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Aggregate Planning Aggregate Planning

Professor Ahmadi

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Planning Tasks and ResponsibilitiesPlanning Tasks and Responsibilities

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Provides the quantity and timing of production Provides the quantity and timing of production for intermediate futurefor intermediate future• Usually 3 to 18 months into futureUsually 3 to 18 months into future

Combines (‘aggregates’) productionCombines (‘aggregates’) production• Often expressed in common unitsOften expressed in common units

Example: Hours, dollars, equivalents Example: Hours, dollars, equivalents (e.g., FTE students)(e.g., FTE students)

Involves capacity and demand variablesInvolves capacity and demand variables

Aggregate PlanningAggregate Planning

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Meet demandMeet demand Use capacity efficientlyUse capacity efficiently Meet inventory policyMeet inventory policy Minimize costMinimize cost

• LaborLabor• InventoryInventory• Plant & equipmentPlant & equipment• SubcontractSubcontract

Aggregate Planning GoalsAggregate Planning Goals

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Aggregate Planning StrategiesAggregate Planning StrategiesPure StrategiesPure Strategies

Capacity Options — change capacity:Capacity Options — change capacity:• changing inventory levelschanging inventory levels• varying work force size by hiring or layoffsvarying work force size by hiring or layoffs• varying production capacity through varying production capacity through

overtime or idle timeovertime or idle time• subcontractingsubcontracting• using part-time workersusing part-time workers

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Aggregate Planning StrategiesAggregate Planning StrategiesPure StrategiesPure Strategies

Demand Options — change demandDemand Options — change demand::

• influencing demandinfluencing demand• backordering during high demand periodsbackordering during high demand periods• counterseasonal product mixingcounterseasonal product mixing

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The ExtremesThe Extremes

Level Strategy

Chase Strategy

Production equals

demand

Production rate is constant

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Mixed strategyMixed strategy• Combines 2 or more aggregate scheduling Combines 2 or more aggregate scheduling

optionsoptions Level scheduling strategyLevel scheduling strategy

• Produce same amount every dayProduce same amount every day• Keep work force level constant Keep work force level constant • Vary non-work force capacity or demand Vary non-work force capacity or demand

optionsoptions• Often results in lowest production costsOften results in lowest production costs

Aggregate Planning StrategiesAggregate Planning Strategies

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Graphical & charting techniquesGraphical & charting techniques• Popular & easy-to-understandPopular & easy-to-understand• Trial & error approachTrial & error approach

Mathematical approachesMathematical approaches• Transportation method Transportation method • Linear decision ruleLinear decision rule• Management coefficients modelManagement coefficients model• SimulationSimulation

Aggregate Planning MethodsAggregate Planning Methods

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The Graphical Approach to Aggregate The Graphical Approach to Aggregate PlanningPlanning

Forecast the demand for each periodForecast the demand for each period Determine the capacity for regular time, Determine the capacity for regular time,

overtime, and subcontracting, for each overtime, and subcontracting, for each periodperiod

Determine the labor costs, hiring and Determine the labor costs, hiring and firing costs, and inventory holding costsfiring costs, and inventory holding costs

Consider company policies which may Consider company policies which may apply to the workers or to stock levelsapply to the workers or to stock levels

Develop alternative plans, and examine Develop alternative plans, and examine their total coststheir total costs