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Chap013st - Chapter 13 Aggregate Planning CHAPTER 13...

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Chapter 13 - Aggregate Planning CHAPTER 13: AGGREGATE PLANNING Answers to Discussion and Review Questions 1. Three levels of planning that involve operations managers are: a. Business plan: It establishes production and capacity strategies. b. Production plan: It establishes production capacity and intermediate term aggregate production schedule. c. Master schedule: It establishes schedules for specific products (disaggregation of production plan). 2. The three phases are forecasting demand, aggregate planning, and disaggregating the overall plan. 3. Aggregate planning involves developing a general plan for employment, output, and inventory levels. The goal is to develop a plan which makes efficient use of the resources of an organization. Planners attempt to determine the best way to meet forecasting demand requirements within the constraints imposed by long-term decisions. 4. The need for aggregate planning is to begin to translate long-term decisions into short-term operating plans. Aggregate planning constitutes the intermediate step in this process. 5. In both manufacturing and service, managers can vary the size of the workforce and subcontract work. Manufacturers have the additional option of varying the size of inventories. 6. The difficulty relates to finding a common unit on which to base aggregate plans when there are a variety of products or services to contend with. 7. a. Maintaining a constant workforce has the advantage of making estimation of labor costs relatively easy, is good for morale, and minimizes hiring and layoff costs. However, inventory carrying costs tend to be high. b. Since labor force has to be continually adjusted, hiring and layoff costs tend to be high. Due to the instability of the labor force, employee morale is low. However, the inventory carrying costs are very low because production is matched with demand, resulting in little or no inventory. c. Varying the workforce can cause morale problems. Moreover, working overtime generally is less productive, increases quality problems, and increases the risk of accidents. 8. Informal techniques are visual, easy to comprehend, and enable planners to compare alternatives. Their chief limitation is that they do not necessarily produce optimum solutions. 9. a. Spreadsheets are intuitively appealing and easy to understand, but solutions are not necessarily optimal. 13-1
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Chapter 13 - Aggregate Planning b. Linear Programming (LP): LP approach is a method of obtaining optimal solutions to problems involving allocation of limited resources. The objective of linear programming is either maximization of profit or minimization of cost. In Aggregate Planning, the objective is usually the minimization of costs related to labor time (regular and overtime), inventory carrying, hiring and layoffs. LP is a valid approach if the cost and variable relationships and assumptions are linear and demand can be treated as deterministic. Even for fairly small problems, LP approach requires computerization due to massive data manipulation and calculations.
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