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Aggregate Planning: Example

Aggregate Planning: Example. (Adapted from Chase and Aquilano, “Fundamentals of Operations Management”, Irwin Pub., 1991). Example: Introduction. A vacuum cleaner manufacturer tries to “plan ahead” in order to effectively address the seasonal variation appearing in the annual

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Aggregate Planning: Example

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  1. Aggregate Planning:Example (Adapted from Chase and Aquilano, “Fundamentals of Operations Management”, Irwin Pub., 1991)

  2. Example: Introduction A vacuum cleaner manufacturer tries to “plan ahead” in order to effectively address the seasonal variation appearing in the annual demand of its products. A planning horizon of 6 months is used. The (aggregate) demand forecast for the next six months along the number of working days are as follows:

  3. Example: Introduction (cont.) The associated cost break-down is as follows:

  4. Example: Introduction (cont.) Starting and Operating Conditions:

  5. The tabular approach:Computing net requirements

  6. Plan 1: Demand Chasing Produce exactly the quantities required for each period through regular labor, by varying the workforce size.

  7. Plan 1: Demand Chasing (cont.)

  8. Plan 2: Minimum Production Workforce + Subcontracting • Adjust the workforce so that the minimal monthly demand is met through regular labor. • Subcontract all excess demand.

  9. Plan 2: Minimum Production Workforce + Subcontracting

  10. Plan 3: Anticipatory (Seasonal) Inventories + Backlogging • Employ the minimal workforce level that can cover the total production requirements over the considered planning horizon, by working only regular hours. • Take care of the demand fluctuations by building anticipatory inventories and/or backlogging excess demand.

  11. Plan 3: Anticipatory (Seasonal) Inventories + Backlogging (cont.)

  12. Analytical Approach:A Linear Programming Formulation min TC = St ( PCt*Pt+WCt*Wt+OCt*Ot+HCt*Ht+FCt*Ft+ SCt*St+ICt*It+BCt*Bt ) s.t. • t, Pt+It-1+St = (Dt-Bt)+Bt-1+It • t, Wt = Wt-1+Ht-Ft • t,5*Pt 8*WDt*Wt+Ot • t, It 0.25*Dt ( ) B6= 0 • t, Pt, Wt, Ot, Ht, Ft, St, It, Bt 0

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