Aggregate Planning

Definition:

The process of developing, analyzing, and maintaining a preliminary, approximate schedule of the overall operations of an organization.

An attempt to balance capacity and demand in such a

way that costs are minimized.

Targeted sales forecasts Production levels Inventory levels Customer backlogs

Production Planning and Control

The Production Control System
Demand forecastin g
Sales and order entry Customer

Aggregate planning

Materials requirement planning

Shop-floor scheduling and control

Production

Shipping and receiving

Inventory manageme nt

Inventory

Vendors

Aggregate Planning

Aggregate planning is considered to be intermediate term in nature. (3-18 months) It begins with the determination of demand and the determination of current capacity. Importance: Demand prediction is difficult Huge amount of time is required to implement the plan, Optimum utilization of facilities, work force and inventory is important because even slight underutilization may lead to huge losses

Aggregate Planning

Planning the lowest cost method of providing the adjustable capacity to accommodate the production requirements

For manufacturing operations, this involves

Planning the work force size Production rate(work hours/work), and

Inventory levels

Aggregate Planning

If demands were only constant, managing productive systems sure would be a lot easier.

Large inventories invite pressures from the top management to reduce investments

With lower inventories, Marketing is not happy with

poor service to the customer

Laying-off workers during a sales slump invites threats from the Unions and the local administration

Aggregate Planning

Manufacturing is responsible for

Producing high quality products,

At low costs, Timed to meet customer delivery schedules, Trade- off between costs and employment stabilization, and also

Maintain balance of the above even for seasonal

demands

Aggregate Plan- Managerial Input

Operations 1.Current machine capacities 2.Plans for future capacities

Materials
1.Supplier capabilities 2.Storage capacity 3.Materials availability

3.Workforce capacities

4.Current staffing level

Distribution & Marketing 1.Customer needs 2.Demand forecasts 3.Competition behavior

Aggregate plan
Engineering 1.New products 2.Product design changes Human Resources 1.Labor-market condition 2.Training capacity Accounting & Finance 1.Cost data 2.Financial condition of firm

Aggregate Plan- Outputs

Complementary products Size of workforce and adjustment Competitive pricing

Inventory levels

Aggregate plan

Units / cost of Backlogs, backorders, or stock outs

Production per month (in units or value)

Units or cost of subcontract

Aggregate Planning
Objective: generate a long-term production plan that establishes a rough product mix, anticipates bottlenecks, and is consistent with capacity and workforce plans.
Issues: Aggregation: product families and time periods must be set appropriately for the environment. Coordination: AP is the link between the high level functions of forecasting/capacity planning and intermediate level functions of MRP, inventory control, and scheduling. Anticipating Execution: AP is virtually always done deterministically, while production is carried out in a stochastic environment.

Workforce Planning

How much and what kind of labor is needed to support production goals? Issues: Basic Staffing Calculations: standard labor hours adjusted for worker availability. Working Environment: stability, morale, learning. Flexibility/Agility: ability of workforce to support plant's ability to respond to short and long term shifts. Quality: procedures are only as good as the people who carry them out.

Capacity/Facility Planning

How much and what kind of physical equipment is needed to support production goals? Issues: Basic Capacity Calculations: stand-alone capacities and congestion effects (e.g., blocking)

Capacity Strategy: lead or follow demand

Make-or-Buy: vendoring, long-term identity Flexibility: with regard to product, volume, mix Speed: scalability, learning curves

Demand Management
Objective: establish an interface between the customer and the plant floor, that supports both competitive customer service and workable production schedules. Issues:
Customer Lead Times: shorter is more competitive. Customer Service: on-time delivery. Batching: grouping like product families can reduce lost capacity due to setups.

Interface with Scheduling: customer due dates are are an enormously important control in the overall scheduling process.

Material Requirement Planning

Objective: Determine all purchase and production components needed to satisfy the aggregate/disaggregate plan. Issues: Bill of Materials: Determines components, quantities and lead times. Inventory Management: Must be coordinated with inventory.

Sequencing and Scheduling

Objective: develop a plan to guide the release of work into the system and coordination with needed resources (e.g., machines, staffing, materials).
Methods: Sequencing: Gives order of releases but not times. Scheduling: Gives detailed release times.

Shop Floor Control

Objective: control flow of work through plant and coordinate with other activities (e.g., quality control, preventive maintenance, etc.)
Issues: Customization: SFC is often the most highly customized activity in a plant.

Information Collection: SFC represents the interface with the actual production processes and is therefore a good place to collect data.
Simplicity: departures from simple mechanisms must be carefully justified.

Aggregate Planning develops mid- term planning Schedules:

Reducing over and under loading, which result in

reduced production costs.

Planning production capacity to meet demand. Even in times of peaks and valleys in demand.

Getting the most out of the material and resources available

Aggregate Planning- Objectives

To develop plans that are

Feasible: should meet the demand the firm intends to meet consistent with its financial and physical capacity

Optimal : ensure that resources are used as wisely as possible and cost kept as low as feasible

To increase the range of alternatives of capacity use for consideration of the management of the firm

Situations in which demand needs to be matched with capacity:

Pricing Promotion Back ordering New demand creation

Optional Strategies for the situations

Hire/ Lay off Overtime Part time or casual labors Inventory Subcontracting Cross- training Other methods

Techniques for Agg. Planning

Linear Programming Mixed- integer Programming Linear Decision Rule Trial and Error techniques

New Trends in Aggregate Planning

Annualized Hours (Flexi year) . it is an extension to flextime.