aggregate planning
TRANSCRIPT
Aggregate Planning
Anheuser-Busch Anheuser-Busch produces
nearly 40% of the beer consumed in the U.S.
Matches fluctuating demand by brand to specific plant, labor, and inventory capacity
High facility utilization requires meticulous cleaning between
batches effective maintenance efficient employees efficient facility scheduling
Aggregate Planning Requires
Logical overall unit for measuring sales and outputs
Forecast of demand for intermediate planning period in these aggregate units
Method for determining costs Model that combines forecasts
and costs so that planning decisions can be made
Setting goals & objectives Example: Meet demand within the
limits of available resources at the least cost
Determining steps to achieve goals Example: Hire more workers
Setting start & completion dates Example: Begin hiring in Jan.;
finish, Mar. Assigning responsibility
Planning
Planning Tasks and Responsibilities
Planning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Short-range plansJob assignmentsOrderingJob schedulingDispatching
Intermediate-range plansSales planningProduction planning and budgetingSetting employment, inventory, subcontracting levelsAnalyzing operating plans
Long-range plansR&DNew product plansCapital expensesFacility location, expansion
Responsible: Operations managers, supervisors, foremen
Responsible: Operations managers
Responsible: Top executives
Relationships of the Aggregate Plan
AggregatePlan for
Production
DemandForecasts,
orders
MasterProduction
Schedule, and MRP systems
Detailed WorkSchedules
ExternalCapacity
Subcontractors
Inventory OnHand
Raw MaterialsAvailable
Work Force
Marketplaceand Demand
Research andTechnology
ProductDecisions
ProcessPlanning & Capacity
Decisions
A mathematically based aggregate planning model requires considerable: time
problem definition model development model verification model application
expertise people who understand the problem people who understand both the
modeling process, and the specific model
money money to pay for all of the above often requires funding for several
people for several months!
What’s Needed for Aggregate Planning
Provides the quantity and timing of production for intermediate future Usually 3 to 18 months into future
Combines (‘aggregates’) production Often expressed in common units
Example: Hours, dollars, equivalents (e.g., FTE students)
Involves capacity and demand variables
Aggregate Planning
Meet demand Use capacity
efficiently Meet inventory
policy Minimize cost
Labor Inventory Plant & equipment Subcontract
Aggregate Planning Goals
Aggregate Planning StrategiesPure Strategies
Capacity Options — change capacity: changing inventory levels varying work force size by hiring
or layoffs varying production capacity
through overtime or idle time subcontracting using part-time workers
Aggregate Planning StrategiesPure Strategies
Demand Options — change demand: influencing demand backordering during high demand
periods counterseasonal product mixing
Aggregate Scheduling Options - Advantages and Disadvantages
Option Advantage Disadvantage SomeComments
Changinginventory levels
Changes inhuman resourcesare gradual, notabruptproductionchanges
Inventoryholding costs;Shortages mayresult in lostsales
Applies mainlyto production,not service,operations
Varyingworkforce sizeby hiring orlayoffs
Avoids use ofother alternatives
Hiring, layoff,and trainingcosts
Used where sizeof labor pool islarge
Option Advantage Disadvantage SomeComments
Varyingproduction ratesthrough overtimeor idle time
Matches seasonalfluctuationswithouthiring/trainingcosts
Overtimepremiums, tiredworkers, may notmeet demand
Allowsflexibility withinthe aggregateplan
Subcontracting Permitsflexibility andsmoothing of thefirm's output
Loss of qualitycontrol; reducedprofits; loss offuture business
Applies mainlyin productionsettings
Advantages/Disadvantages - Continued
Advantages/Disadvantages - ContinuedOption Advantage Disadvantage Some
CommentsUsing part-timeworkers
Less costly andmore flexiblethan full-timeworkers
Highturnover/trainingcosts; qualitysuffers;schedulingdifficult
Good forunskilled jobs inareas with largetemporary laborpools
Influencingdemand
Tries to useexcess capacity.Discounts drawnew customers.
Uncertainty indemand. Hard tomatch demand tosupply exactly.
Createsmarketing ideas.Overbookingused in somebusinesses.
Advantage/Disadvantage - ContinuedOption Advantage Disadvantage Some
Comments
Back orderingduring high-demand periods
May avoidovertime. Keepscapacity constant
Customer mustbe willing towait, butgoodwill is lost.
Many companiesbackorder.
Counterseasonalproducts andservice mixing
Fully utilizesresources; allowsstable workforce.
May requireskills orequipmentoutside a firm'sareas ofexpertise.
Risky findingproducts orservices withopposite demandpatterns.
The Extremes
Level Strategy
Chase Strategy
Production equals
demand
Production rate is constant
Mixed strategyCombines 2 or more aggregate
scheduling options Level scheduling strategy
Produce same amount every day Keep work force level constant Vary non-work force capacity or
demand options Often results in lowest production
costs
Aggregate Planning Strategies