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Process
planning and
capacity
Demand decisions
forecasts,
orders
Workforce Raw
materials
Aggregate available
plan for
production Inventory
on
hand
External
capacity
Master (subcontractors)
production
schedule and
MRP
systems
Detailed
work
schedules
Aggregate Planning Inputs
• Resources:- Workforce,Facilities
• Demand forecast
• Policies:- Subcontracting, Overtime, Inventory levels, Back
orders
• Costs:-Inventory carrying(Holding cost), Back orders,
Hiring/firing, Overtime, Inventory changes, Subcontracting
Aggregate Planning Outputs
• Total cost of a plan
• Projected levels of inventory
Inventory, Output, Employment, Subcontracting.
Techniques for Aggregate
Planning
1. Determine demand for each period
2. Determine capacities for each period
3. Identify policies that are pertinent
4. Determine units costs
5. Develop alternative plans and costs
6. Select the best plan that satisfies objectives.
Otherwise return to step 5.
Aggregate Planning Example
Keepdry, a small manufacturing company (200 employees),
produces umbrellas. The company, founded in 1991 produces the
following three product lines: 1) the Executive Line, 2) the Durable
Line and 3) the Compact line shown in the following figure.
Compact
Line
Executive Durable
Line Line 8
Examples: Unit Demand and
Cost Data
Suppose we have the following unit demand and cost information:
Demand/mo Jan Feb Mar Apr May Jun
4500 5500 7000 10000 8000 6000
Materials $5/unit
Holding costs $1/unit per mo.
Marginal cost of stock-out $1.25/unit per mo.
Hiring and training cost $200/worker
Layoff costs $250/worker
Labor hours required .15 hrs/unit
Straight time labor cost $8/hour
Beginning inventory 250 units
Productive hours/worker/day 7.25
Paid straight hrs/day 8
Determining Straight Labor
Costs and Output
Given the demand and cost information below, what are the aggregate
hours/worker/month, units/worker, and dollars/worker?
Top
executives Intermediate-range plans
(3 to 18 months)
Sales planning
Production planning and budgeting
Operations Setting employment, inventory,
managers subcontracting levels
Analyzing cooperating plans
Short-range plans
(up to 3 months)
Job assignments
Operations Ordering
managers, Job scheduling
supervisors, Dispatching
foremen Overtime
Part-time help
Bottom-up approach
development of pans for major products at some
lower level, within the product line.
CAPACITY
MEASUREMENT OF CAPACITY :
Plant Layout
Process Design
Equipment Selection
CAPACITY PLANNING
Controllable Factors
Expansion
Reduction
Aggregate Plans
2. MATCHING CAPACITY
WITH AGGREGATE
DEMAND PLAN
Level Capacity Plan
The level method allows for a constant rate of
production and uses inventory levels to absorb
fluctuations in demand.
Disadvantages
Greater inventory costs
Increased labor costs in term of overtime and idle time
Resource utilizations change over time
matching capacity with
aggregate demand plan
Disadvantages
The cost of adjusting output rates and/or workforce levels
Cost of fluctuating workforce levels.
Potential damage to employee morale
This strategy would not be feasible for industries which require highly
skilled labor or where competition for labor is fierce.
This strategy would be cost effective during periods of high
unemployment or when low-skilled labor is acceptable.
Mathematical Techniques
A) Pure Strategies
B) Mixed Strategy
A)Pure Strategies :
Varying any one of the
Factors such as work force, production
rate, inventory, sub-contracting and
capacity utilization is known as pure
strategy.
B) Mixed Strategy:
This involves the use
of two or more pure stategies.
Various Pure Strategies in aggregate
capacity Planning