topic 7a-aggregate planning (1)

8/10/2019 Topic 7A-Aggregate Planning (1)

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Operat ionsManagement

Top ic 7AProduct ionPlann ing and Contro l

(Aggregate Plann ing)


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Organizational Strategy and

Production Planning

Decision Level Decision Process Forecast NeededProduction

Planning and

Allocation

Determines

seasonal plan by

product type

Determines

monthly itemproduction

schedules

Monthly Demandfor 6 mths by items

Monthly Demand

for 12 mths by

product types

Annual Demand by

Item and Region

Corporate

(Top Management)

ShopSupervisor

Plant Manager

It explains the relationship between planning structure and organizational structure

It also tells who are responsible for the for the decision making.


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The Planning Process

Long Range Planning

Covers a period of 5 years and made up of :

Product & Market Planning

Financial Planning Resource Planning

Medium Range Planning

Covers 3 18 months and made up of :

Aggregate Planning Item Forecasting

Master Production Schedule (MPS)

Capacity Planning


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Short Range Planning Covers from 1 day to a few weeks and consists of :

Material Requirement Planning (MRP)

(Speci fy w hen prod uct ion and p urchase orders must be made)

Capacity Requirement Planning(Provid e detai led schedu le wh en each operat ion is to b e run on each

wo rk center and how long i t wi l l take to proc ess).

Final Assembly Scheduling

(Operat ion s required to pu t prod uct in its f inal form ).

Production Planning and Control

(Schedu l ing and shop -f loo r contro l act iv i t ies) .

Purchase Planning and Control

(Acq uis i t ion and c ontro l of purch ased i tems) .


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Planning Horizons


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Example: Snapper, produces many different models of lawnmowers, for a total of 145 models. For each month in the

upcoming 3 quarters, the aggregate plan for Snapper might

have the following units of production.

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Aggregate Planning

Operations personnel

build an aggregate

plan using the total

expected demand for

all of the familyproducts.


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Aggregate Planning

The objective of aggregate planning is

to meet forecasted demand while

minimizing cost over the planning

period


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Objective is to minimize cost over the

planning period by adjusting

Production rates

Labor levels

Inventory levels

Overtime work

Subcontracting rates

Other controllable variables

Determine the quantity and timing ofproduction for the intermediate future


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Aggregate Planning

Combines appropriate resourcesinto general terms

Part of a larger production planningsystem

Disaggregation breaks the plan

down into greater detail

Disaggregation results in a masterproduction schedule


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Aggregate Planning Strategies

1. Use inventories to absorb changes indemand

2. Accommodate changes by varyingworkforce size

3. Use part-timers, overtime, or idle time toabsorb changes

4. Use subcontractors and maintain a stableworkforce

5. Change prices or other factors to

influence demand


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1)Capacity Option do not try to change demand but attempt to absorbdemand fluctuations

Changing inv entory levels

Varying w ork fo rce size by h ir ing or layoffs.

Varying p roduct io n rates through overt ime or idle t ime.

Subcontract ing. Using part-t ime workers.

2)Demand Option firms try to smooth out changes in the demand patternover the planning period

Inf luencin g demand.

Back order ing dur ing h igh demand periods.

Coun ter-seasonal prod uct m ixing.

These 8 options, along their advantages and disadvantages are summarized

in Table 13.1.(Please refer Heizer and Render textbook)


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Methods for Aggregate

Planning A mixed strategy may be the best

way to achieve minimum costs

There are many possible mixedstrategies

Finding the optimal plan is notalways possible


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Mixing Options toDevelop a Plan

Chase strategy

Match output rates to demand forecast foreach period

Vary workforce levels or vary productionrate

Favored by many service organizations

Disadvantages constantly changingshort term capacity. (hire/fire, overtime,part time, subcontract)


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Mixing Options toDevelop a Plan

Level strategy Daily production is uniform

Maintains a constant workforce

Stable production leads to better qualityand productivity

Disadvantages Build inventory, or uses

back orders, lost sales.

Some combination of capacityoptions, a mixed strategy, might be

the best solution


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Summary of Planning Techniques

Technique Solution Characteristics

Spreadsheet Heuristic (trial

and error)

Intuitively appealing, easy to

understand; solution not

necessarily optimal.

Linearprogramming

Optimizing Computerized; linear assumptionsnot always valid.

Simulation Heuristic (trial

and error)

Computerized models can be

examined under a variety of

conditions.


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Technique for Aggregate

Planning

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1. Determine demand for each period.

2. Determine capacities for each period. (regular time,overtime and subcontracting for each period)

3. Consider company policies that may apply to

the workers or to stock levels

4. Determine units costs. (Find also labour costs, hire/lay offcosts, inventory holding costs)

5. Develop alternative plans and examine total

costs


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Example of spreadsheet for Aggregate Planning

Period 1 2 3 4 5 6 Total

Demand

Output

Regular workerPart time

Overtime

Subcontract

Hire/Lay off

Output (O) - Demand (D)

Inventory

Beginning

Ending

Average

Backlog

Costs:

Output

Regular worker

Part time

Overtime

Subcontract

Hire/Lay off

Inventory

Backorders

Total


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Aggregate Planning

Example 1:

Period 1 2 3 4 5 6 Total

Forecast 200 200 300 400 500 200 1800

Planners for a company that makes several models of skateboards have gathered

the following information:

Associated data and costs:

Current work force = 15 peopleRegular time labour = RM0.25 per hour

Overtime labour = RM3.00 per unit

Inventory = RM1.00 per unit per period on average inventory.

Back orders = RM5.00 per unit per period

Hire workers = RM50 per worker.

(A temporary worker can produce 15 units per period).

Layoff workers = RM50 per worker.

Labour hours = 8 hour per unit

Workdays = 20 days per period

Subcontract = RM6.00 /unit


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Aggregate Planning

Example 4: Month Jul Aug Sept Oct Nov Dec

Forecast 400 500 550 800 700 700

Cost:

Holding Cost = RM6 per DVD per mth

Normal time labour = RM8 per hr

Overtime = RM12 per hr

Hiring = RM 400 per worker

Layoff = RM 800 per worker

Current work force = 8 workers

Labour hrs per DVD = 4 hrs

Work days per mth = 20 days

Begin inventory = 100

DVDs

No backlog is allowed

Labour hr per day = 8hrs

Max hrs for OT are 50% of

the normal working hrs

Solutions
http://localhost/var/www/apps/conversion/tmp/scratch_2/Aggrgt%20plan_ex4.xlshttp://localhost/var/www/apps/conversion/tmp/scratch_2/aggre_examples.dochttp://localhost/var/www/apps/conversion/tmp/scratch_2/Aggrgt%20plan_ex4.xlshttp://localhost/var/www/apps/conversion/tmp/scratch_2/aggre_examples.doc


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Master Production Schedule

(MPS) A time table that specif ies what is to be

made and w hen

Must be in acco rdance w ith the agg regate

product ion plan

The MPS is the resul t of the product ion

plann ing process

The AP is establ ished in overal l terms, the

MPS is establ ished in terms o f speci f ic

produc ts

The MPS is a statement o f what is to be

produced, no t a forecast of demand


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MPS Example


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Material Requirements

Planning (MRP) A sys tem of planning and schedul ing the

materials requ irements for prod uct ion operat ions

Material Requirement Plann ing is a tool gearedspeci f ical ly to assemb led operat ions

MRP provides answers fo r several quest ions for

the suppl iers:

What items are required?

How many are requ ired?

When are requ ired ?

MRP is common techn ique for dependent demand


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MRP

The structure of the system:

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MRP


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MRP requires 3 main inpu ts:

1. Mas ter Product ion Schedu le(what is to

be made and when)

This governs the MRP systems actions on the timing of procuringmaterials and producing sub-components so that it meets the MPS

output schedule.

2. B il l of materials (materials and parts

required to make the product) Bill of materials is a listing of the components, their description, and

the quantity of each required to make one unit of a product.

This provides the product structure information to the MRP system.

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MRP


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Bills of Material

List o f components, ingredients,

and mater ials needed to make

product

Prov ides product structure

Items above given level are cal led

parents

Items below given level are cal led

chi ldren


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BOM Example 2

B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster

1

E(2)E(2) F(2)

Pack ing bo x and

instal lat ion ki t of wire,bol ts , and sc rews

Std. 12 Speakerboo ster assembly

2

D(2)

12 Speaker

D(2)

12 Speaker

G(1)

Amp-booster

3

Product structure for Awesome (A )

A

Level

0

Independent Demand

Dependent Demand


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BOM Example

B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster

1

E(2)E(2) F(2)

Pack ing bo x and

instal lat ion ki t of wire,bol ts , and sc rews

Std. 12 Speakerboo ster assembly

2

D(2)

12 Speaker

D(2)

12 Speaker

G(1)

Amp-booster

3

Product structure for Awesome (A )

A

Level

0

Part B : 2x num ber of As = (2)(50) = 100

Part C: 3x num ber of As = (3)(50) = 150

Part D: 2x number of Bs+ 2x number of Fs = (2)(100) + (2)(300) = 800

Part E: 2x number of Bs

+ 2x num ber of Cs = (2)(100) + (2)(150) = 500

Part F: 2x num ber of Cs = (2)(150) = 300

Part G: 1x number of Fs = (1)(300) = 300


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Figure 14.1


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Time-Phased Product Structure

| | | | | | | |

1 2 3 4 5 6 7 8Time in w eeks

F

2 weeks

3 weeks

1 week

A

2 weeks

1 week

D

E

2 weeks

D

G

1 week

1 week

2 weeks toproduce

B

C

E

Start produ ct ion of DMust h ave D and Ecom pleted here soproduct ion can

begin on B

Figure 14.4


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MRP Structure

Figure 14.5

Output Reports

MRP byper iod repor t

MRP bydate report

Planned orderrepor t

Purchase advice

Except ion repor ts

Order early or lateor not needed

Order quant i ty toosmal l or too large

Data Files

Purchasing d ata

BOM

Lead t imes

(Item m aster file)

Inventory d ata

Masterproduct ion schedu le

Materialrequirementplanningprograms

(computer andsoftware)


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Material Resource Planning II

(MRP II)

Once an MRP system is in p lace, inventory

data can be augmented by other useful

in format ion

Labor hours

Material co sts

Capital costs

Virtual ly anyresource

System is general ly cal led MRP II or

Material Resource Planning


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Is an integrated information system that shares data amongand synchronizes the activities of production and otherfunctional areas of the business.

MRP II is an extension of MRP to synchronize all aspects ofthe business (i.e. not only manufacturing).

Therefore MRP II system coordinates sales, purchasing,

manufacturing, finance, engineering by adopting a focal

production plan and by using one unified data base to plan andupdate the activities in all the systems.

MRP IIMaterial Resource Planning II(MRP II)


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Material Requirements Planning

ExampleDraw up a product ion schedule for 2000 uni ts o f prod uct A.As sum e the units are required on week 20

DB

A

C

E

E E

DC E E

I tem LT BatchQty

OnHand

A 4 - 0

B 4 100 200

C 3 500 750

D 4 200 400

E 3 400 2000

Solution


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DB

A

C

E

E E

DC E E


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0


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DB

A

C

E

E E

DC E E


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0

16 B 2000 200 1800 4 12 18(100) 0

16 C 2000 750 1250 3 13 3(500) 250

16 D 2000 400 1600 4 12 8(200) 0


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DB

A

C

E

E E

DC E E


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0

16 B 2000 200 1800 4 12 18(100) 0

16 C 2000 750 1250 3 13 3(500) 250

16 D 2000 400 1600 4 12 8(200) 0

12 C 1800 0 1800 3 9 4(500) 200

12 D 1800 0 1800 4 8 9(200) 0


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DB

A

C

E

E E

DC E E


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0

16 B 2000 200 1800 4 12 18(100) 0

16 C 2000 750 1250 3 13 3(500) 250

16 D 2000 400 1600 4 12 8(200) 0

12 C 1800 0 1800 3 9 4(500) 200

12 D 1800 0 1800 4 8 9(200) 0

13 E 1250 1250 0 3 - - 0


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DB

A

C

E

E E

DC E E


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0

16 B 2000 200 1800 4 12 18(100) 0

16 C 2000 750 1250 3 13 3(500) 250

16 D 2000 400 1600 4 12 8(200) 0

12 C 1800 0 1800 3 9 4(500) 200

12 D 1800 0 1800 4 8 9(200) 0

13 E 1250 1250 0 3 - - 0

12 E 2(1600) 750 2450 3 9 7(400) 350


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Week Item Gross

Reqmt

On

Hand

Net

Reqmt

LT Order

Week

Order

Qty

Remain

20 A 2000 0 2000 4 16 2000 0

16 B 2000 200 1800 4 12 18(100) 0

16 C 2000 750 1250 3 13 3(500) 250

16 D 2000 400 1600 4 12 8(200) 0

12 C 1800 0 1800 3 9 4(400) 200

12 D 1800 0 1800 4 8 9(200) 0

13 E 1250 1250 0 3 - - 0

12 E 2(1600) 750 2450 3 9 7(400) 350

8 E 2(1800) 0 3600 3 5 9(400) 0

topic 7a-aggregate planning (1)

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