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    Session7 P

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    Aniket Borse
    Plan 1: Vary the workforce each month to exactly meet demand, incurring hiring and firing costs but avoiding inventory and shortages. Plan 2: Maintain a constant workforce to produce the average demand over 6 months, avoiding hiring/firing but risking inventory or shortages. Plan 3: Keep a steady workforce on regular time to meet minimum demand, using subcontracting when needed to avoid excess inventory or shortfalls.

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    Session7 P

    Uploaded by

    Aniket Borse
    15 views11 pages
    Plan 1: Vary the workforce each month to exactly meet demand, incurring hiring and firing costs but avoiding inventory and shortages. Plan 2: Maintain a constant workforce to produce the average demand over 6 months, avoiding hiring/firing but risking inventory or shortages. Plan 3: Keep a steady workforce on regular time to meet minimum demand, using subcontracting when needed to avoid excess inventory or shortfalls.

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    Session7 p

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    Plan 1: Vary the workforce each month to exactly meet demand, incurring hiring and firing costs but avoiding inventory and shortages. Plan 2: Maintain a constant workforce to produce the average demand over 6 months, avoiding hiring/firing but risking inventory or shortages. Plan 3: Keep a steady workforce on regular time to meet minimum demand, using subcontracting when needed to avoid excess inventory or shortfalls.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    15 views11 pages

    Session7 P

    Uploaded by

    Aniket Borse
    Plan 1: Vary the workforce each month to exactly meet demand, incurring hiring and firing costs but avoiding inventory and shortages. Plan 2: Maintain a constant workforce to produce the average demand over 6 months, avoiding hiring/firing but risking inventory or shortages. Plan 3: Keep a steady workforce on regular time to meet minimum demand, using subcontracting when needed to avoid excess inventory or shortfalls.

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    Download as pdf or txt
    of 11

    Session 7: Aggregate Planning

    Big Picture
    Strategic Decisions
    • Facility location 5 – 10 years
    • Product mix

    Aggregate Planning
    • Inventory level 3 – 18
    months
    • Production level
    • Capacity utilization
    • Subcontracting level

    Operational Decisions
    • Scheduling 1 – 15 days
    • Resource allocation
    Aggregation
    • Group of similar products or services
    – Aggregate planning (product family)
    • Forecast of LCD TVs
    • Forecast of sedan cars
    – Disaggregate planning (SKU level)
    • Forecast of 21”LCD, 23”LCD, …
    • Forecast of black cars, red cars,….

    • Aggregate planning is relevant for Family of


    products (not SKU level)
    Capacity Planning Hierarchy
    Our Focus

    Executional Tactical Strategic


    Capacity Planning Capacity Planning Capacity Planning

    Time
    0-30 days 1-18 months 1-5+ years
    Horizon

    Planning
    Hours or days Weeks or months Quarters or years
    Buckets

    Capacity expansion
    Optimal allocation
    (contraction) of hard-
    of existing capacity
    to-flex resources
    Schedule for
    Decisions
    existing resources Capacity levels of
    Capacity technology
    easy-to-flex
    resources
    Capacity location
    Overview of Aggregate Planning
    • Starts with a forecast
    • Objective of aggregate planning
    – Minimizing cost, Maximizing contribution
    • Relevant costs
    – Inventory costs
    – Shortage costs
    – Outsourcing/subcontracting costs
    – Resource acquisition/liberating costs
    • Hiring of workforce
    • Firing of workforce
    Basic Terms
    • Aggregate time unit

    • Planning horizon

    • Rolling horizon
    Level Production
    Demand

    Production
    Units

    Time
    Chase Demand
    Demand

    Production
    Units

    Time
    Strategies of aggregate planning
    • Chase demand
    – Flexible strategy, produce according to the demand
    – Demand more than capacity
    • Add resources (hiring, subcontracting, overtime, etc.)
    – Demand less than capacity
    • Remove resources (firing, use of outsourcing,, etc,)

    – No demand - supply mismatch (no inventory costs, no


    shortage costs)

    – High cost of flexibility


    Strategies of aggregate planning
    • Level demand
    – Produce at a constant rate
    – Smooth operations, uniform level of resources

    – Vulnerable to inventory costs and shortage costs


    • Demand exceeds supply rate – shortage
    • Demand less than supply rate – inventory
    How to develop aggregate plans
    Consider the example described in the Assignment

    Develop alternative production plans for the firm. Investigate the following
    three different plans with the objective of finding one with the lowest cost.

    Plan 1: Produce to meet exact monthly production requirements using a


    regular eight-hour day by varying workforce.

    Plan 2: Produce to meet expected average demand over the next six months
    by maintaining a constant workforce.

    Plan 3: Produce to meet the minimum demand expected using a constant


    workforce on regular time. Use sub-contracting to meet additional output
    requirements.

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