Shri. K.M. Savjani & Smt. K.K.

Savjani
B.B.A./B.C.A College, Veraval
A
Presentation on
Aggregate Planning and Maintenance Management
Subject:
Production and Operation Management
Presented By
Dimple Baraiya
l Introduction

As a part of operation Management, to achieve performance and operational excellence,

companies have to be managed across a range of time frame. There is a need to build
confidence in their own capabilities in order to achieve long term strategies and short
term results. Planning for such different time periods is termed as aggregate planning.

Aggregate Planning is a 'Big Picture' (Vision) approach to planning for the intermediate
time period. It deals with developing ways to utilise facilities and resources at a regional/
plant level in order to address the demand and supply side of the firm's activities for its
different product groups. It reflects decisions on —

 Output rates
 Employment levels and changes
 Inventory levels and changes
 Sub-contracting
 Outsourcing
 Backorders(Order for a good that can't be filled at current time due to lack of available
supply)
l Introduction

 The term aggregate plan signifies that plans are developed for product lines
or product families rather than individual products. eg. aggregate plan in a
firm producing refrigerators specifies how many refrigerators need to be
produced without any classification by model, design or size. Resource
capacity is also calculated in aggregate terms like labour hours, machine
hours without any classification or specification of type of labour or machines.

 Aggregate Planning begins with a forecast of aggregate demand for a product
like refrigerators or television sets or mobile handsets etc. over the
intermediate time horizon (3 to 18 Months). Then, a general plan is made to
meet the demand requirement by determining output, workforce, finished
goods inventory levels. To increase capacity is not feasible in the
intermediate time horizon. Hence, building new facilities or Purchasing new
equipment is not considered. However, it is Possible to hire new workers or
lay off some, reduce or increase the working hours or build or lower inventory
levels.
Effective Aggregate Planning thus requires appropriate information on .
1. Available resources over the planning period
2. Forecast of expected demand
3. Policies regarding changes in employment levels

Thus, inputs to aggregate Planning would include resources,

demand forecast, policy statements, on workforce changes,
overtime, inventory level changes, sub-contracting, back orders and
cost of inventory carrying, back orders, subcontracting etc.
The output from aggregate planning would be —
(i) Total cost of a plan
(ii) Projected levels of inventory, output, employment, subcontracting
and back ordering
2 Definitions

"Aggregate planning is the process of developing, analyzing and maintaining a preliminary

approximate schedule of the overall operations of an organisation.“

"Aggregate planning is the process of determining output levels of product groups over the
next 6 to 18 months period or a weekly or monthly basis.“

"An approach to determine the quantity and timing of production for the intermediate future
usually 3 to 18 months ahead." Thus, we can say that it consists of resource management
planning activities that are done after long term capacity planning decisions are done. It helps
the firm in allocating and utilising its' resources to satisfy expected demand Over an
intermediate time horizon and achieve its long term strategies. It is the best way to meet
forecasted demand and minimise cost over the planning period. It helps in designing the best
operating level/ design capacity for which average unit cost is at the minimum.
[3] Importance of Aggregate Plan

1) It helps in minimising costs and maximising profit.

2) It helps to maximise customer service by providing on time deliveries. It helps to
adjust workforce requirements, inventory requirements, machine capacity utilisation
and thereby improving delivery time.
3) It minimises investment in inventory. Excessive inventory leads to blockage of capital.
However by determining demand and summing up the demand for individual product,
inventory levels could be adjusted as per the aggregate demand for each time period.
4) It helps in maximising utilisation of plant and equipment by facilitating fully loaded
facilities and minimising over loading and under loading.
5) It helps in minimising changes in work force levels. Due to fluctuating workforce
levels there might be loss of labour productivity, increasing cost and time needed for
training new employees. But, aggregate planning helps in appropriate utilisation of
workforce by determining overtime or undertime hiring or lay off or subcontracting or
outsourcing.
6) It helps in minimizing changes in production rates by orderly and systematic
transition of production capacity to meet peaks and valleys of expected customer
demand. Frequent changes in production rates may cause difficulty in coordinating
material procurement and may require rebalancing of line.
Approaches to Aggregate Planning

An aggregate plan takes into consideration two factors, the overall level of output
and the capacity required to produce that output. There are. 2 approaches to estimating
the capacity required to produce an aggregation (total) of a company's products.
 Top Down Approach
 A bottom-up approach or Sub plan consolidation Approach

 Top Down Approach :

Top down Approach involves developing an entire plan by working at highest level
of consolidation of products. It consolidates the products into an average product and
then develops an overall plan. In this approach the desirable overall plan is developed
for the period in the planning horizon, with the plan for the first few periods being
relatively firm. This approach is based on the assumption that if the proper amount of
total capacity is available, the right amount of capacity for all parts will be available. It
is based in terms of a pseudo product (fictitious product) which represents the average
characteristics of the entire product line to be planned. The I plan is then disintegrated /
disaggregated to allocate capacity to product families and individual products. However,
if the product mix varies with time there could be difficulties in disaggregation.
Approaches to Aggregate Planning

A Bottom up Approach / Sub plan Consolidation Approach / Resource

Requirement Planning / Rough cut capacity Planning :
It involves developing plans for major products or product families at some
lower level within the product line. These sub plans are then consolidated to
arrive at the aggregate plan which gives the overall output and the capacity
needed to produce it. It is also called Resource Requirement Planning which is
usually used along with Material Requirement Planning (MRP). Both Materials
and Capacity must be available for products to be made and hence material
plans need to be coordinated with a more detailed production plan.
Resource Requirement Planning which is also known as Rough cut Capacity
Planning is done with tentative master production schedule (MPS) to test
feasibility in terms of capacity before finalising MPS. It ensures that a
proposed MPS does not overload any key department or machine or
workstation making it feasible. This is a quick and cost effective method of
finding out discrepancies between capacity requirement of MPS and available
capacity.
CONCEPT OF CAPACITY PLANNING

After selection of production process, an operations manager is faced with the problem of
determining capacity. Capacity in general means the maximum production rate of a facility
or plant. It indicates volume of output per period of time. In a service organisation it
indicates the number of units, a facility can hold, receive or store in a period of time.
This decision is very important for an operations manager since it helps in determining
capital requirement which involves a fixed cost element. Capacity also helps in
determining whether the facility would be sufficient to meet customer demand in a timely
manner or whether facilities would remain idle if it's too large and thereby add to existing
cost of production or operation. Hence, determining an appropriate facility size/ capacity is
important for earning a high rate on investment as well as for fulfilling the objective of
high capacity utilisation.
Capacity Planning can be done in 3 time horizons :
1) Long Term Capacity (more than 1 year) : It is a function of adding facilities and
equipment that have long lead (waiting) time.
2) Intermediate/ Medium Term (3 to 18 months) : When we can add equipment, personnel
and shifts. We can subcontract or build or use inventory. This is Aggregate Planning task.
3) Short Run Capacity (upto 3 months) : Where we schedule jobs and people and allocate
machinery. We use capacity that is already existing and modifying capacity is difficult.
CONCEPT OF CAPACITY PLANNING

Capacity can also be explained as follows :

1) Fixed capacity : The total capital assets of a company at a particular time is

known as fixed capacity. It represents upper limit to the internal capacity
that a company can use to meet its demand. It can't be easily changed in
intermediate range time horizon.
2) Adjustable capacity : It is the size of workforce, number of hours per week
they work, number of shifts and extent of subcontracting.
3) Design capacity or Installed capacity v : It is the planned rate of output of
goods/ services under normal or full scale operating conditions. It sets
maximum limit and helps in determining actual utilisation of capacity.
4) System capacity : It is less than or equal to the design capacity. It is the
maximum output of a specific product or product mix that the system
(machines, workers) is capable of producing.
5) Potential capacity is that which can be made available within the decision
horizon of' top management.
CONCEPT OF CAPACITY PLANNING

6) Immediate capacity is the capacity that can be made available within the current budgeted
period.
7) Effective capacity is thé operating/ practical capacity. It usually ranges from 75% to 85% of
maximum theoretical / installed or designed capacity. This is due to loss of capacity due to
machine breakdown, preventive maintenance or delays due to scheduling. Thus, the
efficiency attained is always less than 100%. Moreover, there would also be loss of output
due to rejections and scrap.
8) Normal/ Rated capacity/ Average capacity of a plant is the estimated quantity of output or
production that should be achieved as per the estimation done by Industrial Engineering
department. eg. A steel plant may have a rated capacity of 1 lakh tonnes of steel per month.
9) Actual or Utilised capacity : This is expressed as a percentage of rated capacity. It is the
actual output achieved during a particular time period. The actual output may be less than
rated output due to factors like employee absenteeism, low productivity level, actual
demand for the product or any other inefficiencies.
System efficiency is the ratio of actual measured output of goods and services to the system
capacity.
System efficiency = Actual output
___________
System capacity
CONCEPT OF CAPACITY PLANNING

Thus, capacity of a plant can be expressed as the rate

of
output or units per day or per week or per month,
tonnes per month, gallons per hour,- labour hours per
day.
 In case of companies with more diverse product lines,
capacity is measured in terms of value of output per
day/week / month. For instance, capacity measured in
automobile industry is by the number of vehicles and
in a job shop is by labour hours worked. However, in a
warehouse, it is by the cubic counts.
Capacity Requirement Planning (CRP)
 CRP is a technique for determining what labour and equipment capacities are required for
meeting the production objectives depicted in Master Production Schedule(MPS) and
Material Requirement Planning (MRP-I).
MRP-I and CRP clearly specify what materials and capacities are needed and when they are
needed so that objectives can be met.
The major inputs for CRP process are .
1) Planned orders and released orders from MRP system.
2) Loading information from work centre status file
3) Routing information from the shop routing file
4) Changes which modify capacity, give alternative routing or altered planned order.
The above inputs when given in time will lead to effective functioning of the system.
The CRP process begins with aggregate planning followed by MPS based on rough cut
capacity planning and then the order for components are exploded by MRP. The CRP system
then converts those orders into standard labour and machine hours of load on appropriate
workers and machines as identified from work Centre status and shop routing files. This
results in a load projection report work centrewise. If the work centre capacities are
adequate, the planned order releases are verified for MRP system and released orders
become purchase and shop orders. Workload reports are also used for controlling inputs and
outputs. If the initial load projection report reveals inadequacy of capacity in any work
Maintenance Management

13.1 Concept :
Every industrial organisation has various processes for production of goods and services and
every service organisation also uses various equipments for supporting the provision of routine
services. Thereby, these equipments and assets need to be protected and maintained in order to
keep them in proper working condition and ensure that repairs can be done regularly to bring
them back into working condition if any breakdown occurs.
Thus, maintenance is the function of production management which is concerned with the
day to day problem of keeping the physical plant in good working condition. It is essential for
ensuring the availability of machines, buildings and services for performing their function
effectively, so that the investment done in these assets or equipments yields a good return.
There are two categories of activities related to maintenance in an organisation.
1) Maintaining the assets like building, parking lots, lawns, fences, services and utilities.
2) Maintaining equipments, machinery, vehicles, waste disposal systems, inspection tools, testing
instruments, conveyors and other material handling equipments, office equipments like
computers, printers, telephones, photocopiers, fax machines etc.
Thus, Maintenance Management is concerned with the planning, organising and directing of
resources in order to control the availability and performance of the industrial plants to some
specified level. It is a function that supports production function and involves maintenance
planning, scheduling and execution of maintenance activities along with controlling costs of
maintenance.
Importance of Maintenance
Management
1) In order to provide good customer service, companies must have equipments that are reliable and help in
fulfilling customer demand when needed. Thus, there is a need to create dependability of service in order
to establish a competitive edge. Equipments must be kept •in reliable condition without costly stoppage
of work and down time due to repairs in order to remain competitive and productive.
2) Equipments or machines that involve heavy investment also need appropriate maintenance to keep them
in good working condition. Such companies like oil refineries, iron and steel industries need proper and
effective maintenance for their smooth functioning.
3) Good maintenance is crucial for cost control in any company. Companies that adopt automation heavily
rely on machinery and equipment for a better competitive position and improved productivity. The cost of
breakdown and thereby idle time is very high with more technically advanced and expensive machines.
Hence, it is necessary that these equipments like CNC machines, robots, pressure gauges work reliably
with specifications making maintenance a key function.
4) Companies that wish to attain a competitive edge need to focus on keeping the equipments consistent
and operating within specifications (process capability) so that, they produce high quality products. Thus,
maintenance is essential aspect of 'Quality Assurance'. Any inconsistency in equipment would bring
variability in product features and specifications and result in defective parts which do not meet the
established specification especially in industries like auto parts, casting, moulding processes etc.
5) Organisations practising JIT (Just in Time) programs operate with low inventories and hence can not afford
to have a lengthy period of equipment failure. They would be at a risk of losing market share to their
competing companies which could be more reliable. Hence, not just reducing the cost of idle equipment
or labour cost would be a danger but there would be loss of sale due to inappropriate maintenance and no
safety/ buffer stock due to JIT.
Types of Maintenance:

(1) Breakdown / Corrective Maintenance : This takes place when there is

stoppage of work because of machine breakdown. Thus repairs are done after the
equipment stops working and maintenance takes the form of repair work. eg. A
conveyor belt broken-down. The role of maintenance department is to check into
the difficulty and make necessary repairs.

It ensures,
1) Controlling cost of repair staff, including regular and overtime labour cost.
2) Controlling cost of operation of repair shop.
3) Putting back equipment into operation as quickly as possible to minimise
interruption in production.
4) Controlling investment involved in replacing spare parts.
5) Controlling investment involved in stand up or back up machines like spare wheel
in a car.
6) Performing appropriate amount of repair at each malfunction along with certain
decisions about repair like making easier and small solutions or overhauling/
changing the entire equipment/ machine.
Types of Maintenance:

(2) Preventive Maintenance : This is undertaken before the need arises and aims at
minimising the possibility of unexpected interruptions in production or major breakdowns.
Preventive maintenance comprises of
1) Periodic inspection of plant and equipment to avoid breakdown.
2) Proper design of equipment and appropriate installation.
3) Repetitive servicing and maintenance of equipment.
4) Proper and adequate lubrication, cleaning and painting of building and equipment.
This maintenance is contrast to break down maintenance and inspection is the key to
good preventive maintenance and must cover everything from production machinery,
material handling tools and equipments, lighting, motors, controls, plant services and
building. Suitable statistical techniques have been developed to decide the frequency of
inspection. Although some companies and organisations focus only on inspecting
expensive items, it should be noted that if a failure in up keep leads to employee harm,
stoppage of production or wasting assets of the plant then, it should be included in
preventive maintenance programme. Preventive maintenance provides greater safety for
workers, reduced downtime in production, fewer repairs, repairs before breakdown,
reduced cost of repairs, less stand by equipment, less cost of manufacture and
identification of high maintenance cost items.
Types of Maintenance:

Preventive maintenance includes —

1) Proper identification of items to be included.
2) Proper records covering volume of work and cost.
3) Inspections on a fixed schedule with standing orders on specific
requirements.
4) Use of checklist by inspectors.
5) Use of repair budgets for major items of equipment. (vi)
Inspection frequency schedule once a year or once a quarter
etc.
6) Well qualified inspectors capable of making simple repairs and
familiar with items being inspected.
7) Administrative procedures and follow up on maintenance
programme.
Types of Maintenance:

(3) Routine Maintenance : This includes activities like

periodic inspection cleaning, lubrication and repair of
equipments used in production after completion of free
service period. Routine maintenance is divided into
1) Running maintenance which is done while the
equipment is in operation like greasing or lubricating
bearings while machine is running.
2) Shutdown Maintenance which is carried out when
the machine is not in use. After it is shut down, its
maintenance work is carried out like repairing boiler
tubes of a boiler.
Types of Maintenance:

Planned Maintenance : This maintenance is

carried out as per a planned/ predetermined
schedule and is also known as Scheduled
Maintenance or Productive maintenance. It
involves inspection of all plant and equipments,
buildings, machinery in order to lubricate, repair
or overhaul to avoid breakdown or deterioration
in its functioning. It aims at reducing machine
stoppage due to sudden breakdown demanding
emergency maintenance.
Types of Maintenance:

Predictive maintenance / continuous

maintenance : In case of sensitive
instruments like optical tools, temperature
and resistance gauges, amplitude meters,
vibration analysers, problems can occur
frequently. Hence, conditions can be
measured periodically or on a continuous
basis and •enables the maintenance team to
plan for overhaul. This will allow an extension
to the service life without fear of failure.
Types of Maintenance:

Total Productive Maintenance (TPM) is a new

approach which brings total quality management in the
practice of preventive maintenance. It involves the
concept of reducing variability through employee
involvement and excellent maintenance records. It is
designed to eliminate losses caused due to breakdown
of machines and equipment by identifying and
attacking all the causes of equipment breakdowns and
system down time. It places high value on team work,
consensus building and continuous improvement. It
aims at 'Zero breakdown' or 'Zero down time'.
QUESTIONS ???