Aggregate Planning
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Aggregate Planning IDS 605 IDS 605 Busing Busing
description
Aggregate Planning. IDS 605 Busing. Aggregate Planning. The development of a plan for: Output rate for groups or families of products Inventory levels to be maintained Production backlogs Changes in work force to support production strategy over the medium time horizon. - PowerPoint PPT Presentation
Transcript of Aggregate Planning
Aggregate Planning
IDS 605IDS 605
BusingBusing
Aggregate Planning
The development of a plan for:– Output rate for groups or families of products– Inventory levels to be maintained– Production backlogs– Changes in work force to support production
strategy over the medium time horizon
Meeting demand while effectively utilizing a facility Proactive Strategies:
– Produce seasonal complements– Offer discounts and promotions– Increase advertising in slack periods
Meeting demand while effectively utilizing a facility Reactive Strategies
– Change number of employees– Overtime/slack time– Add/eliminate shifts– Plant shutdowns– Use inventory– Subcontract work– Backlogs/backorders– Lose sales
Cost Considerations in Aggregate Planning Payroll Hiring/Firing Overtime Inventory Carrying Subcontracting Back orders, stockouts, lost sales Promotions and discounts
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
TOTALS 435 25 15
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
TOTALS 435 25 15
Cost
Payroll: 435 employee-months @ $2,000 = $870,000
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
TOTALS 435 25 15
Cost
Payroll: 435 employee-months @ $2,000 = $870,000
Hiring: 25 employees @ $1,000 = $ 25,000
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
TOTALS 435 25 15
Cost
Payroll: 435 employee-months @ $2,000 = $870,000
Hiring: 25 employees @ $1,000 = $ 25,000
Layoff: 15 employees @ $2,000 = $ 30,000
Aggregate Plan with Varying Work-Force (Chase)Starting employees = 100 Units per employee per month = 1000
Hiring cost per employee = $1000 Layoff cost per employee = $2000
Payroll cost per employee per month = $2000
Forecast Planned
Month Demand Production Employees Hired Laid off
Jan 100,000 100,000 100 0 0
Feb. 120,000 120,000 120 20 0
Mar. 105,000 105,000 105 0 15
Apr. 110,000 110,000 110 5 0
TOTALS 435 25 15
Cost
Payroll: 435 employee-months @ $2,000 = $870,000
Hiring: 25 employees @ $1,000 = $ 25,000
Layoff: 15 employees @ $2,000 = $ 30,000
$925,000
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Apr. 110,000 105,000 5,000 0 2,500
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Apr. 110,000 105,000 5,000 0 2,500
TOTALS 45,000 30,000 37,500
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Apr. 110,000 105,000 5,000 0 2,500
TOTALS 45,000 30,000 37,500
Cost
Payroll: 105 employees x 4 months @ $2,000 = $840,000
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Apr. 110,000 105,000 5,000 0 2,500
TOTALS 45,000 30,000 37,500
Cost
Payroll: 105 employees x 4 months @ $2,000 = $840,000
Inventory cost: 37,500 average units @ $0.20 =$ 7,500
Aggregate Plan with Varying Inventory (Level Workforce)Number of Employees = 105 Units per employee per month = 1,000
Payroll cost per employee per month = $2,000 Beginning inventory = 15,000 units
Unit cost of carrying inventory per month = $0.20
Forecast Planned Inventory
Month Demand Production Beginning Ending Average
Jan 100,000 105,000 15,000 20,000 17,500
Feb. 120,000 105,000 20,000 5,000 12,500
Mar. 105,000 105,000 5,000 5,000 5,000
Apr. 110,000 105,000 5,000 0 2,500
TOTALS 45,000 30,000 37,500
Cost
Payroll: 105 employees x 4 months @ $2,000 = $840,000
Inventory cost: 37,500 average units @ $0.20 =$ 7,500
$847,500
Chase versus Level Plans
Varying workforce (chase demand)– substantial hiring/firing costs– inventory carrying cost low to zero– workforce skill & dedication low
Varying inventory (level workforce)– low to zero hiring/firing costs– inventory carrying costs could be substantial– workforce skill and dedication high– may incur stockouts/backlog
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