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Aggregate PlanningAggregate Planning
OverviewOverview
Aggregate planning in the planning Aggregate planning in the planning processprocess
Aggregate planning strategiesAggregate planning strategies• Capacity optionsCapacity options
Chase strategyChase strategy Level strategyLevel strategy
• Demand optionsDemand options
• Mixing optionsMixing options Graphical/charting methodsGraphical/charting methods Linear programmingLinear programming SimulationSimulation
Planning RelationshipsPlanning Relationships
Planning RelationshipsPlanning Relationships
Business or annual plan
Planning RelationshipsPlanning Relationships
Business or annual plan
Aggregate plan – production and staffing plan
Planning RelationshipsPlanning Relationships
MPS or workforce schedule
Business or annual plan
Aggregate plan – production and staffing plan
Planning RelationshipsPlanning Relationships
MPS or workforce schedule
Business or annual plan
Aggregate plan – production and staffing plan
Planning RelationshipsPlanning Relationships
MPS or workforce schedule
Business or annual plan
Aggregate plan – production and staffing plan
Planning HorizonsPlanning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Intermediate-range plansSales planningProduction planning and budgetingSetting employment, inventory, subcontracting levelsAnalyzing operating plans
Responsible: Operations managers
Planning HorizonsPlanning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Long-range plansR&DNew product plansCapital expensesFacility location, expansion
Responsible: Top executives
Planning HorizonsPlanning Horizons
Today 3 Months 1 year 5 years
Planning Horizon
Short-range plansJob assignmentsOrderingJob schedulingDispatching
Responsible: Operations managers, supervisors, foremen
Planning HorizonsPlanning 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
Planning hierarchyPlanning hierarchyLong-range
capacityplanning
Aggregateplanning
Masterproductionschedule
Productionplanning
and controlsystems
Pullsystems(J I T)
Pushsystems(MRP)
Many othersystems
Long-rangecapacityplanning
Aggregateplanning
Masterproductionschedule
Productionplanning
and controlsystems
Pullsystems(J I T)
Pushsystems(MRP)
Many othersystems
Planning horizon
Long range: Years
Itermediate range:
6 – 18 months
Short range: Weeks
Planning hierarchyPlanning hierarchy
Long-rangecapacityplanning
Aggregateplanning
Masterproductionschedule
Productionplanning
and controlsystems
Pullsystems(J I T)
Pushsystems(MRP)
Many othersystems
Planning horizon
Long range: Years
Itermediate range:
6 – 18 months
Short range: Weeks
Scope
Entire production line i.e. Ford trucks
Product Family
i.e. Ford F series
Specific model
i.e. Ford F-150
Planning hierarchyPlanning hierarchy
What is an aggregate plan?What is an aggregate plan?
Aggregate Plan
What is an aggregate plan?What is an aggregate plan?
Demandforecast
I nventory
Machinecapacitiesand costs
Laborcapacitiesand costs
Outsourcingcapacitiesand costs
Aggregate Plan
Amount toproduce
Amount oflabor andovertimerequired
ProjectedI nventories
Amount tooutsource
Demandforecast
I nventory
Machinecapacitiesand costs
Laborcapacitiesand costs
Outsourcingcapacitiesand costs
Aggregate Plan
What is an aggregate plan?What is an aggregate plan?
Managerial InputsManagerial Inputs
Managerial InputsManagerial Inputs
Aggregate plan
Managerial InputsManagerial Inputs
Aggregate plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Managerial InputsManagerial Inputs
Cost data Financial condition of firm
Accounting and financeAggregate
plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Managerial InputsManagerial Inputs
Labor-market conditions Training capacity
Human resources
Cost data Financial condition of firm
Accounting and financeAggregate
plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Managerial InputsManagerial Inputs
New products Product design changes Machine standards
EngineeringLabor-market conditions Training capacity
Human resources
Cost data Financial condition of firm
Accounting and financeAggregate
plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Managerial InputsManagerial Inputs
Supplier capabilities Storage capacity Materials availability
Materials
New products Product design changes Machine standards
EngineeringLabor-market conditions Training capacity
Human resources
Cost data Financial condition of firm
Accounting and financeAggregate
plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Managerial InputsManagerial Inputs
Supplier capabilities Storage capacity Materials availability
Materials
Current machine capacities Plans for future capacities Workforce capacities Current staffing level
Operations
New products Product design changes Machine standards
EngineeringLabor-market conditions Training capacity
Human resources
Cost data Financial condition of firm
Accounting and financeAggregate
plan
Customer needs Demand forecasts Competition behavior
Distribution and marketing
Aggregate Planning Aggregate Planning ObjectivesObjectives
Minimize Costs/Maximize ProfitsMinimize Costs/Maximize Profits Maximize Customer ServiceMaximize Customer Service Minimize Inventory InvestmentMinimize Inventory Investment Minimize Changes in Production RatesMinimize Changes in Production Rates Minimize Changes in Workforce Minimize Changes in Workforce
LevelsLevels Maximize Utilization of Plant and Maximize Utilization of Plant and
EquipmentEquipment
Aggregate Planning StrategiesAggregate Planning StrategiesPure StrategiesPure Strategies
Capacity Options — change Capacity Options — change capacitycapacity::•changing inventory levelschanging inventory levels•varying work force size by varying work force size by
hiring or layoffshiring or layoffs•varying production capacity varying production capacity
through overtime or idle timethrough overtime or idle time•subcontractingsubcontracting•using part-time workersusing part-time workers
Aggregate Planning StrategiesAggregate Planning StrategiesPure StrategiesPure Strategies
Demand Options — change demandDemand Options — change demand::
• influencing demandinfluencing demand
• backordering during high demand backordering during high demand
periodsperiods
• counterseasonal product mixingcounterseasonal product mixing
Advantage/Disadvantages of Advantage/Disadvantages of
Aggregate Planning OptionsAggregate Planning Options
See Table 13.1See Table 13.1
Mixing the options:Mixing the options:The ExtremesThe Extremes
Level Strategy
Chase Strategy
Production equals
demand
Production rate is constant
Level planning strategyLevel planning strategy• Produce same amount every Produce same amount every monthmonth• Keep work force level constant Keep work force level constant
Find alternative work for employees when there Find alternative work for employees when there is less demandis less demand
• Vary non-work force capacity or demand Vary non-work force capacity or demand optionsoptions
Inventory levels allowed to fluctuateInventory levels allowed to fluctuate• Often results in lowest production costsOften results in lowest production costs• Toyota, Nissan employ this strategyToyota, Nissan employ this strategy
Aggregate Planning StrategiesAggregate Planning Strategies
Chase planning strategyChase planning strategy• Output rates match demandOutput rates match demand• Vary work force level Vary work force level
Hiring/laying offHiring/laying off• Vary non-work force capacity or demand Vary non-work force capacity or demand
optionsoptions Overtime and outsourceOvertime and outsource Part time employeesPart time employees
• Service industries often utilize this strategyService industries often utilize this strategy Hospitality, construction, educationHospitality, construction, education
Aggregate Planning StrategiesAggregate Planning Strategies