aggregate and capacity planning
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Chapter 14
Aggregate Sales and
Operations Planning
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Sales and Operations Planning
The Aggregate Operations Plan
Examples: Chase and Levelstrategies
OBJECTIVES
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Master scheduling
Material requirements planning
Order scheduling
Weekly workforce and
customer scheduling
Daily workforce and customer scheduling
Process planning
Strategic capacity planning
Sales and operations aggregate! planning
"ong
range
#ntermediat
e
range
Short
range
Manufacturing
Ser$ices
%&hi'it 1()1
%&hi'it 1()1
Sales plan *ggregate operations plan
+orecasting
, demand
management
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Sales and Operations Planning
Activities
Long-range planning – Greater than one year planning horizon – Usally per!ormed in annal in"rements
#edim-range planning – Six to eighteen months – Usally $ith $ee%ly& monthly or 'arterly
in"rements
Short-range planning – One day to less than six months – Usally $ith $ee%ly or daily in"rements
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The Aggregate Operations Plan
#ain prpose: Spe"i!y the optimal"om(ination o! – prod"tion rate )nits "ompleted per
nit o! time*
– $or%!or"e level )nm(er o! $or%ers* – inventory on hand )inventory "arried
!rom previos period* Prod"t grop or (road "ategory
)Aggregation* This planning is done over anintermediate-range planning period o! +to , months
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Balancing Aggregate Demand
and Aggregate Production apacity
/
2///
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0///
1////
an +e' Mar *pr May un
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1////
0///
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2///
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0///
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an +e' Mar *pr May un
(-// (///
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Sppose the !igre tothe right represents!ore"ast demand innits
Sppose the !igre tothe right represents!ore"ast demand innits
.o$ sppose thislo$er !igre representsthe aggregate "apa"ityo! the "ompany tomeet demand
.o$ sppose thislo$er !igre representsthe aggregate "apa"ityo! the "ompany tomeet demand
/hat $e $ant to do is(alan"e ot theprod"tion rate&$or%!or"e levels& andinventory to ma%ethese !igres mat"h p
/hat $e $ant to do is(alan"e ot theprod"tion rate&$or%!or"e levels& andinventory to ma%ethese !igres mat"h p
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Required nputs to the Production
Planning System
Planningfor
production
External
capacity
Competitors’bea!ior
"a# materiala!ailability
$ar%etdemand
Economic
conditions
Current
pysical
capacity
Current
#or%force
In!entory
le!els
&cti!ities
re'uired
for
production
External
to firm
Internal
to firm
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!ey Strategies "or #eeting Demand
Chase
Level
Some "om(ination o! the t$o
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Aggregate Planning $%amples& 'nit
Demand and ost Data
Materials 4-5unit6olding costs 415unit per mo)
Marginal cost of stockout 41)2-5unit per mo)
6iring and training cost 42//5worker
"ayoff costs 42-/5worker
"a'or hours required )1- hrs5unitStraight time la'or cost 405hour
7eginning in$entory 2-/ units
Producti$e hours5worker5day )2-
Paid straight hrs5day 0
Sppose $e have the !ollo$ing nitdemand and "ost in!ormation:
Sppose $e have the !ollo$ing nit
demand and "ost in!ormation:
Demand5mo an +e' Mar *pr May un
(-// --// /// 1//// 0/// .///
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Jan Feb Mar Apr May JunDays/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Unis/worker 10!3.33 91".33 1015 1015 10!3.33 9!!.!7
#/worker #1$40" 1$21! 1$344 1$344 1$40" 1$2"0
Producti$e hours5worker5day )2-
Paid straight hrs5day 0
Demand5mo an +e' Mar *pr May
un
(-// --// /// 1//// 0///
.///
Given the demand and "ost in!ormation (elo$& $hat
are the aggregate hors0$or%er0month& nits0$or%er& anddollars0$or%er1
Given the demand and "ost in!ormation (elo$& $hat
are the aggregate hors0$or%er0month& nits0$or%er& anddollars0$or%er1
)2-&2
2
)2-&/)1-8(0)33
,
0()33&2281/.3)33
22&0hrs&40841(/
0
ut(and(Try $%ample& Determining
Straight )a*or osts and Output
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hase Strategy
+,iring - .iring to meet demand/
Jan
Days/mo 22
Hrs/worker/mo 159.5
Unis/worker 1$0!3.33
#/worker #1$40"
Jan
Deman% 4$500
&e'. in). 250
*e re+. 4$250,e+. workers 3.997
Hire%
Fire% 3
-orkore 4
n%in' in)enory 0
Lets assme or "rrent $or%!or"e is 2$or%ers3
Lets assme or "rrent $or%!or"e is 2$or%ers3
4irst& "al"late net re'irements !orprod"tion& or 5677-86795867 nits
Then& "al"late nm(er o! $or%ersneeded to prod"e the netre'irements& or58670,7+3++9+3;;2 or 5 $or%ers
4inally& determine the nm(er o!$or%ers to hire0!ire3 <n this "ase $eonly need 5 $or%ers& $e have 2& so+ "an (e !ired3
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Jan Feb Mar Apr May JunDays/mo 22 19 21 21 22 20
Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145
Unis/worker 1$0!3 91" 1$015 1$015 1$0!3 9!7
#/worker #1$40" 1$21! 1$344 1$344 1$40" 1$2"0
Jan Feb Mar Apr May Jun
Deman% 4$500 5$500 7$000 10$000 "$000 !$000
&e'. in). 250
*e re+. 4$250 5$500 7$000 10$000 "$000 !$000,e+. workers 3.997 5.9"9 !."97 9."52 7.524 !.207
Hire% 2 1 3
Fire% 3 2 1
-orkore 4 ! 7 10 " 7
n%in' in)enory 0 0 0 0 0 0
=elo$ are the "omplete "al"lations !or the remainingmonths in the six month planning horizon
=elo$ are the "omplete "al"lations !or the remainingmonths in the six month planning horizon
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J an Feb Mar Apr May Jun
Deman% 4$500 5$500 7$000 10$000 "$000 !$000&e'. in). 250
*e re+. 4$250 5$500 7$000 10$000 "$000 !$000
,e+. workers 3.997 5.9"9 !."97 9."52 7.524 !.207
Hire% 2 1 3
Fire% 3 2 1-orkore 4 ! 7 10 " 7
n%in' in)enory 0 0 0 0 0 0
Jan Feb Mar Apr May Jun oss
Maeria #21$250.00 #27$500.00 #35$000.00 #50$000.00 #40$000.00 #30$000.00 203$750.00
abor 5$!27.59 7$2"2.7! 9$2!".97 13$241.3" 10$593.10 7$944."3 53$95".!2
Hirin' os 400.00 200.00 !00.00 1$200.00
Firin' os 750.00 500.00 250.00 1$500.00
>8:7&57-3:8
=elo$ are the "omplete "al"lations !or the remaining months inthe six month planning horizon $ith the other "osts in"lded
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1(
)evel 0or1"orce Strategy +Surplus
and Shortage Allo2ed/
Jan
Deman% 4$500
&e'. in). 250
*e re+. 4$250
-orkers !
ro%uion !$3"0n%in' in)enory 2$130
urpus 2$130
6ora'e
Lets ta%e the same pro(lem as(e!ore (t this time se theLevel /or%!or"e strategy
Lets ta%e the same pro(lem as(e!ore (t this time se theLevel /or%!or"e strategy
This time $e $ill see% to sea $or%!or"e level o! $or%ersThis time $e $ill see% to sea $or%!or"e level o! $or%ers
1
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Jan Feb Mar Apr May Jun
Demand 4,500 5,500 7,000 10,000 8,000 6,000
Beg. inv. 250 2,10 2,140 1,20 !2,680 !1,00
"e# re$. 4,250 ,70 4,860 8,770 10,680 7,00
%&r'er( 6 6 6 6 6 6
)r&du*#i&n 6,80 5,510 6,0+0 6,0+0 6,80 5,800
nding inven#&r 2,10 2,140 1,20 !2,680 !1,00 !1,500
-urpu( 2,10 2,140 1,20
-/&r#age 2,680 1,00 1,500
"&#e, i0 1e re*a.*u.a#e #/i( (/ee# 1i#/ 7 1&r'er(
1e 1&u.d /ave a (urp.u(
"&#e, i0 1e re*a.*u.a#e #/i( (/ee# 1i#/ 7 1&r'er(
1e 1&u.d /ave a (urp.u(
=elo$ are the "omplete "al"lations !or the remainingmonths in the six month planning horizon
=elo$ are the "omplete "al"lations !or the remainingmonths in the six month planning horizon
1.
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Jan Feb Mar Apr May Jun
4,500 5,500 7,000 10,000 8,000 6,000
250 2,10 10 !+10 !,+10 !1,620
4,250 ,70 4,860 8,770 10,680 7,00
6 6 6 6 6 6
6,80 5,510 6,0+0 6,0+0 6,80 5,800
2,10 2,140 1,20 !2,680 !1,00 !1,500
2,10 2,140 1,20
2,680 1,00 1,500
Jan Feb Mar Apr May Jun
8,448 7,2+6 8,064 8,064 8,448 7,680 48,000.00
1,+00 27,550 0,450 0,450 1,+00 2+,000 181,250.00
2,10 2,140 1,20 5,500.00
,50 1,625 1,875 6,850.00
>85,&:77377
Belo# are te complete calculations for te
remaining monts in te six mont planning
ori(on #it te oter costs included
Belo# are te complete calculations for te
remaining monts in te six mont planning
ori(on #it te oter costs included
.ote& total"osts nderthis strategyare less thanChase at>8735738
.ote& total"osts nderthis strategy
are less thanChase at>8735738
3ab&r
Ma#eria.
-#&rage
-#&*'&u#
1
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3ield #anagement 4pera#ing 5ie.d Managemen# -y(#em(
Addre((e( pr&b.em( .i'e4verb&&'ing
Fare 6.a((e(
)remium -ea#(
-ing.e 4rder uan#i#ie(
10
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Strategic Capacity
#anagement 6apa*i#y Managemen# 6&n*ep#(
*&n&mie( and Di(e*&n&mie( &0 -*a.e 3earning 6urve
6apa*i#y ).anning
– De*i(i&n #ree a( a #&&. #& eva.ua#e *apa*i#y
a.#erna#ive(
1