Aggregate Planning_Lect_Give - Aggregate Planning 1...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Aggregate Planning 1 Planning Tasks and Responsibilities 2 Types of Planning Over a Time Horizon Long Range Planning Intermediate Range Planning Short Range Planning *Limited options exist Add Facilities Add long lead time equipment Sub-Contract Add Equipment Add Shifts * Add Personnel Build or Use Inventory Schedule Jobs Schedule Personnel Allocate Machinery * Modify Capacity Use Capacity 3 The Production Planning Process Top Management Planning Business Planning Sales Planning Production Planning Objectives Demands Resources no FEEDBACK Products Materials Capacity no Operations management Planning Resource OK? yes Bill of Materials Inventory status Routings Master Scheduling Materials Planning Capacity Planning Planning OK? yes Operations Management Execution Purchasing Shop Floor control Performance Measurement Parts Hours 4 Accountability Relationships of the Aggregate Plan Marketplace and Demand Demand Forecasts, orders Product Decisions Process Planning & Capacity Decisions Aggregate Plan for Production Master Production Schedule, and MRP systems Detailed Work Schedules Research and Technology Work Force Raw Materials Available External Capacity Subcontractors Inventory On Hand 5 Aggregate Planning Goals Meet demand Meet Use capacity Use efficiently Match capacity to Match demand Meet inventory policy Meet Minimize cost Minimize Labor Labor Inventory Inventory Plant & equipment Plant Subcontract Subcontrac 6 Inputs and Outputs to APP Capacity Capacity Constraints Constraints Strategic Strategic Objectives Objectives Company Company Policies Policies Demand Demand Forecasts Forecasts Aggregate Aggregate Production Production Planning Planning Financial Financial Constraints Constraints Size of Size of Workforce Workforce Production Production per month per month (in units or $) (in units or $) Inventory Inventory Levels Levels Units or dollars Units or dollars subcontracted, subcontracted, backordered, or lost backordered, or lost 7 Production planning process Corporate strategies and policies Economic Political Competitive conditions Aggregate demand forecast Business Plan Aggregate Plan Establishes Operations and capacity strategy Establishes Operations capacity Master Production Schedule Establishes schedule for specific products 8 Required Inputs to the Production Required Planning System Competitors’ behavior External capacity Raw material availability Planning for production Market demand Economic conditions External to firm Current physical capacity Current workforce Inventory levels Activities required for production Internal to firm Pure Strategies - The Extremes Level Strategy Production rate is constant Level production - produce at constant rate & use inventory as needed to meet demand Chase Strategy Production equals demand Chase demand - change workforce levels so that production matches demand 10 Level Production Demand Production Units Time 11 11 Chase Demand Demand Production Units Time 12 Aggregate Planning Strategies Pure Strategies Capacity Options — change capacity: Capacity changing inventory levels changing varying work force size by hiring or varying layoffs varying production capacity through varying overtime or idle time subcontracting subcontracting using part-time workers using 13 13 Aggregate Planning Strategies Pure Strategies Demand Options — change demand: Demand influencing demand – pricing, promotion influencing backordering during high demand backordering periods counterseasonal product mixing counterseasonal 14 Balancing Aggregate Demand Balancing and Aggregate Production Capacity 10000 Suppose the figure to Suppose the figure to the right represents the right represents forecast demand in forecast demand in units units Now suppose this Now suppose this lower figure represents lower figure represents the aggregate capacity the aggregate capacity of the company to meet of the company to meet demand demand What we want to do is What we want to do is balance out the balance out the production rate, production rate, workforce levels, and workforce levels, and inventory to make inventory to make these figures match up these figures match up 10000 8000 8000 6000 4000 2000 0 Jan Feb Mar 9000 8000 6000 6000 4000 2000 0 Jan Feb Mar Apr May Jun 4500 4000 4000 Apr May Jun 5500 4500 7000 6000 10000 8000 Examples from Indian industry Automobiles - Mahindra _different Automobiles strategies Two wheelers – LML Ltd (flow) Two Process – ACC refractories Process Hotels, Restaurants Hotels, Services – Services Banking , Credit cards Banking Airports _ flexi - counters Airports 16 APP Using Pure Strategies Solved example: QUARTER Spring Summer Fall Winter Hiring cost Firing cost Inventory carrying cost Production per employee Beginning work force SALES FORECAST (LB) 80,000 50,000 120,000 150,000 = $100 per worker = $500 per worker = $0.50 pound per quarter = 1,000 pounds per quarter = 100 workers 17 17 APP Using Pure Strategies QUARTER Spring Summer Fall Winter SALES FORECAST (LB) 80,000 50,000 120,000 150,000 Level production Hiring cost = $100 per worker Firing cost = $500 per worker (50,000 + 120,000 + 150,000 + 80,000) Inventory carrying cost = $0.50 pound per quarter 4 Production per employee = 1,000 pounds per quarter Beginning = 100,000 poundsworkers work force = 100 18 Level Production Strategy SALES FORECAST 80,000 50,000 120,000 150,000 PRODUCTION PLAN INVENTORY 100,000 100,000 100,000 100,000 400,000 20,000 70,000 50,000 0 140,000 QUARTER Spring Summer Fall Winter Cost = 140,000 pounds x 0.50 per pound = $70,000 19 19 Chase Demand Strategy Chase QUARTER SALES PRODUCTION FORECAST PLAN WORKERS NEEDED WORKERS WORKERS HIRED FIRED Spring Summer Fall Winter 80,000 50,000 120,000 150,000 80,000 50,000 120,000 150,000 80 50 120 150 0 0 70 30 100 20 30 0 0 50 Cost = (100 workers hired x $100) + (50 workers fired x $500) = $10,000 + 25,000 = $35,000 20 APP Using Mixed Strategies MONTH January February March April May June DEMAND (CASES) 1000 400 400 400 400 400 MONTH July August September October November December DEMAND (CASES) 500 500 1000 1500 2500 3000 Production per employee= 100 cases per month Wage rate = $10 per case for regular production = $15 per case for overtime = $25 for subcontracting Hiring cost = $1000 per worker Firing cost = $500 per worker Inventory carrying cost = $1.00 case per month Beginning work force = 10 workers 21 21 Summary: The Aggregate Operations Plan Main purpose: Specify the optimal combination Main of production rate (units completed per unit of production time) workforce level (number of workers) workforce inventory on hand (inventory carried from inventory previous period) Product group or broad category (Aggregation) Product This planning is done over an intermediateThis intermediaterange planning period of 6 to18 months Aggregate Planning Examples: Unit Aggregate Demand and Cost Data Suppose we have the following unit Suppose we have the following unit demand and cost information: demand and cost information: Demand/mo Jan 4500 Feb 5500 Mar 7000 Apr 10000 May 8000 Jun 6000 Materials Holding costs Marginal cost of stockout Hiring and training cost Layoff costs Labor hours required Straight time labor cost Beginning inventory Productive hours/worker/day Paid straight hrs/day $5/unit $1/unit per mo. $1.25/unit per mo. $200/worker $250/worker .15 hrs/unit $8/hour 250 units 7.25 8 Cut-and-Try Example: Determining Straight Labor Costs and Output Given the demand and cost information below, what Given the demand and cost information below, what are the aggregate hours/worker/month, units/worker, and are the aggregate hours/worker/month, units/worker, and dollars/worker? dollars/worker? Demand/mo Jan 4500 Feb 5500 Mar 7000 Apr 10000 May 8000 Jun 6000 7.25x22 Productive hours/worker/day Paid straight hrs/day 22x8hrsx$8=$14 08Days/mo Hrs/wo rker/mo Units/wo rker $ /wo rker Jan 22 1 5 9 .5 1 0 6 3 .3 3 $ 1 ,4 0 8 Feb 19 1 3 7 .7 5 9 1 8 .3 3 1 ,2 1 6 7.25 8 Apr 21 1 5 2 .2 5 1015 1 ,3 4 4 M ar 21 1 5 2 .2 5 1015 1 ,3 4 4 159.5/0.15 =1063.3 M ay 22 1 5 9 .5 1 0 6 3 .3 3 1 ,4 0 8 Jun 20 145 9 6 6 .6 7 1 ,2 8 0 24 Chase Strategy Chase (Hiring & Firing to meet demand) Days/mo Hrs/worker/mo Units/worker $/worker Jan 22 159.5 1,063.33 $1,408 Lets assume our current workforce is 77workers. Lets assume our current workforce is workers. First, calculate net requirements for production, or 4500-250=4250 units Demand Beg. inv. Net req. Req. workers Hired Fired Workforce Ending inventory Jan 4,500 250 4,250 3.997 3 4 0 Then, calculate number of workers needed to produce the net requirements, or 4250/1063.33=3.997 or 4 workers Finally, determine the number of workers to hire/fire. In this case we only need 4 workers, we have 7, so 3 can be fired. Below are the complete calculations for the remaining Below are the complete calculations for the remaining months in the six month planning horizon months in the six month planning horizon Days/mo Hrs/worker/mo Units/worker $/worker Jan 22 159.5 1,063 $1,408 Feb 19 137.75 918 1,216 Mar 21 152.25 1,015 1,344 Apr 21 152.25 1,015 1,344 May 22 159.5 1,063 1,408 Jun 20 145 967 1,280 Demand Beg. inv. Net req. Req. workers Hired Fired Workforce Ending inventory Jan 4,500 250 4,250 3.997 3 4 0 Feb 5,500 5,500 5.989 2 6 0 Mar 7,000 7,000 6.897 1 7 0 Apr 10,000 10,000 9.852 3 10 0 May 8,000 8,000 7.524 2 8 0 Jun 6,000 6,000 6.207 1 7 0 Below are the complete calculations for the remaining months in the six month planning horizon with the other costs included Demand Beg. inv. Net req. Req. workers Hired Fired Workforce Ending inventory Jan 4,500 250 4,250 3.997 3 4 0 Feb 5,500 5,500 5.989 2 6 0 Mar 7,000 7,000 6.897 1 7 0 Apr 10,000 10,000 9.852 3 10 0 May 8,000 8,000 7.524 2 8 0 Jun 6,000 6,000 6.207 1 7 0 Material Labor Hiring cost Firing cost Jan Feb Mar Apr May Jun $21,250.00 $27,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 400.00 200.00 600.00 750.00 500.00 250.00 Costs 203,750.00 53,958.62 1,200.00 1,500.00 $260,408.62 Level Workforce Strategy (Surplus and Shortage Allowed) Lets take the same problem Lets take the same problem as before but this time use as before but this time use the Level Workforce strategy the Level Workforce strategy This time we will seek to use This time we will seek to use a workforce level of 6 a workforce level of 6 workers workers Demand Beg. inv. Net req. Workers Production Ending inventory Surplus Shortage Jan 4,500 250 4,250 6 6,380 2,130 2,130 Below are the complete calculations for the Below are the complete calculations for the remaining months in the six month planning horizon remaining months in the six month planning horizon Jan 4,500 250 4,250 6 6,380 2,130 2,130 Feb 5,500 2,130 3,370 6 5,510 2,140 2,140 Mar 7,000 2,140 4,860 6 6,090 1,230 1,230 Apr 10,000 1,230 8,770 6 6,090 -2,680 2,680 May 8,000 -2,680 10,680 6 6,380 -1,300 1,300 Jun 6,000 -1,300 7,300 6 5,800 -1,500 1,500 Demand Beg. inv. Net req. Workers Production Ending inventory Surplus Shortage Note, if we recalculate this sheet with 7 workers Note, if we recalculate this sheet with 7 workers we would have a surplus we would have a surplus Below are the complete calculations for the Below are the complete calculations for the remaining months in the six month planning remaining months in the six month planning horizon with the other costs included horizon with the other costs included Jan 4,500 250 4,250 6 6,380 2,130 2,130 Feb 5,500 2,130 3,370 6 5,510 2,140 2,140 Mar 7,000 10 4,860 6 6,090 1,230 1,230 Apr 10,000 -910 8,770 6 6,090 -2,680 2,680 Jan $8,448 31,900 2,130 Feb $7,296 27,550 2,140 Mar $8,064 30,450 1,230 Apr $8,064 30,450 3,350 May 8,000 -3,910 10,680 6 6,380 -1,300 1,300 May $8,448 31,900 1,625 Jun 6,000 -1,620 7,300 6 5,800 -1,500 1,500 Jun $7,680 29,000 1,875 Note, total Note, total costs under costs under this strategy this strategy are less than are less than Chase at Chase at $260.408.62 $260.408.62 $48,000.00 181,250.00 5,500.00 6,850.00 $241,600.00 Labor Material Storage Stockout Quantitative Techniques For AP Pure Strategies Mixed Strategies Linear Programming Transportation Method Pure Strategies – Chase & Level Production Example: QUARTER Spring Summer Fall Winter Hiring cost Firing cost Inventory carrying cost SALES FORECAST (LB) 80,000 50,000 120,000 150,000 = $100 per worker = $500 per worker = $0.50 pound per = $2.00 = 1,000 pounds per = 100 workers quarter Regular production cost per pound Production per employee quarter Beginning work force 14-32 14- Level Production Strategy Level Level production (50,000 + 120,000 + 150,000 + 80,000) = 100,000 pounds 4 SALES FORECAST 80,000 50,000 120,000 150,000 PRODUCTION PLAN INVENTORY 100,000 100,000 100,000 100,000 400,000 20,000 70,000 50,000 0 140,000 QUARTER Spring Summer Fall Winter Cost of Level Production Strategy (400,000 X $2.00) + (140,00 X $.50) = $870,000 Chase Demand Strategy QUARTER SALES PRODUCTION FORECAST PLAN WORKERS NEEDED WORKERS WORKERS HIRED FIRED Spring Summer Fall Winter 80,000 50,000 120,000 150,000 80,000 50,000 120,000 150,000 80 50 120 150 0 0 70 30 100 20 30 0 0 50 Cost of Chase Demand Strategy (400,000 X $2.00) + (100 x $100) + (50 x $500) = $835,000 Mixed Strategy Mixed Combination of Level Production and Chase Demand strategies Examples of management policies no more than x% of the workforce can be laid off in one quarter inventory levels cannot exceed x dollars Many industries may simply shut down manufacturing during the low demand season and schedule employee vacations during that time General Linear Programming (LP) Model LP gives an optimal solution, but demand and costs must be linear Let Wt = workforce size for period t Pt =units produced in period t It =units in inventory at the end of period t Ft =number of workers fired for period t Ht = number of workers hired for period t LP MODEL Minimize Z = $100 (H1 + H2 + H3 + H4) + $500 (F1 + F2 + F3 + F4) + $0.50 (I1 + I2 + I3 + I4) + $2 (P1 + P2 + P3 + P4) Subject to Demand constraints P 1 - I1 I1 + P 2 - I2 I2 + P 3 - I3 I3 + P 4 - I4 1000 W1 1000 W2 1000 W3 1000 W4 100 + H1 - F1 W1 + H2 - F2 W2 + H3 - F3 W3 + H4 - F4 = 80,000 = 50,000 = 120,000 = 150,000 = P1 = P2 = P3 = P4 = W1 = W2 = W3 = W4 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) Production constraints Work force constraints Transportation method for Aggregate Planning Used if no change in manpower – i.e. no hiring and Used firing costs h = holding costs per unit holding r = regular production cost / unit regular o = overtime costs per unit overtime s = subcontracting costs per unit subcontracting b = backordering costs per unit backordering I = beginning Inventory beginning R = regular capacity regular O = overtime capacity overtime S = subcontracting capacity subcontracting 38 38 Transportation Table for Agg. Plan Transportation Period 1 Beginning Inventory Regular Overtime 0 r o s r+b o+b s+b r+2b o+2b s+2b D1 Period 2 h r+h o+h Period 3 2h r+2h R1 o+2h O1 s+2h S1 r+h R2 o+h O2 s r+b o+b s+b D2 Unused Capacity (Dummy) I Total Capacity Available (Supply) Period 1 Subcontra ct Regular Overtime Subcontra ct Regular Overtime Subcontra ct Total Demand s+h r o Period 2 s+h r S2 R3 Period 3 o O3 s S3 D3 Aggregate Planning – assumptions made Regular capacity same in all periods (No Regular holidays , festivals etc) Cost is a linear function of unit cost and Cost number of units. (cost actually step a function) Plans are feasible – sufficient capacity / Plans inventory holding available All costs associated with a decision are All represented by a lump sum or per unit cost (Actually step function) Cost figures can be reasonably estimated Cost Inventory build up and withdrawal at Inventory constant rate. Backlogs for entire period. Hierarchical Nature of Planning Items Items Product lines or families Production Planning Sales and Operations Plan Capacity Planning Resource requirements plan Resource Level Plants Individual products Master production schedule Rough-cut capacity plan Critical work centers Components Material requirements plan Capacity requirements plan All work centers Manufacturing operations Shop floor schedule Input/ output control Individual machines Disaggregation: process of breaking an aggregate plan into more detailed plans Disaggregation: Collaborative Planning Sharing information and synchronizing Sharing production across supply chain Part of CPFR (collaborative planning, Part forecasting, and replenishment) involves selecting products to be jointly involves managed, creating a single forecast of customer demand, and synchronizing production across supply chain Available-to-Promise (ATP) Quantity of items that can be promised to customer Difference between planned production and customer orders already received ATP in period 1 = (On-hand quantity + MPS in period 1) – (CO* until the next period of planned production) ATP in period n = (MPS in period n) – (CO until the next period of planned production) Capable-to-promise quantity of items that can be produced and made available at a later date *CO= customer order ATP: Example ATP: ATP: Example (cont.) ATP: ATP: Example (cont.) Take excess units from April ATP in April = (10+100) – 70 = 40 = 30 ATP in May = 100 – 110 = -10 =0 ATP in June = 100 – 50 = 50 Rule Based ATP Product Request Yes Is the product available at this location? No Is an alternative product available at an alternate location? No Capable-topromise date Yes Availableto-promise Allocate inventory Availableto-promise Yes Is an alternative product available at this location? No Allocate inventory Yes Is the customer willing to wait for the product? Yes Revise master schedule Is this product available at a different location? No 14-47 14- No Lose sale Trigger production Aggregate Planning 1. 2. 3. 3. 4. 5. 6. Steps and techniques for aggregate planning Steps Determine demand for each period Determine capacities for each period (regular, OT, sub-contracting etc) Identify company / departmental policies that are pertinent (safety stock, level workforce) Determine unit costs - for regular time, OT, subsubcontracting, holding inventories, backorders, layoffs etc Develop alternative plans and compute cost for each If satisfactory plan emerges, select one that best satisfies objectives- else repeat step 5. objectives48 Aggregate Planning – assumptions made Regular capacity same in all periods (No Regular holidays , festivals etc) Cost is a linear function of unit cost and Cost number of units. (cost actually step a function) Plans are feasible – sufficient capacity / Plans inventory holding available All costs associated with a decision are All represented by a lump sum or per unit cost (Actually step function) Cost figures can be reasonably estimated Cost Inventory build up and withdrawal at Inventory constant rate. Backlogs for entire period. 49 49 Next _ MPS and MRP 50 ...
View Full Document

Ask a homework question - tutors are online