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3. Aggregate Planning

3. Aggregate Planning. Aggregate Planning. Aggregate Planning. Provides the quantity and timing of production for intermediate future Usually 3 to 18 months into future Combines (‘aggregates’) production Often expressed in common units : h ours, dollars, equivalents

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3. Aggregate Planning

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  1. 3. Aggregate Planning

  2. Aggregate Planning

  3. Aggregate Planning • Provides the quantity and timing of production for intermediate future • Usually 3 to 18 months into future • Combines (‘aggregates’) production • Often expressed in common units: hours, dollars, equivalents • Involves capacity and demand variables

  4. Aggregate Planning Goals • Meet demand • Use capacity efficiently • Meet inventory policy • Minimize cost • Labor • Inventory • Plant & equipment • Subcontract

  5. Options to Consider • Changing inventory levels (with backorders) • Varying workforce size by hiring or layoffs • Varying production rates through overtime or idle time • Subcontracting • Using part-time workers • Influencing demand

  6. Options

  7. Options

  8. Options

  9. Options

  10. Aggregate Planning Strategies • Chase Strategy • Matching the production rate to exactly meet the demand by hiring and laying off workers. • Level Strategy • Maintain a stable workforce working at constant output rate; absorb demand variations with inventory, backlogs, or lost sales. • Mixed Strategy • A combination of chase and level strategies to match supply and demand.

  11. Aggregate Planning Methods • Spreadsheet techniques • Popular & easy-to-understand • Trial & error approach • Mathematical approaches • Linear programming models • Simulation

  12. Example • A manufacturer of roofing supplies has monthly forecasts for the 6-month period

  13. Forecast demand 70 – 60 – 50 – 40 – 30 – 0 – Level production using average monthly forecast demand Production rate per working day Jan Feb Mar Apr May June = Month       22 18 21 21 22 20 = Number of working days Continued

  14. Continued • inventory cost: $5/unit, backorder cost: $10/unit • wage: $40/day, hiring cost: $1500, layoff cost: $3000 • production rate: 5 units/day

  15. Chase Strategy

  16. Level Strategy

  17. Mixed Strategy

  18. Linear Programming Models • Workforce planning model • Production planning model

  19. Workforce Planning Model • Decision variables Wt = number of workers available in periodt Ht = number of workers hired in periodt Lt = number of workers laid off in period t Pt = number of units produced in periodt It = number of units in inventory at the end of periodt Bt = number of units backordered at the end of periodt

  20. Continued • Given parameters Dt = demand forecast in periodt nt = number of units made by one worker in periodt CtW = cost of oneworkerin period t CtH, CtL = cost to hire or lay off oneworkerin period t CtP = cost to produce one unit in periodt CtI, CtB = cost to hold or backorder one unit for period t

  21. Continued • Objective function • Constraints • Possible extensions

  22. Mar Apr May Demand 800 1,000 750 Capacity 850 850 850 Beginning inventory 100 Production cost 40 41 45 Inventory cost 2 2 2 Production Planning Model

  23. Model 1 • Pt = number of units produced in periodt It = units in inventory at the end of periodt

  24. Model 2 • Let Xij be the number of items produced in month i and consumed in month j.

  25. Mar Apr May Demand 800 1,000 750 Capacity: Regular 700 700 700 Overtime 50 50 50 Subcontracting 150 150 130 Beginning inventory 100 tires Costs Regular time $40 per tire Overtime $50 per tire Subcontracting $70 per tire Inventory $ 2 per tire per month Another Example

  26. Model 2 • Let Xij, Yij and Zij be the number of items produced in month i and consumed in month j, using regular production, overtime, and subcontracting, respectively.

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