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Operations Management Aggregate Planning

Operations Management Aggregate Planning. Aggregation Relationship to Other Plans Reactive vs. Aggressive Alternatives Aggregate Planning Strategies Planning with Spreadsheets Planning with Mathematical Models. Aggregate Planning Overview Problem Context. Aggregate Plan is....

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Operations Management Aggregate Planning

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  1. Operations ManagementAggregate Planning • Aggregation • Relationship to Other Plans • Reactive vs. Aggressive Alternatives • Aggregate Planning Strategies • Planning with Spreadsheets • Planning with Mathematical Models

  2. Aggregate Planning OverviewProblem Context Aggregate Plan is.... • statement of ____________ rates, _____________ levels, and _______________ holdings based on customer demands and capacity limitations Goal: Specify the ____________ combination of • production rate • workforce level • inventory on hand that _____________ all relevant costs.

  3. Aggregate Planning OverviewAggregation • Translation of annual business plans into ______ labor and output plans for the ________________ term • Generalize the problem • too ____ to solve for each individual product • Aggregate quantities into broad categories or product groups • Intermediate Range

  4. Aggregate Planning OverviewPlanning Horizons • Long-range planning • Greater than _____ year planning horizon • Intermediate-range planning • ____ to _______ months • Short-range planning • One day to less than ____ months

  5. Aggregate PlanningRelationship to Other Plans • Brings operations, finance, and marketing __________ • Manufacturing.... • business plan • a ______________ of income, costs, and profits • _________________ plan • sets production rates, inventory levels, and work-force levels for a product family • ____________ production schedule • specifies _________ and productions __________

  6. Business Plan Manufacturing Service Production Staffing Aggregate Plan Plan Plans Master Production Schedule (MPS) Capacity Material Work-force Requirements Requirements Schedule) Plan (CRP) Plan (MRP) Aggregate Planning OverviewRelationship to Other Plans

  7. Aggregate Production PlanningProduction Planning Environment • Should inventories be used to absorb changes in demand? • Should the ______ of the workforce vary? • Should part-time, overtime, and/or undertime be used? • Should sub-contractors be used to maintain a stable workforce? • Should price or other factors be changed to influence demand?

  8. Production Planning EnvironmentCapacity Management Options • Accept demand forecast as a given, and _______ to fluctuations in demand. • Resources: • changing inventory levels • varying work force size by hiring or layoffs • varying production capacity through overtime or idle time • subcontracting • using part-time workers

  9. Production Planning EnvironmentDemand Management Options • _________ the demand pattern to achieve efficiency and reduce costs. • Resources: • competitive pricing and promotion • counter-seasonal product mixing • backordering during high demand periods

  10. Aggregate Production PlanningProduction Planning Strategies Level Strategy • Keep the work-force level __________ • not hiring or laying off workers • Vary _____-workforce capacity or demand options • Advantage of level output rates and ________ work force • Disadvantages of • increased inventory investment, and • increased undertime and overtime expenses

  11. Aggregate Production PlanningProduction Planning Strategies Level Strategy

  12. Aggregate Production PlanningProduction Planning Strategies • Chase Strategy • production _________ demand • uses _______ ___ ________ to match demand • does not include building of anticipation inventory • produces ___________ inventory investment. • expense of adjusting work-force size • potential alienation of workforce, loss of productivity, and lower quality • favored by service organizations because inventory is difficult if not impossible to adopt

  13. Aggregate Production PlanningProduction Planning Strategies • Chase Strategy

  14. Aggregate Production PlanningProduction Planning Strategies Mixed Strategy • Neither a pure level or pure chase strategy • work force level is not exactly level, and • does not exactly match demand on a period-by-period basis Fitting the Situation • The best strategy must fit the companies • environment, and • competitive priorities

  15. Aggregate Production PlanningProduction Planning Strategies Mixed Strategy

  16. Aggregate Production PlanningRelevant Costs Relevant costs to consider and include: • Basic production (labor) costs • regular time and overtime • __________ in production levels • hiring, training, layoff • Inventory costs ( _________ costs): • storage, insurance, taxes,spoilage, obsolescence • Backorder and stockout costs ( ___________ costs): • expediting, goodwill, lost sales

  17. Aggregate Planning Aggregate Planning Techniques • Cut-and-Try charting and graphic methods • trial & error approach • cost out _______________ plans and pick the _______ one • popular & easy-to-understand • Mathematical approaches

  18. Aggregate Planning Techniques Cut-and-Try • Forecast of demand for each period • Determine the ____________ for regular time, overtime, and subcontracting, for each period • Determine the labor ______, hiring and firing costs, and inventory holding costs • Consider company policies which may apply to the workers or to stock levels • Develop ______________ plans, and examine their total costs

  19. Aggregate Planning TechniquesUsing Spreadsheets • Use a spreadsheet approach for • stating a strategy, • developing a plan, • identifying possible improvements, and • modify until we are satisfied. • Components of a spreadsheet are: • input values • derived values, and • calculated costs.

  20. Using SpreadsheetsAggregate Planning Example Number of working days: Jan 22 Feb 19 Mar 22 Apr 21 May 22 Jun 20

  21. Using SpreadsheetsAggregate Planning Example

  22. Using SpreadsheetsLevel Strategy Example

  23. Using SpreadsheetsLevel Strategy Example

  24. Using SpreadsheetsLevel Strategy Example

  25. Using SpreadsheetsLevel Strategy Example

  26. Using SpreadsheetsChase Strategy Example

  27. Using SpreadsheetsChase Strategy Example

  28. Using SpreadsheetsChase Strategy Example

  29. Using SpreadsheetsChase Strategy Example

  30. Aggregate Planning MethodsAggregate Planning with Mathematical Models • Mathematical Models • Transportation algorithm • Linear Programming • Simulation • Managerial considerations • Mathematical techniques are ___________ aids to the planning process • Planning process is dynamic and complicated by _______________ objectives • Manager - not _______________ - make decisions

  31. Aggregate PlanningWorkforce Issues in Service Firms • Close control of labor hours to ensure ________ response to customer demand • Some form of ___ - ______ labor resource that can be added or deleted to meet unexpected demand • Flexibility of individual worker skills to permit ______________ of available labor

  32. Aggregate PlanningChapter Wrap-Up • Read Chapter 12 • Concepts / Terminology • Review Lecture notes • Recommended Problems • none

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