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Aggregate Planning in A Supply Chain: Powerpoint Presentation To Accompany Powerpoint Presentation To Accompany

supply ch8

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Alaa Al Harbi
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236 views12 pages

Aggregate Planning in A Supply Chain: Powerpoint Presentation To Accompany Powerpoint Presentation To Accompany

supply ch8

Uploaded by

Alaa Al Harbi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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8 Aggregate Planning in a

Supply Chain

PowerPoint presentation
to accompany
Chopra and Meindl
Supply Chain Management, 6e
Copyright © 2016 Pearson Education, Inc. 8–1
Learning Objectives
1. Understand the importance of aggregate
planning as a supply chain activity.
2. Describe the information needed to produce an
aggregate plan and the outputs obtained.
3. Explain the basic trade-offs to consider when
creating an aggregate plan.
4. Formulate and solve basic aggregate planning
problems using Microsoft Excel.

Copyright © 2016 Pearson Education, Inc. 8–2


Role of Aggregate Planning
in a Supply Chain
• Capacity has a cost and lead times are often long
• Aggregate planning:
– process by which a company determines levels of capacity,
production, subcontracting, inventory, stockouts, and pricing
over a specified time horizon
– goal is to maximize profit
– decisions made at a product family.
– time frame of 3 to 18 months
– how can a firm best use the facilities it has?

Copyright © 2016 Pearson Education, Inc. 8–3


Role of Aggregate Planning
in a Supply Chain
• Identify operational parameters over the specified
time horizon
– Production rate – Subcontracting
– Workforce – Backlog
– Overtime – Inventory on hand
– Machine capacity level
• All supply chain stages should work together on an
aggregate plan that will optimize supply chain
performance

Copyright © 2016 Pearson Education, Inc. 8–4


The Aggregate Planning Problem
• Given the demand forecast for each period in the planning
horizon, determine the production level, inventory level,
and the capacity level for each period that maximizes the
firm’s (supply chain’s) profit over the planning horizon.
• A planning horizon is the time period over which the
aggregate plan is to produce a solution.
• Specify the planning horizon (typically 3-18 months)
• Specify the duration of each period
• Specify key information required to develop an aggregate
plan

Copyright © 2016 Pearson Education, Inc. 8–5


Information Needed for
an Aggregate Plan
• Aggregate demand forecast Ft for each Period t over T periods
• Production costs
– Labor costs, regular time ($/hr) and overtime ($/hr)
– Subcontracting costs ($/hr or $/unit)
– Cost of changing capacity – hiring or layoff ($/worker), adding or
reducing machine capacity ($/machine)
• Labor/machine hours required per unit
• Inventory holding cost ($/unit/period)
• Stockout or backlog cost ($/unit/period)
• Constraints – overtime, layoffs, capital available, stockouts,
backlogs, from suppliers

Copyright © 2016 Pearson Education, Inc. 8–6


Outputs of Aggregate Plan
• Production quantity from regular time, overtime,
and subcontracted time
• Inventory held
• Backlog/stockout quantity
• Workforce hired/laid off
• Machine capacity increase/decrease

• A poor aggregate plan can result in lost sales, lost


profits, excess inventory, or excess capacity

Copyright © 2016 Pearson Education, Inc. 8–7


Identifying Aggregate Units of
Production
• Aggregate unit should be identified in a way
that the resulting production schedule can be
accomplished in practice
• Focus on the bottlenecks when selecting the
aggregate unit and identifying capacity and
production times
• Account for activities such as setups and
maintenance

Copyright © 2016 Pearson Education, Inc. 8–8


Aggregate Planning Strategies
• Trade-off between capacity, inventory,
backlog/lost sales
• Chase strategy – using capacity as the lever
• Flexibility strategy – using utilization as the
lever
• Level strategy – using inventory as the lever
• Tailored or hybrid strategy – a combination of
strategies

Copyright © 2016 Pearson Education, Inc. 8–9


Chase Strategy
• Vary machine capacity or hire and lay off workers
as demand varies
• Often difficult to vary capacity and workforce on
short notice
• Expensive if cost of varying capacity is high
• Negative effect on workforce morale
• Results in low levels of inventory
• Used when inventory holding costs are high and
costs of changing capacity are low

Copyright © 2016 Pearson Education, Inc. 8 – 10


Time Flexibility Strategy
• Use excess machine capacity
• Workforce stable, number of hours worked varies
• Use overtime or a flexible work schedule
• Flexible workforce, avoids morale problems
• Low levels of inventory, lower utilization
• Used when inventory holding costs are high and
capacity is relatively inexpensive

Copyright © 2016 Pearson Education, Inc. 8 – 11


Level Strategy
• Stable machine capacity and workforce levels,
constant output rate
• Inventory levels fluctuate over time
• Inventories carried over from high to low
demand periods
• Better for worker morale
• Large inventories and backlogs may accumulate
• Used when inventory holding and backlog costs
are relatively low

Copyright © 2016 Pearson Education, Inc. 8 – 12

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