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Chapter-4 Aggregate Planning

The document discusses aggregate planning and master scheduling. It provides an overview of aggregate planning, which involves intermediate-range capacity planning over 2-12 months to satisfy expected demand. It also discusses developing a master schedule by disaggregating the aggregate plan into specific end item production quantities and timing over a shorter horizon of 6-8 weeks. The master schedule is one output of the aggregate planning and master scheduling process.

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Yonatan
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438 views

Chapter-4 Aggregate Planning

The document discusses aggregate planning and master scheduling. It provides an overview of aggregate planning, which involves intermediate-range capacity planning over 2-12 months to satisfy expected demand. It also discusses developing a master schedule by disaggregating the aggregate plan into specific end item production quantities and timing over a shorter horizon of 6-8 weeks. The master schedule is one output of the aggregate planning and master scheduling process.

Uploaded by

Yonatan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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12-1 Aggregate Planning

Chapter 4

Aggregate planning and Master


Scheduling
12-2 Aggregate Planning

Planning Horizon
Aggregate planning: Intermediate-range
capacity planning, usually covering 2 to 12 months.
The goal of aggregate planning is to achieve a
production plan that will effectively utilize the
organization’s resources to satisfy expected
demand.

Long range

Intermediate
range
Short
range

Now 2 months 1 Year


12-3 Aggregate Planning

Overview of Planning Levels

Organizations make capacity decisions on three levels:


 Short-range plans (Detailed plans)
 Machine loading
 Job assignments
 Intermediate plans (General levels)
 Employment
 Output, and inventories
 Long-range plans
 Long term capacity
 Location / layout
12-4 Aggregate Planning

Planning Sequence
Figure 12.1

Economic,
Corporate competitive, Aggregate
strategies and political demand
and policies conditions forecasts

Establishes operations
Business Plan
and capacity strategies

Establishes
Aggregate plan
operations capacity

Master schedule Establishes schedules


for specific products
12-5 Aggregate Planning

Overview of aggregate planning


 Aggregate planning begins with a forecast of aggregate
demand for the intermediate range.
 This is followed by a general plan to meet demand
requirements by setting output, employment, and finished-
goods inventory or service capacities.
 Managers must consider a number of plans, each of which
must be examined in light of feasibility and cost.
 If a plan is reasonably good but has minor difficulties, it
may be reworked.
 Aggregate plans are updated periodically, often monthly,
to take into account updated forecast and other changes.
12-6 Aggregate Planning

Aggregate Planning Inputs

 Resources  Costs
 Workforce/production rate  Inventory carrying
 Facilities and equipment  Back orders

 Demand forecast  Hiring/firing

 Policies  Overtime

 Inventory changes
 Subcontracting
 Overtime  subcontracting

 Inventory levels

 Back orders
12-7 Aggregate Planning

Aggregate Planning Outputs

 Total cost of a plan


 Projected levels of:
 Inventory
 Output

 Employment

 Subcontracting

 Backordering
12-8 Aggregate Planning

Aggregate Planning Strategies

 Proactive
 Involve demand options: Attempt to alter
demand to match capacity
 Reactive
 Involve capacity options: attempt to alter
capacity to match demand
 Mixed
 Some of each
12-9 Aggregate Planning

Demand Options

 Pricing

 Promotion

 Back orders

 New demand
12-10 Aggregate Planning

Pricing
 Pricing differential are commonly used to shift demand
from peak periods to off-peak periods, for example:
 Some hotels offer lower rates for weekend stays
 Some airlines offer lower fares for night travel
 Movie theaters offer reduced rates for matinees
 Some restaurant offer early special menus to shift some of
the heavier dinner demand to an earlier time that
traditionally has less traffic.
 To the extent that pricing is effective, demand will be
shifted so that it correspond more closely to capacity.
 An important factor to consider is the degree of price
elasticity of demand; the more the elasticity, the more
effective pricing will be in influencing demand patterns.
12-11 Aggregate Planning

Promotion
 Advertising and any other forms of promotion,
such as displays and direct marketing, can
sometimes be very effective in shifting demand
so that it conforms more closely to capacity.
 Timing of promotion and knowledge of
response rates and response patterns will be
needed to achieve the desired result.
 There is a risk that promotion can worsen the
condition it was intended to improve, by
bringing in demand at the wrong time.
12-12 Aggregate Planning

Back order
 An organization can shift demand to other periods
by allowing back orders. That is , orders are taken
in one period and deliveries promised for a later
period.
 The success of this approach depends on how
willing the customers are to wait for delivery.
 The cost associated with back orders can be
difficult to pin down since it would include lost
sales, annoyed or disappointed customers, and
perhaps additional paperwork.
12-13 Aggregate Planning

New demand
 Manufacturing firms that experience
seasonal demand are sometimes able
to develop a demand for a
complementary product that makes
use of the same production process.
For example, the firms that produce
water ski in the summer, produce
snow ski in the winter.
12-14 Aggregate Planning

Capacity Options

 Hire and layoff workers


 Overtime/slack time

 Part-time workers

 Inventories

 Subcontracting (in- out)


12-15 Aggregate Planning

Aggregate Planning Strategies


for meeting uneven demand

 Maintain a level workforce


 Maintain a steady output rate
 Match demand period by period
 Use a combination of decision variables
12-16 Aggregate Planning

Basic Strategies

 Level capacity strategy:


 Maintaining a steady rate of regular-time
output while meeting variations in demand by a
combination of options such as: inventories,
overtime, part-time workers, subcontracting
and back orders.
 Chase demand strategy:
 Matching capacity to demand; the planned
output for a period is set at the expected
demand for that period.
12-17 Aggregate Planning

Chase Approach

 Advantages
 Investment in inventory is low
 Labor utilization is high
 Disadvantages
 The cost of adjusting output rates and/or
workforce levels
12-18 Aggregate Planning

Level Approach

 Advantages
 Stable output rates and workforce levels
 Disadvantages
 Greater inventory costs
 Increased overtime and idle time
 Resource utilizations vary over time
12-19 Aggregate Planning

Techniques for Aggregate Planning


Techniques for aggregate planning are classified
into two categories:
 Informal trial-and-error techniques (frequently
used)
 Mathematical techniques
12-20 Aggregate Planning

Master scheduling
 The result of disaggregating the aggregate plan is a master schedule
showing the quantity and timing of specific end items for a
scheduled horizon, which often covers about six to eight weeks
ahead.
 The master schedule shows the planned output for individual
products rather than an entire product group, along with the timing
of production.
 It should be noted that whereas the aggregate plan covers an interval
of, say, 12 months, the master schedule covers only a portion of this.
In other words, the aggregate plan is disaggregated in stages , or
phases, that may cover a few weeks to two or three months.
 The master schedule contains important information for marketing
as well as for production. It reveals when orders are scheduled for
production and when completed orders are to be shipped.
12-21 Aggregate Planning

Aggregate Plan to Master Schedule


Figure 12.4
Jan Feb Mar.
Aggregate
Planning Aggregate
plan 200 300 400

Disaggregation Type Jan. Feb. Mar


21 100 100 100
Master
inch
schedule 26 75 150 200
Master inch
Schedule 29 25 50 100
inch
total 200 300 400
12-22 Aggregate Planning

Master Scheduling Process

Inputs Outputs
Beginning inventory Projected inventory
Master
Forecast Master production schedule
Scheduling

Customer orders Uncommitted inventory

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