1. AGGREGATE PLANNING Rachmat A. Anggara 9th ofApril 2010

2. Product decisions Research and technology Marketplace and demand Process planning and capacity decisions Demand forecasts, orders Workforce Raw materials available Aggregate plan for production Inventory on hand External capacity (subcontractors) Master production schedule and MRP systems Detailed work schedules OPERATION MANAGEMENT FLOW Figure 13.2 • PRASETIYA MULYA BUSINES SCHOOL

3. Aggregate Planning Aggregate planning is an operational activity which does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period. • Inventory carrying • Back orders • Hiring/firing • Overtime • Inventory changes • subcontracting • Workforce • Facilities • PRASETIYA MULYA BUSINES SCHOOL

4. Aggregate Planning Inputs • Resources • - Workforce • - Facilities • Demand forecast • Policy statements • - Subcontracting • - Overtime • - Inventory levels • - Back orders • Costs • Inventory carrying • Back orders • Hiring/firing • Overtime • Inventory changes • subcontracting • PRASETIYA MULYA BUSINES SCHOOL

5. Aggregate Planning Outputs • Total cost of a plan • Projected levels of inventory • Inventory • Output • Employment • Subcontracting • Backordering • PRASETIYA MULYA BUSINES SCHOOL

6. Aggregate Planning Strategies • PRASETIYA MULYA BUSINES SCHOOL

7. Aggregate Planning Strategies Demand options Capacity options Input Process Output • PRASETIYA MULYA BUSINES SCHOOL

8. Aggregate Planning Strategies Advantages-disadvantages • PRASETIYA MULYA BUSINES SCHOOL

9. Aggregate Planning Strategies Advantages-disadvantages • PRASETIYA MULYA BUSINES SCHOOL

10. Aggregate Planning Strategies Advantages-disadvantages • PRASETIYA MULYA BUSINES SCHOOL

11. Aggregate Planning Strategies Advantages-disadvantages • PRASETIYA MULYA BUSINES SCHOOL

12. Methods for Aggregate Planning • Chase strategy • Match output rates to demand forecast for each period • Vary workforce levelsor vary production rate • Favored by many service organizations • Level strategy • Daily production is uniform • Use inventory or idle time as buffer • Stable production leads to better quality and productivity • PRASETIYA MULYA BUSINES SCHOOL

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 Methods for Aggregate Planning • Level strategy • PRASETIYA MULYA BUSINES SCHOOL

14. Forecast demand and monthly production 70 – 60 – 50 – 40 – 30 – 0 – Production rate per working day Jan Feb Mar Apr May June Methods for Aggregate Planning • Chase strategy • PRASETIYA MULYA BUSINES SCHOOL

15. Graphical & Charting Methods Determine the demand for each period Determine the capacity for regular time, overtime, and subcontracting each period Find labor costs, hiring and layoff costs, and inventory holding costs Consider company policy on workers and stock levels Develop alternative plans and examine their total costs • PRASETIYA MULYA BUSINES SCHOOL

16. Total expected demand Number of production days Average requirement = 6,200 124 = = 50 units per day Aggregate planning example! LEVEL STRATEGY • PRASETIYA MULYA BUSINES SCHOOL

17. 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 Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

18. Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

19. Aggregate planning example! Total units of inventory carried over from one month to the next = 1,850 units Workforce required to produce 50 units per day = 10 workers • PRASETIYA MULYA BUSINES SCHOOL

20. Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

21. Aggregate planning example! CHASE STRATEGY Production = Expected Demand • PRASETIYA MULYA BUSINES SCHOOL

22. Forecast demand =monthly production 70 – 60 – 50 – 40 – 30 – 0 – Production rate per working day Jan Feb Mar Apr May June = Month       22 18 21 21 22 20 = Number of working days Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

23. Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

24. Aggregate planning example! • PRASETIYA MULYA BUSINES SCHOOL

25. Mathematical Approach • Useful for generating strategies • Transportation Method of Linear Programming • Produces an optimal plan • Management Coefficients Model • Model built around manager’s experience and performance • Other Models • Linear Decision Rule • Simulation • PRASETIYA MULYA BUSINES SCHOOL