Chapter 11 Aggregate Planning and Master Scheduling.
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Transcript of Chapter 11 Aggregate Planning and Master Scheduling.
Chapter 11
Aggregate Planning and Master Scheduling
Chapter 11: Learning Objectives
You should be able to: Explain what aggregate planning is and how it is useful Identify the variables decision makers have to work
with in aggregate planning and some of the possible strategies they can use
Describe some of the graphical and quantitative techniques planners use
Prepare aggregate plans and compute their costs Describe the master scheduling process and explain its
importance
11-2
Aggregate Planning
Aggregate planning Intermediate-range capacity planning that
typically covers a time horizon of 2 to 18 months Useful for organizations that experience
seasonal, or other variations in demand Goal:
o Achieve a production plan that will effectively utilize the organization’s resources to satisfy demand
11-3
Sales and Operations Planning
Some organizations use the term sales operations and planning rather than aggregate planning Sales and operation planning
o Intermediate-range planning decisions to balance supply and demand, integrating financial and operations planning
o Since the plan affects functions throughout the organization, it is typically prepared with inputs from sales, finance, and operations
11-4
Overview of Planning Levels
Long-Range Plans
Long-term capacity} 5Location} 8Layout} 6Product design} 4Work system design} 7
Intermediate Plans
(This Chapter)General levels of:• Employment• Output•Finished-goods inventories•Subcontracting•Backorders
Short-Range Plans
Detailed plans:• Production lot size}
13• Order quantities} 13• Machine loading} 16• Job assignments} 16• Job sequencing} 16• Work schedules} 16
Overview of Planning Levels (chapter numbers shown)
11-5
The Planning Sequence
11-6
Aggregation
The plan must be in units of measurement that can be understood by the firm’s non-operations personnel Aggregate units of output per month Dollar value of total monthly output Total output by factory Measures that relate to capacity such as labor
hours
11-7
Dealing with Variation
Most organizations use rolling 3, 6, 9 and 12 month forecasts Forecasts are updated periodically, rather than
relying on a once-a-year forecast This allows planners to take into account any
changes in either expected demand or expected supply and to develop revised plans
11-8
Dealing with Variation
Strategies to counter variation: Maintain a certain amount of excess capacity to handle
increases in demand Maintain a degree of flexibility in dealing with changes
o Hiring temporary workerso Using overtime
Wait as long as possible before committing to a certain level of supply capacityo Schedule products or services with known demands firsto Wait to schedule other products until their demands
become less uncertain
11-9
Overview of Aggregate Planning
Forecast of aggregate
demand for the intermediate
range
Develop a general plan to meet demand requirements
Update the aggregate plan
periodically (e.g., monthly)
11-10
Aggregate Planning Inputs
Resources Workforce/production rates Facilities and equipment
Demand forecast Policies
Workforce changes Subcontracting Overtime Inventory levels/changes Back orders
Costs Inventory carryingBack ordersHiring/firingOvertime Inventory changessubcontracting
11-11
Aggregate Planning Outputs
Total cost of a plan Projected levels of
Inventory Output Employment Subcontracting Backordering
11-12
Demand Options
Pricing Used to shift demand from peak to off-peak
periods Price elasticity is important
Promotion Advertising and other forms of promotion
Back orders Orders are taken in one period and deliveries
promised for a later period11-13
Supply Options
Hire and layoff workers Overtime/slack time Part-time workers Inventories Subcontracting
11-14
Aggregate Planning Pure Strategies
Level capacity strategy: Maintaining a steady rate of regular-time output
while meeting variations in demand by a combination of options: o 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.
11-15
Uneven Demand and Two Strategies:
11-16
Chase Approach
Capacities are adjusted to match demand requirements over the planning horizon Advantages
o Investment in inventory is lowo Labor utilization in high
Disadvantageso The cost of adjusting output rates and/or workforce
levels
11-17
Level Approach
Capacities are kept constant over the planning horizon
Advantages Stable output rates and workforce
Disadvantages Greater inventory costs Increased overtime and idle time Resource utilizations vary over time
11-18
Workers and inventory
11-19
Estimating Cost
11-20
Techniques for Aggregate Planning
General procedure: Determine demand for each period Determine capacities for each period Identify company or departmental policies that
are pertinent Determine unit costs Develop alternative plans and costs Select the plan that best satisfies objectives.
Otherwise return to step 5.
11-21
Trial-and-Error Techniques
Trial-and-error approaches consist of developing simple table or graphs that enable planners to visually compare projected demand requirements with existing capacity
Alternatives are compared based on their total costs
Disadvantage of such an approach is that it does not necessarily result in an optimal aggregate plan
11-22
Trial-and-Error Technique Assumptions
The regular output capacity is the same in all periods Cost is a linear function composed of unit cost and number
of units Plans are feasible All costs are associated with a decision option can be
represented by a lump sum Cost figures can be reasonably estimated and are constant
for the planning period Inventories are built up and drawn down at a uniform rate
throughout each period Backlogs are treated as if they exist the entire period
11-23
Cumulative Graph
11-24
Mathematical Techniques
Linear programming models Simulation models
Computerized models that can be tested under different scenarios to identify acceptable solutions to problems
11-25
Aggregate Planning in Services Hospitals:
Aggregate planning used to allocate funds, staff, and supplies to meet the demands of patients for their medical services
Airlines: Aggregate planning in this environment is complex due to the number
of factors involved Capacity decisions must take into account the percentage of seats to
be allocated to various fare classes in order to maximize profit or yield Restaurants:
Aggregate planning in high-volume businesses is directed toward smoothing the service rate, determining workforce size, and managing demand to match a fixed capacity
Can use inventory; however, it is perishable
11-26
Aggregate Planning in Services
The resulting plan in services is a time-phased projection of service staff requirements
Aggregate planning in manufacturing and services is similar, but there are some key differences related to: Demand for service can be difficult to predict Capacity availability can be difficult to predict Labor flexibility can be an advantage in services Services occur when they are rendered
11-27
Disaggregation
AggregatePlan
Disaggregation
MasterSchedule
11-28
Disaggregating the Aggregate Plan
Master schedule: The result of disaggregating an aggregate plan Shows quantity and timing of specific end items
for a scheduled horizon
11-29
Master Scheduling
The heart of production planning and control It determines the quantity needed to meet demand
from all sources It interfaces with
o Marketingo Capacity planningo Production planningo Distribution planning
Provides senior management with the ability to determine whether the business plan and its strategic objectives will be achieved
11-30
The Master Scheduler
The master scheduler’s duties: Evaluating the impact of new orders Providing delivery dates for orders Deals with problems
o Evaluating the impact of production or delivery delayso Revising master schedule when necessary because of
insufficient supplies or capacityo Bring instances of insufficient capacity to the attention
of relevant personnel so they can participate in resolving conflicts
11-31
Time Fences
Period
“frozen”(firm orfixed)
“slushy”somewhat
firm
“liquid”(open)
1 2 3 4 5 6 7 8 9
11-32
The Master Scheduling Process
Beginning inventory
Forecast
Customer orders
Inputs Outputs
Projected inventory
Master production schedule
Uncommitted inventory
MasterProductionSchedule
11-33
Master Scheduling Process
The master production schedule (MPS) is one of the primary outputs of the master scheduling process Once a tentative MPS has been developed, it must be
validated Rough cut capacity planning (RCCP) is a tool used in
the validation process Approximate balancing of capacity and demand to test the
feasibility of a master schedule Involves checking the capacities of production and
warehouse facilities, labor, and vendors to ensure no gross deficiencies exist that will render the MPS unworkable
11-34
MPS – Forecasts and Customer Orders
11-35
MPS – Projected On Hand
11-36
Determining MPS and Projected On Hand
Week
Inventory from
Previous Week Requirements
Inventory before MPS
(70)MPS
Projected Inventory
1 64 33 31 31
2 31 30 1 1
3 1 30 -29 + 70 = 41
4 41 30 11 11
5 11 40 -29 + 70 = 41
6 41 40 1 1
7 1 40 -39 + 70 = 31
8 31 40 -9 + 70 = 61
11-37
Adding MPS and Projected On Hand to the MPS
11-38
Available-to-Promise
11-39