Aggregate planning involves developing a preliminary schedule for operations over the next 6-18 months to satisfy demand forecasts at minimum cost. It aims to minimize costs/maximize profits, maximize customer service, minimize inventory/workforce changes. The process determines demand, capacities, unit costs, develops alternative plans, and selects the optimal plan. Common strategies are level, which maintains steady output/employment, or chase, which matches demand/capacity period to period. Linear programming, linear decision rules, and simulation models are optimization techniques used.
Aggregate planning involves developing a preliminary schedule for operations over the next 6-18 months to satisfy demand forecasts at minimum cost. It aims to minimize costs/maximize profits, maximize customer service, minimize inventory/workforce changes. The process determines demand, capacities, unit costs, develops alternative plans, and selects the optimal plan. Common strategies are level, which maintains steady output/employment, or chase, which matches demand/capacity period to period. Linear programming, linear decision rules, and simulation models are optimization techniques used.
Aggregate planning involves developing a preliminary schedule for operations over the next 6-18 months to satisfy demand forecasts at minimum cost. It aims to minimize costs/maximize profits, maximize customer service, minimize inventory/workforce changes. The process determines demand, capacities, unit costs, develops alternative plans, and selects the optimal plan. Common strategies are level, which maintains steady output/employment, or chase, which matches demand/capacity period to period. Linear programming, linear decision rules, and simulation models are optimization techniques used.
Aggregate planning involves developing a preliminary schedule for operations over the next 6-18 months to satisfy demand forecasts at minimum cost. It aims to minimize costs/maximize profits, maximize customer service, minimize inventory/workforce changes. The process determines demand, capacities, unit costs, develops alternative plans, and selects the optimal plan. Common strategies are level, which maintains steady output/employment, or chase, which matches demand/capacity period to period. Linear programming, linear decision rules, and simulation models are optimization techniques used.
Meaning Aggregate planning is the process of developing, analyzing, and maintaining a preliminary, approximate schedule of the overall operations of an organization.
The aggregate plan generally contains targeted
sales forecasts, production levels, inventory levels, and customer backlogs. This schedule is intended to satisfy the demand forecast at a minimum cost.
2 Defined as … The process of determining output levels of product groups over the coming 6 to 18 months on a weekly or monthly basis ; the plan identifies the overall level of outputs in support of the business plan.
forecasted demand into specific production rates and the corresponding labor requirements for the intermediate term.
3 Objectives
•Minimize cost / maximize profits
•Maximize customer service •Minimize inventory investment •Minimize changes in production rates •Minimize changes in workforce levels •Maximize utilization of plant and equipment
4 Aggregate Planning Process
Determine Determine Identify policies demand for capacities for that are pertinent each period . each period .
Develop Determine units Select the best alternative plans costs for units plan that satisfies and compute produced . objectives costs for each.
5 Aggregate Planning Strategies
There are two pure planning strategies available to
the aggregate planner:
Level strategy Chase strategy
Firms may choose to utilize one of the pure
strategies in isolation, or they may opt for a strategy that combines the two. 6 Level strategy A level strategy seeks to produce an aggregate plan that maintains a steady production rate and a steady employment level.
In order to satisfy changes in customer demand,
the firm must raise or lower inventory levels in anticipation of increased or decreased levels of forecast demand.
7 Level strategy The firm maintains a level workforce and a steady rate of output when demand is low. This allows the firm to establish higher inventory levels than are currently needed.
As demand increases, the firm is able to continue a
steady production rate/steady employment level, while allowing the inventory surplus to absorb the increased demand
8 Chase strategy A chase strategy implies matching demand and capacity period by period.
This could result in a considerable amount of hiring,
firing or laying off of employees; insecure and unhappy employees; increased inventory carrying costs; problems with labor unions; and erratic utilization of plant and equipment.
9 Chase strategy
It also implies a great deal of flexibility on the firm's
part. The major advantage of a chase strategy is that it allows inventory to be held to the lowest level possible, and for some firms this is a considerable savings.
Most firms embracing the just-in-time production
concept utilize a chase strategy approach to aggregate planning
10 Level vs. Chase
LEVEL CHASE
• ADVANTAGES • ADVANTAGES
• Stable output rates and • Investment in inventory is
workforce low • Labor utilization in high • DISADVANTAGES • DISADVANTAGES • Greater inventory costs • Increased over time and • The cost of fluctuating work idle time force • Resource utilizations vary • Potential damage to over time employee morale
11 Techniques
Linear Programming Model
Linear Decision Rule
Simulation
12 Linear programming LP models are methods for obtaining optimal solutions to problems involving the allocation of scarce resources in terms of cost minimization or profit maximization.
the goal is to minimize the sum of costs related to
regular labor time, over time, inventory holding costs, and costs associated with changing size of the work force.
Constraints involve the capacities of the workforce,
inventories and subcontracting 13 E.H. BOWMAN - proposed formulating the problem in terms of transportation type programming model as a way to obtain aggregate plans that would match capacities with demand requirements and minimize cost.
In order to use this approach, planners must
identify capacity (supply) of regular time, over time, subcontracting and inventory on a period by period basis as well as related costs of each variable.
14 LINEAR DECISION RULE Linear decision rule is another optimizing technique. It seeks to minimize total production costs (labor, overtime, hiring/lay off, inventory carrying cost) using a set of cost-approximating functions to obtain a single quadratic equation.
Then, by using calculus, two linear equations can
be derived from the quadratic equation, one to be used to plan the output for each period and the other for planning the workforce for each period.
15 SIMULATION MODELS By developing an aggregate plan within the environment of a simulation model, it can be tested under a variety of conditions to find acceptable plans for consideration.
These models can also be incorporated into a
decision support system, which can aid in planning and evaluating alternative control policies.
16 SIMULATION MODELS These models can integrate the multiple conflicting objectives inherent in manufacturing strategy by using different quantitative measures of productivity, customer service, and flexibility.
