Aggregate planning and MPS

Aggregate planning

It may be defined as an intermediate production plan which has a range of 2 to 18 months to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period..It has different approaches strategies and objectives which will be discussed next. . . . . . . .

Definition

There are certain inputs of aggregate planning that is to say the factors which should be kept in mind while planning for aggregate production;

These are

Inputs of aggregate planning

Workforce Facilities

Demand forecasts Policies Costs

Inputs of aggregate planning

Total cost of a plan Projected levels of inventory

Inventory Output Employment Subcontracting Backordering

Outputs of aggregate planning

Proactive Alter demand to match capacity

Reactive Alter capacity to match demand

Mixed Some of each

Aggregate Planning Strategies

In a proactive strategy a firm plans to change the demand by means of advertisements or by means of offering benefits for a specific product.

Proactive strategy

A reactive planning strategy has two parts which are;

Level strategy Chase strategy

Reactive strategy

A level strategy seeks to produce an aggregate plan that maintains a steady production rate and/or 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. The firm maintains a level workforce and a steady rate of output when demand is somewhat 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

Level 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. 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.

Chase strategy

Level strategy

ADVANTAGES

- Stable output rates and workforce

DISADVANTAGES

-greater inventory costs -increased over time and idle time

-resource utilizations vary over time

ADVANTAGES

-Investment in inventory is low -Labor utilization in high DISADVANTAGES

-The cost of fluctuating work force-potential damage to employee morale

Chase strategy

Linear programming model Linear decision rule Simulation

Techniques

Master Production Schedule Lists the products to be manufactured, when they should

be completed, and in what quantities It is the conversion of the aggregate schedule into a very

specific schedule of individual products Products listed in the master schedule generally divide

into three categories: 1. Firm customer orders 2. Forecasted demand 3. Spare parts

Master production schedule

Aggregate planning is a relatively longer term planning that spans over a period of around 18months on the other hand MPS is the putting of AP action i.e. planning individual products for a shorter time span.

Time unit for aggregate planning is one month while the time unit for MPS is a week.

Relationship between MPS and aggregate planning

That’s all what we have today for youwe could have explained it in more detail but time constraint didn’t allow us !!!!!!!!

Credits

This is a joint effort of

UMAR YAZDANI (D 11 IN 05)AFSAAR ALI ( D 11 IN 27)HANIF HAZARA (D 11 IN 39)TAUQIR HAIDER ( D 11 IN 33)