Class 14 - AGENDA QUIZ 5 AGGREGATE PLANNING TAKE HOME...

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AGENDA QUIZ 5 AGGREGATE PLANNING TAKE HOME AGGREGATE PLANNING EXERCISE
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Aggregate Planning þ Objective is to minimize cost over the planning period by adjusting þ Production rates þ Labor levels þ Inventory levels þ Overtime work þ Subcontracting rates þ Other controllable variables Determine the quantity and timing of production for the immediate future
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Aggregate Planning þ A logical overall unit for measuring sales and output þ A forecast of demand for an intermediate planning period in these aggregate terms þ A method for determining costs þ A model that combines forecasts and costs so that scheduling decisions can be made for the planning period Required for aggregate planning
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Aggregate Planning þ Combines appropriate resources into general terms þ Part of a larger production planning system þ Disaggregation breaks the plan down into greater detail þ Disaggregation results in a master production schedule
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Aggregate Planning Strategies 1. LEVEL STRATEGY Keep production same every period Use inventory to manage demand 2. CHASE STRATEGY Produce to level of demand Increase costs of changing capacity 3. HYBRID STRATEGY
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Demand Options þ Influencing demand þ Use advertising or promotion to increase demand in low periods þ Attempt to shift demand to slow periods þ May not be sufficient to balance demand and capacity
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Demand Options þ Back ordering during high- demand periods þ Requires customers to wait for an order without loss of goodwill or the order þ Most effective when there are few if any substitutes for the product or service þ Often results in lost sales
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Demand Options þ Counterseasonal product and service mixing þ Develop a product mix of counterseasonal items þ May lead to products or services outside the company’s areas of expertise
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Options for Influencing Supply (Schroeder, Operations Management, 2000) Hiring and layoff of employees Using overtime and undertime Using part-time or temporary labor Carrying inventory Subcontracting Making cooperative arrangements
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Methods for Aggregate Planning þ A mixed strategy may be the best way to achieve minimum costs þ There are many possible mixed strategies þ Finding the optimal plan is not always possible
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Developing an Aggregate
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