Ch 13 - Part 1 - Chapter13 AggregatePlanning XunLi...

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Chapter 13  Aggregate Planning Xun Li
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Learning Objectives 1) Business, sales & operations planning 2) What is aggregate planning?** 3) Aggregate planning strategies** 4) Develop aggregate plans & calculate costs Level plan*** Chase plan*** Hybrid plan 1) Evaluate the impact of aggregate plans on functional  areas
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LO1: Business, sales & operations  planning
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LO2: What is Aggregate Planning? Medium-term functional plans designed to  operationalize the long-term strategic plan Based on composite (representative) products: Simplifies calculations Forecasts for grouped items are more accurate Balancing Aggregate Demand and Aggregate Production Capacity Details the aggregate production rate and the size of  the workforce 4
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LO2: What is Aggregate Planning? 5 0 2000 4000 6000 8000 10000 Jan Feb Mar Apr May Jun 4500 5500 7000 10000 8000 6000 0 2000 4000 6000 8000 10000 Jan Feb Mar Apr May Jun 4500 4000 9000 8000 4000 6000 Suppose the figure to the right represents forecast demand in units. Now suppose this lower figure represents the aggregate capacity of the company to meet demand. What we want to do is balance out the production rate, workforce levels, and inventory to make these figures match up.
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LO3: Aggregate Plan Strategies Level plans: Maintains a constant workforce  and produces the  same amount of product in each time period. Options to absorb demand peaks & valleys Finished goods inventories : Anticipate demand Back orders & lost sales : Delay delivery or allow demand to go unfilled Shift demand to off-peak times : Proactive marketing 6
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LO3: Aggregate Plan Strategies Chase plans: Produces exactly what is needed to satisfy  demand during each period. Options to adjust capacity Overtime & Undertime: Short-term option  Subcontracting: Medium-term option Hire & fire workers: Long-term option  Change the size of the workforce 7
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LO3: Aggregate Plan Strategies Hybrid Plan Use a combination of options: Build-up inventory ahead of rising demand & use 
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