aggregrate planning 12

8/2/2019 Aggregrate Planning 12

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Aggregate Planning

Aggregate Planning

Chapter 12


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Aggregate Planning

Core MRP II

Aggregate ForecastAggregate Production

Plan

MANUFACTURING RESOURCE PLANNING

Detailed Forecast Master ProductionSchedule

Rough-Cut CapacityPlanning

Material

RequirementsPlanning

Capacity

RequirementsPlanning

DispatchingPurchasing


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Aggregate Planning

Aggregate Planning Strategies Maintain a level workforce

Maintain a steady output rate

Match demand period by period Use a combination of decision

variables


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Aggregate Planning

Basic Strategies

Level capacity: Maintaining a steady rate of regular-time

output while meeting variations in demand by

a combination of options.

Chase demand:

Matching capacity to demand; the planned

output for a period is the expected demand for

that period.


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Aggregate Planning

Master schedule: The result ofdisaggregating an aggregate plan; shows

quantity and timing of specific end items for

a scheduled horizon.

Rough-cut capacity planning: Approximate

balancing of capacity and demand to test the

feasibility of a master schedule.

Disaggregating


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Aggregate Planning

Master Scheduling Process

MasterScheduling

Beginning inventory

Forecast

Customer orders

Inputs Outputs

Projected inventory

Master production schedule

Uncommitted inventory


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Aggregate Planning

Time Fences in MPS

Period

frozen firm full open

1 2 3 4 5 6 7 8 9 10 11 12


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Aggregate Planning

Aggregate Production Planning

Aggregate Versus Detailed Plans

Costs Of Production

Chase, Level, And Mixed Strategies


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Aggregate Planning


Plans differ in terms of detail and planning horizons

The aggregate production plan has a moderate horizonbut little detail E.g., Plan overall facility production month-by-month for the

the next 18 months

The master production schedule has a short horizonbut great detail E.g., Plan production for each product week-by-week for the

next 12 weeks


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Aggregate Planning


Why plan aggregate production levels?

Aggregate plans do not provide detail needed to run facility

But detail unnecessary for medium-range resource

deployment decisions

Labor force size

Financing inventory

Aggregate forecasts are more accurate than detailed

forecasts


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Aggregate Planning

Aggregate Versus Detailed

Forecasts Sales forecasts can be aggregated with respect to time:

January February March Aggregate

Product A 100 150 200


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Aggregate Planning

Sales forecasts can be aggregated with respect to time:

January February March Aggregate

Product A 100 150 200 450


Forecasts


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Aggregate Planning

Sales forecasts can be aggregated with respect to

product:

January

Product A 100

Product B 200

Aggregate


Forecasts


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Aggregate Planning

Sales forecasts can be aggregated with respect to

product:

January

Product A 100

Product B 200

Aggregate 300


Forecasts

l


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Aggregate Planning

Why? Aggregate forecasts are more accurate than

individual detailed forecasts

JanuaryForecast

JanuaryActual

ForecastError % Error

Product A 100 120

Product B 200 180

Aggregate 300


Forecasts

A Pl i


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Aggregate Planning

Why? Aggregate forecasts are more accurate than

individual detailed forecasts

JanuaryForecast

JanuaryActual

ForecastError % Error

Product A 100 120 -20 -17%

Product B 200 180 20 11%

Aggregate 300 300 0 0


Forecasts

A Pl i


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Aggregate Planning

Use aggregate forecasts for planning medium-range

overall production levels.

High long-range forecast accuracy

Detail not needed for planning long-range resource use (labor,inventory, etc.)

Use detailed forecasts for initial detailed short-range

Master Production Schedule (MPS) Detailed forecasts reasonably accurate for this time frame

Need product-specific detail for MPS


Forecasts

A Pl i


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Aggregate Planning

The Aggregate Production Plan

Consider the following aggregate demand forecast:

The plan is stated in the the common unit of capacitydirectlabor hours

Period Q1 Q2 Q3 Q4Forecasted Demand (DLH) 5,000 0 20,000 5,000

Aggregate Production (DLH)

A t Pl i


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Aggregate Planning

Suppose we want to try to match demand:


Aggregate Production (DLH) 5,000 0 20,000 5,000


A t Pl i


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Aggregate Planning

Suppose we want to try to match demand:

How do we cost out the plan?




Aggregate Planning


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Aggregate Planning

First need some more information:



Projected Available Balance (DLH) 0

Workers 10


Aggregate Planning


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Aggregate Planning

Projected Available Balance is simply the estimated

ending inventory for each period



Projected Available Balance (DLH) 0 0 0 0 0

Workers 10


Aggregate Planning


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Aggregate Planning

The # workers needed is based on the planned

production and average worker productivityhere, it is

500 DLH/Worker/Quarter




Workers 10 10 0 40 10


Aggregate Planning


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Aggregate Planning

Costs Of Maintaining And Changing

Production Levels Costs of keeping production steady:

Ch -- Holding cost ($ / DLH / quarter)

Cb

-- Backorder cost ($ / DLH / quarter)

Costs of changing production CH -- Hiring cost ($ / Worker)

CF -- Firing cost ($ / Worker)

Also need to worry about: CR -- Wage rate ($ / DLH / period)

Aggregate Planning


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Aggregate Planning


For our example, the wage rate is $10/DLH




Workers 10 10 0 40 10

Wages Cost 50,000 0 200,000 50,000

Hiring Cost

Firing Cost

Holding Cost

Backorder Cost

Total Cost

Aggregate Planning


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Aggregate Planning

The hiring and firing costs are $2000 and $500,

respectively




Workers 10 10 0 40 10

Wages Cost 50,000 0 200,000 50,000

Hiring Cost 0 0 80,000 0

Firing Cost 0 5,000 0 15,000

Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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Aggregate Planning

Holding and backorder costs are $1 and $3

/DLH/Quarter, respectively




Workers 10 10 0 40 10

Wages Cost 50,000 0 200,000 50,000


Firing Cost 0 5,000 0 15,000

Holding Cost 0 0 0 0

Backorder Cost 0 0 0 0

Total Cost


Aggregate Planning


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Aggregate Planning

Which gives us a projected cost of $400,000 for the year




Workers 10 10 0 40 10

Wages Cost 50,000 0 200,000 50,000


Firing Cost 0 5,000 0 15,000

Holding Cost 0 0 0 0

Backorder Cost 0 0 0 0

Total Cost 50,000 5,000 280,000 65,000

400,000


Aggregate Planning


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Aggregate Planning

Chase, Level, & Mixed Strategies

This example is the first of the two "pure" strategies

Chase strategy: make only as much as you can sell

The other pure strategy has a different cost structure

Level strategy: maintain a steady production rate

In reality, a firm's strategy will be a combination or

mixture of chase and level

Aggregate Planning


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Aggregate Planning

A level strategy will absorb fluctuations in demand

through fluctuations in inventory


Aggregate Production (DLH) 7,500 7,500 7,500 7,500


Workers 10

Wages Cost

Hiring CostFiring Cost

Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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gg egate lanning






Workers 10 15 15 15 15

Wages Cost


Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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gg g g





Projected Available Balance (DLH) 0 2,500

Workers 10 15 15 15 15

Wages Cost


Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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gg g g





Projected Available Balance (DLH) 0 2,500 10,000

Workers 10 15 15 15 15

Wages Cost


Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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gg g g





Projected Available Balance (DLH) 0 2,500 10,000 -2,500 0

Workers 10 15 15 15 15

Wages Cost


Holding Cost

Backorder Cost

Total Cost


Aggregate Planning


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gg g g





Projected Available Balance (DLH) 0 2,500 10,000 -2,500 0

Workers 10 15 15 15 15

Wages Cost 75,000 75,000 75,000 75,000

Hiring Cost 10,000 0 0 0Firing Cost 0 0 0 0

Holding Cost 2,500 10,000 0 0

Backorder Cost 0 0 7,500 0

Total Cost 87,500 85,000 82,500 75,000

330,000


aggregrate planning 12

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