Unit09 - Aggregate Planning MPS
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Transcript of Unit09 - Aggregate Planning MPS
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Dr. Rameez Khalid, PMP, CQSSBB Faculty, Department of Management
Institute of Business Administration, Karachi
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Planning Horizon
Aggregate planning: Intermediate-range capacity planning, usually covering 2 to 12 months.
Short range
Intermediate range
Long range
Now 2 months 1 Year
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• Short-range plans (Detailed plans) – Machine loading – Job assignments
• Intermediate plans (General levels) – Employment – Output
• Long-range plans – Long term capacity – Location / layout
Overview of Planning Levels
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Planning Sequence
Business Plan Establishes operations and capacity strategies
Aggregate plan Establishes
operations capacity
Master schedule Establishes schedules for specific products
Corporate strategies
and policies
Economic, competitive, and political conditions
Aggregate demand
forecasts
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Aggregate Planning
• Begin with forecast of aggregate demand • Forecast intermediate range • General plan to meet demand by setting
– Output levels – Employment – Finished goods inventory level
• Production plan is the output of aggregate planning • Update plan periodically – rolling planning horizon
always covers the next 12 – 18 months
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• Resources – Workforce – Facilities
• Demand forecast • Policies
– Subcontracting – Overtime – Inventory levels – Back orders
• Costs – Inventory carrying – Back orders – Hiring/firing – Overtime – Inventory changes – Subcontracting
Aggregate Planning Inputs
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• Total cost of a plan • Projected levels of inventory
– Inventory – Output – Employment – Subcontracting – Backordering
Aggregate Planning Outputs
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Aggregate Planning Strategies
• Proactive – Alter demand to match capacity
• Reactive – Alter capacity to match demand
• Mixed – Some of each
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• Pricing
• Promotion
• Back orders
• New demand
Demand Options
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• Hire and layoff workers
• Overtime/slack time
• Part-time workers
• Inventories
• Subcontracting
Capacity Options
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Aggregate Planning Strategies
1. Maintain a level workforce
2. Maintain a steady output rate
3. Match demand period by period
4. Use a combination of decision variables
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Basic Strategies
• Level capacity strategy:
– Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.
• Chase demand strategy:
– Matching capacity to demand; the planned output for a period is set at the expected demand for that period.
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Chase Approach
• Advantages
– Investment in inventory is low
– Labor utilization is high
• Disadvantages
– The cost of adjusting output rates and/or workforce levels
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Level Approach
• Advantages
– Stable output rates and workforce
• Disadvantages
– Greater inventory costs
– Increased overtime and idle time
– Resource utilizations vary over time
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1. Determine demand for each period
2. Determine capacities for each period
3. Identify policies that are pertinent
4. Determine units costs
5. Develop alternative plans and costs
6. Select the best plan that satisfies objectives. Otherwise return to step 5.
Techniques for Aggregate Planning
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Summary of Planning Techniques
Technique Solution Characteristics Graphical/charting Heuristic (trial
and error) Intuitively appealing, easy to understand; solution not necessarily optimal.
Linear programming
Optimizing Computerized; linear assumptions not always valid.
Simulation Heuristic (trial and error)
Computerized models can be examined under a variety of conditions.
13-16
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Cumulative Graph
1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10
Cumulative production Cumulative production
Cumulative demand Cumulative demand
Cum
ulat
ive
outp
ut/d
eman
d Cu
mul
ativ
e ou
tput
/dem
and
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Aggregate Plan to Master Schedule
Aggregate Planning
Aggregate Planning
Disaggregation
Master Schedule Master
Schedule
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• Master schedule: The result of disaggregating 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 the Aggregate Plan
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Master Scheduling
• Master schedule – Determines quantities needed to meet demand – Interfaces with
• Marketing • Capacity planning • Production planning • Distribution planning
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Master Scheduling Process
Master Scheduling
Beginning inventory
Forecast
Customer orders
Inputs Outputs Projected inventory
Master production schedule
Uncommitted inventory ATP
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Projected On-hand Inventory
Projected on-hand inventory
Inventory from previous week
Current week’s requirements
- =
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Projected On-hand Inventory
64 1 2 3 4 5 6 7 8Forecast 30 30 30 30 40 40 40 40Customer Orders (committed) 33 20 10 4 2Projected on-hand inventory 31 1 -29
Beginning Inventory
Customer orders are larger than forecast in week 1
Forecast is larger than Customer orders in week 2
Forecast is larger than Customer orders in week 3
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Time Fences
Time Fences – points in time that separate phases of a master schedule planning horizon.
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Time Fences in MPS
Period
”frozen” (firm or fixed)
“slushy” somewhat
firm ”liquid” (open)
1 2 3 4 5 6 7 8 9
13-25
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REFERENCES
•Operations Management William J. Stevenson
•Operations Management Barry Render & Jay Heizer