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Chapter 13 Aggregate Planning

Chapter 13 – Aggregate Planning Operations Management by R. Dan Reid & Nada R. Sanders 3

Operations Management

by

R. Dan Reid & Nada R. Sanders

3 rd

Edition ©

Wiley 2007

PowerPoint Presentation by R.B. Clough UNH M. E. Henrie - UAA

© Wiley 2007

Learning Objectives
Learning Objectives
  • Explain business planning

  • Explain sales and operations planning

  • Identify different aggregate planning strategies and options for changing demand and/or capacity in aggregate plans

  • Develop aggregate plans, calculate associated costs, and evaluate the plan in terms of operations, marketing, finance, and human resources

  • Describe differences between aggregate plans for service and manufacturing companies

© Wiley 2007

Learning Objectives (continued)
Learning Objectives (continued)
  • Explain role and objectives of the master production schedule (MPS) and describe the objectives of master production scheduling

  • Develop a MPS and project the capacity needed using rough-cut capacity planning

  • Calculate available-to-promise quantities (ATP)

  • Describe time fence policies

© Wiley 2007

The Role of Aggregate

Planning
Planning
  • Integral to part of the business planning process

  • Supports the strategic plan

  • Also known as the production plan

  • Identifies resources required for operations for the next 6 -18 months

  • Details the aggregate production rate

and size of work force required

© Wiley 2007

The Role of the Aggregate Plan
The Role of the Aggregate Plan

© Wiley 2007

Types of Aggregate Plans
Types of Aggregate Plans
  • Level Aggregate Plans

    • Maintains a constant workforce

    • Sets capacity to accommodate average demand

    • Often used for make-to-stock products like appliances

    • Disadvantage- builds inventory and/or uses back orders

  • Chase Aggregate Plans

    • Produces exactly what is needed each period

    • Sets labor/equipment capacity to satisfy period demands

    • Disadvantage- constantly changing short term capacity

  • © Wiley 2007

    Level Plan Example
    Level Plan Example
    • Level production rate= 28,000 units/7 periods= 4000 units

    • Level workforce= (4000 units x .64 std.)/160 = 16 people

    Level Plan Example  Level production rate= 28,000 units/7 periods= 4000 units  Level workforce= (4000

    © Wiley 2007

    Chase Plan Example
    Chase Plan Example
    • Chase hires and fires staff to exactly meet each periods demand

    • Period 1 = (500 units x .64 std.)/160 = 2 people, need to fire 16 people

    Chase Plan Example  Chase hires and fires staff to exactly meet each periods demand 

    © Wiley 2007

    Types of Aggregate Plans (Cont.)
    Types of Aggregate Plans (Cont.)
    • Hybrid Aggregate Plans

      • Uses a combination of options

      • Options should be limited to facilitate execution

      • May use a level workforce with overtime & temps

      • May allow inventory buildup and some backordering

      • May use short term sourcing

    © Wiley 2007

    Aggregate Planning Options
    Aggregate Planning Options
    • Demand based options

      • Reactive: uses finished goods inventories and backorders for fluctuations

      • Proactive: shifts the demand patterns to minimize fluctuations e.g. early bird dinner prices at a restaurant

  • Capacity based options

    • Changes output capacity to meet demand

    • Uses overtime, under time, subcontracting, hiring, firing, and part-timers cost and operational implications

  • © Wiley 2007

    Evaluating the Current Situation
    Evaluating the Current Situation
    • Important to evaluate current situation in terms of;

      • Point of Departure

        • Current % of normal capacity

        • Options are different depending on present situation

    • Magnitude of change

      • Larger changes need more dramatic measures

    • Duration of change

      • Is the length of time a brief seasonal change?

      • Is a permanent change in capacity needed?

    © Wiley 2007

    Developing the Aggregate Plan
    Developing the Aggregate Plan
    • Step 1- Choose strategy: level, chase, or Hybrid

    • Step 2- Determine the aggregate production rate

    • Step 3- Calculate the size of the workforce

    • Step 4- Test the plan as follows:

      • Calculate Inventory, expected hiring/firing, overtime needs

      • Calculate total cost of plan

  • Step 5- Evaluate performance: cost, service, human resources, and operations

  • © Wiley 2007

    Plan for Companies with Tangible

    Products – Plans A, B, C, D
    Products – Plans A, B, C, D
    • Plan A: Level aggregate plan using inventories and back orders

    • Plan B: Level plan using inventories but no back orders

    • Plan C: Chase aggregate plan using hiring and firing

    • Plan D: Hybrid plan using initial workforce and overtime as needed

    © Wiley 2007

    Problem Data for Plans A & B

    (Table 13-4)
    (Table 13-4)
    © Wiley 2007
    © Wiley 2007

    Plan A - Level Using Inventory &

    Backorders (Table 13-5)
    Backorders (Table 13-5)
    • First calculate the level production rate (14400/8=1800)

    © Wiley 2007
    © Wiley 2007
    Plan A Evaluation
    Plan A Evaluation
    • Fill rate is 83.9%

    • Fill rate is likely to low

    • Inventory levels seem to be okay

    • Human resources fires two employees

    © Wiley 2007

    Plan B Chase Aggregate Plan

    Using Hiring and Firing (Table 13-6)
    Using Hiring and Firing (Table 13-6)

    © Wiley 2007

    Plan B Evaluation
    Plan B Evaluation
    • Plan B costs slightly less than the level plan.

    • Hiring demands ranges from two in November to thirty-four in February

    • Utilization is highest, 70.6%, in December and

    even lower in the other months

    • Space and equipment are underutilized in every other month of the plan

    © Wiley 2007

    Aggregate Plans for Service Companies with Non-Tangible Products- Plans E, F, G

    Aggregate Plans for Service Companies with Non-Tangible Products- Plans E, F, G  Options remain the
    • Options remain the same level, chase, and hybrid plans

      • Overtime and under time can be used

      • Staff can be hired and fired

  • Inventory cannot be used to level the service plan

  • All demand must be satisfied or lose business to a competing service provider

  • © Wiley 2007

    Problem Data for Plans C, D, and E

    (Table 13-7)
    (Table 13-7)

    Cost Data

    Capacity Data

    Demand Data (calls)

    Beginning workforce (employees)

    Service standard per call (hours)

    Regular time available per period (hours)

    Overtime available per period (hours)

    Regular time labor cost per hour

     

    Overtime labor cost per hour

    Subcontracting cost per unit (labor only)

    Hiring cost per employee

    Firing cost per employee

    11

    21

    20

    19

    18

    17

    16

    15

    14

    13

    12

    9

    8

    7

    6

    5

    4

    © Wiley 2007

    B $150.00 $250.00 $60.00 $12.00 $8.00

    B

    $150.00

    $250.00

    $60.00

    $12.00

    $8.00

    160

    24

    4

    60

    8

    8

    Period 1

    Period 2

    Period 3

    Period 4

    Period 5

    Period 6

    Period 7

    Period 8

    2400

    1320

    1680

    2760

    2040

    1200

    1560

    2400

    10

    A

    28

    27

    26

    25

    24

    23

    Total Number of Periods

    22

    Plan C Level Aggregate Plan with No Back Orders, No Tangible Product

    (Table 13-8)
    (Table 13-8)
    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280
    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280
    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280
    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280

    Compute Workforce Needed

    11040

    1440

    3

    • 8 Total

    7

    6

    5

    4

    1560

    2

    9600

    5280

    6720

    26880

    8160

    4800

    6240

    15360

    2400

    1320

    1680

    2760

    2040

    1200

    Total Cost

    $708,810

    Detailed Plan Computations

    Demand (calls)

    Service hours needed

    Regular time hours available

    Undertime hours

    Cost Calculations for Plan E

    Regular time labor cost

    Hiring cost

    Firing cost

    0

    1

    2400

    9600

    11040

    1440

    $706,560

    $2,250

    $0

    Workers Needed

    Number to Hire

    Number to Fire

    0

    9

    69

    11040

    4320

    2880

    6240

    4800

    11040

    5760

    11040

    11040

    11040

    11040

    11040

    Period

    61440

    11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280 6720 26880 8160

    Calls per Worker per Period (Reg Time)

    40

    <-- Need to staff to meet the maximum number of calls

    2760

    Maximum Demand

    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280
    Compute Workforce Needed 11040 1440 3 8 Total 7 6 5 4 1560 2 9600 5280
    D E F G H I J K L M Plan E: Level Aggregate Plan with
    D E F G H I J K L M Plan E: Level Aggregate Plan with
    D E F G H I J K L M Plan E: Level Aggregate Plan with
    D E F G H I J K L M Plan E: Level Aggregate Plan with
    • D E

    F

    G

    H

    I

    J

    K

    L

    M

    Plan E: Level Aggregate Plan with No Backorders, No Tangible Product

    • Staff of 69 people creates excessive UT (averages 30% UT)

    • Cost per service call is $46.15 ($708,000 Divided by 15360 calls)

    © Wiley 2007

    Plan D Hybrid Aggregate Plan Using Initial Workforce and OT as Needed

    (Table 13-9)
    (Table 13-9)

    Detailed Plan Computations

    Period

    Plan F: Hybrid Aggregate Plan Using Initial Workforce and Overtime as Needed
    Plan F: Hybrid Aggregate Plan Using Initial Workforce and Overtime as Needed
    Plan F: Hybrid Aggregate Plan Using Initial Workforce and Overtime as Needed
    Plan F: Hybrid Aggregate Plan Using Initial Workforce and Overtime as Needed
    M L K I J G D E F H
    M
    L
    K
    I J
    G
    D E
    F
    H
    9600 8160 11040 6720 5280 9600 61440 Regular time hours of capacity 9600 9600 9600 9600
    9600 8160 11040 6720 5280 9600 61440 Regular time hours of capacity 9600 9600 9600 9600
    9600 8160 11040 6720 5280 9600 61440 Regular time hours of capacity 9600 9600 9600 9600
    9600 8160 11040 6720 5280 9600 61440 Regular time hours of capacity 9600 9600 9600 9600

    9600

    8160

    11040

    6720

    5280

    • 9600 61440

    Regular time hours of capacity

    9600

    9600

    9600

    9600

    9600

    4800

    • 9600 76800

    Overtime hours needed

    0

    0

    0

    0

    1440

    Total Cost

    $631,680

    4320

    Service hours needed

    16800

    0

    • 0 1440

    Undertime hours

    0

    3360

    4800

    1440

    0

    2880

    0

    0

    Cost Calculations for Plan F

    Regular time labor cost

    $614,400

    Overtime labor cost

    $17,280

    9600

    9600

    6240

    • 2040 2760

    • 2400 15360

    • 1680 1320

    • 1560 1200

    2400

    • 8 Total

    1

    2

    3

    4

    5

    6

    Demand (calls)

    7

    9600 8160 11040 6720 5280 9600 61440 Regular time hours of capacity 9600 9600 9600 9600

    26

    27

    28

    29

    30

    31

    32

    33

    34

    35

    36

    37

    38

    39

    • Costs reduced by $77K and under time to an average of 20%

    • Cost per service call reduced to $41.13 (-$5.02)

    © Wiley 2007

    Plan E Chase Aggregate Plan for Nontangible Products Using Hiring

    and Firing (Table 13-10)
    and Firing (Table 13-10)

    42

    43

    44

    45

    46

    47

    48

    49

    50

    51

    52

    53

    54

    55

    56

    57

    58

    Plan G: Chase Aggregate Plan Using Hiring and Firing Beginning Number of Employees 60
    Plan G: Chase Aggregate Plan Using Hiring and Firing Beginning Number of Employees 60
    Plan G: Chase Aggregate Plan Using Hiring and Firing Beginning Number of Employees 60

    Plan G: Chase Aggregate Plan Using Hiring and Firing

    Plan G: Chase Aggregate Plan Using Hiring and Firing Beginning Number of Employees 60
    Beginning Number of Employees 60
    Beginning Number of Employees
    60

    4

    3

    2

    1

    Detailed Plan Computations

    0 9 27 0 9 21 0 27 0 0 18 21 0 0 0 0
    0
    9
    27
    0
    9
    21
    0
    27
    0
    0
    18
    21
    0
    0
    0
    0

    Period

    2760

    2040

    1200

    1560

    2400

    Demand (calls)

    8

    7

    6

    6240

    1680

    Total Cost

    Firing cost

    Hiring cost

    Regular time labor cost

    Cost Calculations for Plan G

    33

    Number of fires

    Number of hires

    60

    5

    Number of employees needed

    42

    69

    51

    30

    39

    60

    $517,920
    $517,920

    $9,900

    $16,500

    $491,520

    9600

    5280

    6720

    11040

    8160

    4800

    9600

    Service hours needed

    2400

    1320

    L K I J H G D E F
    L
    K
    I J
    H
    G
    D
    E
    F
    • Total cost reduced by $114K over Plan F, utilization improved to 100%, and cost per service call now $33.72 (-$7.41)

    • Workforce fluctuates from 30-69 people- morale problems

    • Solution?? Compare smaller permanent workforce, more OT??

    © Wiley 2007

    Aggregate Planning Bottom Line
    Aggregate Planning Bottom Line
    • The Aggregate plan must balance several

    perspectives

    • Costs are important but so are:

      • Customer service

      • Operational effectiveness

      • Workforce morale

  • A successful AP considers each of these factors

  • © Wiley 2007

    Master Production Scheduling
    Master Production Scheduling
    • Master production schedule (MPS) is the

    anticipated build schedule

    • MPS is often stated in produce or

    service specifications rather than dollars

    • MPS is often built, managed, reviewed and maintained by the master scheduler

    © Wiley 2007

    Planning Links to MPS
    Planning Links to MPS

    © Wiley 2007

    Role of the MPS
    Role of the MPS
    • Aggregate plan:

      • Specifies the resources available (e.g.: regular workforce, overtime, subcontracting, allowable inventory levels & shortages)

    • Master production schedule:

      • Specifies the number & when to produce each end item (the anticipated build schedule)

      • Disaggregates the aggregate plan

    © Wiley 2007

    Objectives of Master Schedule
    Objectives of Master Schedule
    • The Master Scheduler must:

      • Maintain the desired customer service level

      • Utilize resources efficiently

      • Maintain desired inventory levels

  • The Master Schedule must:

    • Satisfy customer demand

    • Not exceed Operation’s capacity

    • Work within the constraints of the Aggregate Plan

  • © Wiley 2007

    MPS as a Basis of

    Communication
    Communication
    • MPS is a basis for communication between

    operations and other functional areas

    • Demand management and master scheduler is communication is ongoing to incorporate

      • Forecasts, order-entry, order-promising, and physical distribution activities

    • Authorized MPS is critical input to the material

    requirements planning (MRP)

    © Wiley 2007

    Developing an MPS
    Developing an MPS
    • The Master Scheduler:

      • Develops a proposed MPS

      • Checks the schedule for feasibility with available capacity

      • Modifies as needed

      • Authorizes the MPS

  • Consider the following example:

    • Make-to-stock environment with fixed orders of 125 units

    • There are 110 in inventory to start

    • When are new order quantities needed to satisfy the forecasted demand?

  • © Wiley 2007

    The MPS Record W e e k B I 1 2 3 4 5 6 7
    The MPS Record
    W e e k
    B I
    1
    2
    3
    4
    5
    6
    7
    8
    9
    1 0
    1 1
    1 2
    F o re c a s t
    5 0
    5 0
    5 0
    5 0
    7 5
    7 5
    7 5
    7 5
    5 0
    5 0
    5 0
    5 0
    P ro je c te d
    a va ila b le
    110
    6 0
    1 0
    -4 0
    M
    P S
    W e e k
    B I
    1
    2
    3
    4
    5
    6
    7
    8
    9
    1 0
    1 1
    1 2
    F o re c a s t
    5 0
    5 0
    5 0
    5 0
    7 5
    7 5
    7 5
    7 5
    5 0
    5 0
    5 0
    5 0
    P ro je c te d
    a va ila b le
    110
    6 0
    1 0
    8 5
    3 5
    -4 0
    M
    P S
    125
    • Projected Available = beginning inventory + MPS shipments -

    forecasted demand

    • The MPS row shows when replenishment shipments need to arrive to avoid a stock out (negative projected available)

    © Wiley 2007

       
             

    Revised and Completed MPS Record

     
         
                   
               
               
       
     

    W e e k

     

    BI

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    11

    12

    Forec as t

     

    50

    50

    50

    50

    75

    75

    75

    75

    50

    50

    50

    50

    P rojec ted available

    110

    60

    10

    85

    35

    85

    10

    -65

    M PS 125 125

    M PS

     

    125

    125

    M PS 125 125

    W e e k

     

    BI

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    11

    12

    Forec as t

     

    50

    50

    50

    50

    75

    75

    75

    75

    50

    50

    50

    50

    P rojec ted available

    110

    60

    10

    85

    35

    85

    10

    60

    110

    60

    10

    85

    35

    M PS

    M PS
     

    125

    125

    125

    125

    125

    M PS 125 125 125 125 125

    © Wiley 2007

    Evaluating the MPS
    Evaluating the MPS
    • Rough-cut capacity planning:

      • An estimate of the plan’s feasibility

      • Given the demonstrated capacity of critical resources (e.g.: direct labor & machine time), have we overloaded the system?

  • Customer service issues:

    • Does “available-to-promise” inventory satisfy customer orders? If not, can future MPS quantities be pulled in to satisfy new orders?

  • © Wiley 2007

    Rough Cut Capacity Problem: a shoe company produces two models of dance shoes. Over the past 3 years 72,000 pairs of Model M have been produced using 21,600 direct labor hours and 5760 machine hours, and 108,000 pairs of Model W using 43,200 hours of labor and 12,960 hours of machine time.

    Rough Cut Capacity Problem : a shoe company produces two models of dance shoes. Over the
    • Step 1: Determine the Planning factors:

      • Labor Factors

    Total DL hours building model

    number of units built 43,200 hours

    W

    108,000 pairs

    Direct Labor Planning Factor 21,6000 hours
    DL

    PF M

    72,000 pairs

    0.30 hour ; DL PF

    0.40 hour

    • Machine Factors

    Total machine hours building model

    number of units built

    0.08hour ; MachinePF W

    12,960

    108,000

    Machine Planning Factor 5760 hours

    Machine PF M

    72,000 pairs

    0.12hour

    © Wiley 2007

    Step 2:Calculate the Workload Generated by This Schedule

    Step 2 :Calculate the Workload Generated by This Schedule Model M Planning Factors (hours per pair)

    Model M

    Planning Factors (hours per pair)

    • 0.30 0.08

    • 0.40 0.12

    A

    B

    C

    Model W

    10

    9

    8

    7

    F

    E

    D

    Totals

    Q4

    Q3

    9500

    • 6500 27500

    7500

    • 10100 39600

    Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600
    F E D Totals Q4 Q3 9500 6500 27500 7500 10100 39600

    6

    5

    4

    11

    Time

    Machine

    Labor

    Direct

    Q2

    Q1

    Quarterly Master Production Schedule (MPS) (pairs)

    5500 12000
    5500
    12000
    12 Model M 6000 13 Model W 10000
    12 Model M
    6000
    13 Model W
    10000

    © Wiley 2007

    Step 3: Calculate the Capacity Needs for Each Resource for Each Time Period

    Step 3 : Calculate the Capacity Needs for Each Resource for Each Time Period 2850 Q1
    2850 Q1 Q2 Q3 Q4 Totals Model M Model W Direct Labor Hours Required Totals 1650
    2850
    Q1
    Q2
    Q3
    Q4
    Totals
    Model M
    Model W
    Direct Labor Hours Required
    Totals
    1650
    1800
    15840
    1950
    8250
    4000
    4800
    3000
    4040
    24090
    5990
    5850
    6450
    5800
    2850 Q1 Q2 Q3 Q4 Totals Model M Model W Direct Labor Hours Required Totals 1650
    2850 Q1 Q2 Q3 Q4 Totals Model M Model W Direct Labor Hours Required Totals 1650

    F

    480 760 520 2200 1200 1440 900 1212 4752 1680 1880 1660 1732 6952 440
    480
    760
    520
    2200
    1200
    1440
    900
    1212
    4752
    1680
    1880
    1660
    1732
    6952
    440

    Machine Time (Hours) Required

    Q1

    Q2

    Q3

    Q4

    Totals

    15
    15

    A

    B

    C

    • D E

    Model M Model W Totals
    Model M
    Model W
    Totals

    © Wiley 2007

    Step 4: Calculate Individual Workcenter Capacity Needs Based on Historical Percentage Allocation

    Step 4 : Calculate Individual Workcenter Capacity Needs Based on Historical Percentage Allocation 27 A Center
    27
    27

    A

    Center 101

     

    Center 102

     

    Direct Labor Hours Required by Work Center

     
     

    Q1

    Q2

    Q3

    Q4

    Totals

    Center 101

    3480

    3870

    3510

    3594

    14454

    Center 102

    2320

    2580

    2340

    2396

    9636

    Totals

    5800

    6450

    5850

    5990

    24090

    Work Center Historical Breakdown

     

    Direct

    Machine

    Labor

    Time

    E

    Totals

    Q4

    60%

    60%

    40%

    40%

    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    • C D

    F

    B

    Q3

    Q1

    Q2

    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    E Totals Q4 60% 60% 40% 40% C D F B Q3 Q1 Q2
    752 6952 1732 1660 1880 1680 2780.8 692.8 664 672 4171.2 1039.2 996 1008 1128
    752
    6952
    1732
    1660
    1880
    1680
    2780.8
    692.8
    664
    672
    4171.2
    1039.2
    996
    1008 1128

    Center 101

    Center 102

    Totals

    Machine Time Hours Required by Work Center

    Center 101 Center 102 Totals Machine Time Hours Required by Work Center
    Center 101 Center 102 Totals Machine Time Hours Required by Work Center
    Center 101 Center 102 Totals Machine Time Hours Required by Work Center

    © Wiley 2007

     The authorized MPS is used to promise orders to customers Using the MPS to “Order
    • The authorized MPS is used to promise orders to customers

    Using the MPS to “Order Promise”

    • The MPS table is expanded to add customer orders and available-to-promise rows (inventory to satisfy new orders)

    • ATPAction Bucket = (beginning inventory + MPS shipment) less (customer orders before next replenishment). Available in period 1

    • ATP=MPS shipment Customer orders between current MPS shipment and next scheduled replenishment in periods 3,5,7,8, & 11

    W e e k

    B I

    1

    2

    3

    4

    5

    6

    7

    8

    9

    10

    11

    12

    F o re c as t

    50

    50

    50

    50

    75

    75

    75

    75

    50

    50

    50

    50

    C us tom er o rd e rs

     

    35

    25

    25

    20

    0

    15

    0

    0

    10

    0

    0

    10

    P ro je c ted

    a vaila b le

    110

    60

    10

    85

    35

    85

    10

    60

    110

    60

    10

    85

    35

    A vaila b le-to-p ro m is e

    50

    80

    110

    125

    115

    115

    M P S

    125

    125

    © Wiley 2007

    125

    125

    125

    M P S 125 125 © Wiley 2007 125 125 125

    Example of Revising the ATP MPS Record: A customer calls marketing willing to purchase 200 units if they can be delivered in

    period 5. The two tables below show how the system logic would first slot the 200 into period 5 and then how the order would be allocated across periods 1, 3, and 5 and adjusting the ATP row.

    Example of Revising the ATP MPS Record: A customer calls marketing willing to purchase 200 units
    Example of Revising the ATP MPS Record: A customer calls marketing willing to purchase 200 units

    © Wiley 2007

    Stabilizing the MPS
    Stabilizing the MPS

    © Wiley 2007

    Aggregate Planning Across the

    Organization
    Organization
    • Aggregate planning, MPS, and rough-cut capacity affection functional areas throughout the organization

      • Accounting is affected because aggregate plan details the resources needed by operations

      • Marketing as the aggregate plan supports the marketing plan

      • Information systems maintains the databases that support demand forecasts and other such information

    © Wiley 2007

    Chapter 13 Highlights
    Chapter 13 Highlights
    • Planning begins with the development of the strategic business plan that provides your company’s direction and

    objectives for the next two to ten years.

    • Sales and operations planning integrates plans from the other functional areas and regularly evaluates company performance.

    • The level aggregate plan maintains the same size workforce and produces the same output each period. Inventories and backorders absorb fluctuations in demand. The chase aggregate plan changes the capacity each period to match the demand

    • Demand patterns can be smoothed through pricing incentives, reduced prices for out-of-season purchases, or nonprime service times.

    © Wiley 2007

    Chapter 13 Highlights (continued)
    Chapter 13 Highlights (continued)
    • The difference in aggregate planning for companies that do

    not provide a tangible product is that the option to use inventories is not available

    • The MPS shows how the resources authorized by the AP will be used to satisfy the organizational objectives. The MPS specifies the products to be built in each time period. MPS is checked for feasibility using a rough-cut capacity planning technique.

    • The objectives of master scheduling are to satisfy customer service objectives, use resources effectively, and minimize costs. An MPS is developed by looking at individual MPS records and calculating when replenishment quantities are needed. The MPS records are summed together to show the total proposed workload.

    © Wiley 2007

    Chapter 13 Highlights (continued)
    Chapter 13 Highlights (continued)
    • Available-to-promise logic is used when

    promising order delivery dates to customers,

    ATP logic allows the company to make viable

    delivery promises

    • Time fence policies stabilize the MPS. The demand time fence and the planning time fence divide the MPS into three portions: frozen, slushy, and liquid.

    © Wiley 2007

    The End
    The End
    • Copyright © 2007 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United State Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

    © Wiley 2007