promotion Back ordering

New demand creation

OPTIONS WHICH CAN BE USED TO INCREASE OR DECREASE CAPACITY TO MATCH CURRENT DEMAND Lay off Overtime Part-time or casual labor Inventory Subcontracting Cross training Other methods

PRACTICAL IMPLICATIONS OF AGGREGATE PLANNING

GENERAL EXAMPLE TO UNDERSTAND THE CONCEPT

VARIOUS COST ASSOCIATED

SOLUTION OF PLAN-1 (CONSTANT WORK FORCE)

PLAN-2 SUBCONTRACTING

PLAN-3

HIRING & FIRING

SELECTION OF THE BEST PLAN

CASE OF TATA VOLTAS

VOLTAS- Manufactures of Window air conditioners. Models- 0.75, 1, 1.5, 2 tons. In 2009- expected sales in units 1 lacs and succeeded. In 2009- They produced above units in 2 shifts with 300 workers in each shift. In 2010- co. expected to sell 1.5 lacs depending upon the success of 2009 Institutional orders- Aggregate 10000 units to be produced in 2010 Total Expected Production- aggregate 160000 units that is 60000 additional units with existing production capacity(machine/ labor force)

CONTI..

Management option to meet the Fluctuating Demand (Capacity Adjustment):Build inventories in slack period in anticipation of higher demand in future.

Carried backorders/lost sales during peak period.

Overtime in peak period:- (utilization of part time labors) used subcontracting technique

COMPANY PROFILE- TATA MOTORS

Indian multinational automotive manufacturing company headquartered in Mumbai, Maharashtra. Products- cars, trucks, vans, coaches, buses and military vehicles. world's eighteenth-largest motor vehicle manufacturing company. Founded in 1945 as a, the co manufacturer of locomotives company manufactured its first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad and Pun e (India), and in Argentina, South Africa, Thailand and the United Kingdom. Tata Motors acquired the South Korean truck manufacturer Daewoo Commercial Vehicles Company in 2004 and the British premium car maker Jaguar Land Rover in 2008

TATA ARIAS AGGREGATE PLANNING

JAN No. of working days 25 FEB 23 MAR 24 APR 20 MAY 25 JUN 24

Inventory carrying cost Stock out cost Cost of subcontracting Cost of hiring and traning Laying off cost Time required for 1 unit Regular time wage Overtime wage Starting inventory Safey stock Present workforce Overtime per worker not to exceed

Rs 2.00 per unit/month Rs 5.00 per unit/month Rs 60.00 per unit Rs 400.00 per worker Rs 500.00 per worker 7 labour hours. Rs 15.00 per hour Rs 10.00 per hour 500 units 25% of monthly demand 100 4 hours per day

The cost of material can be ignored as it is common to every unit that is produced.

Target production for 6 months =1000 cars ( TATA ARIA)

SOLUTION
Jan Feb Mar Apr May Jun cost

Starting inventory
No. od days No. of hr per worker Total hrs Labour employed

400
25 200 8000 40

240
25 186 7440 40

-135
24 192 7680 40

347
20 170 6800 40

499
25 200 8000 40

739
24 192 7680 40

Actual production
Inventory Regular wages Inventory cost

175
240 120000 480

174
-135

168
347

140
499

175
739

168
321 111600 624 680400 4274

111600 1152 00 694

10200 120000 0 998 1478