Competitor behavior materials raw materials

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Competitor behavior Materials Raw materials availability Current inventory levels Subcontractor capabilities Storage capacities
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Aggregate Measure of Demand Measured by output: 1. Broader Category (TV/ VCR) 2. Product Group (Medical Equipment) 3. Aggregate Unit (Weight/ Volume…) Measured by input 1. Machine-Hour 2. Labor-Hour 3. No. of Production Lines
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Aggregate Measure of Demand (II) Why measured by aggregate units? * Forecasting on aggregate unit is more accurate than that on individual item * Provide the flexibility to absorb possible uncertainty * Specify best combination plan for organization’s resources * Provide feasible basis for further disaggregating into lower level planning
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The Concept of Aggregation: Product before Aggregation
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The Concept of Aggregation: Workforce before Aggregation
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The Concept of Aggregation: Aggregation
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Components of the Aggregated Demand
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Reduce Seasonal Variations in Aggregate Demand Aggregate demand: the total demand for all products/services produced by a production facility, usually there are significant seasonal variations in aggregate demand Overall objective of APP: to matching capacity with demand fluctuations
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Reduce Seasonal Variations in Aggregate Demand (II) Two major approaches to reduce seasonal variations in aggregate demand: 1.Shift demand from the periods with high requirements to the periods with low requirements through: * price incentives/* new promotion o 2. Adopt products/services that have counter-seasonal or counter-cyclical demand patterns such as: -- Electronic Heater vs. Electronic Fan -- Swimming Training vs. Skating Training
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Factors in Aggregate Production Planning External Factors: 1. Market Demand 2. Economic Conditions 3. RM Availability 4. Competitors Behaviors 5……………
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Factors in Aggregate Production Planning(II) Internal factors: 1.Production rate 3.Inventory level 5.Backlog policy 7. Union agreement 8. Capital Limit 2. Workforce level 4. Subcontracting 6. Physical Plant Capacity 9. ………………….
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Aggregate Planning Strategies Pure strategies: (changing one variable at a time to match demand fluctuation) 1. Varying Workforce Level 2. Varying Production Rate 3. Varying Inventory Level 4. Varying Subcontracting Amount 5. Varying Backlog Policy 6…………………………….
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Aggregate Planning Strategies (II) Mixed strategies: (changing two or more variables at a time to match demand fluctuation) 1. Varying both Workforce Level and Inventory Level 2. ……( many possible combinations)
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Extreme Aggregate Planning Strategies- Constant Output and Constant Capacity Inventory Demand Capacity = Output Cost Increased Inventory Holding Cost/ Back-Order Cost Costs Minimized Hiring & Firing Cost/ Subcontracting Cost Overtime- Idle Time Cost Use When Inventory Holding Cost is Low For High Capital Intensive Operations Examples Water Purification Plant Level Strategy
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Extreme Aggregate Planning Strategy- Variable Output and Constant Capacity Idle Time Overtime Output Capacity Demand Cost Increase
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