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Medium range plan - what we will make over the next 3-18 months. general demand controllable variables / forms of capacity
production rates labor levels inventory levels outsourcing overtime
Linkages
Marketing:
when will products be available ? Lead times ? Excess inventory (good time for a sale?)
Human resources
timing of hiring, firing and training
Information Systems
what to track linkages to other supply chain members
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Outsource
parts they could make the entire product
Demand management
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usually outsource simple work never outsource entire project when demand decreases they bring work back in house - have never laid off when demand outstrips their capacity they turn work down
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Minuses
decreased control can be very expensive in certain situations suppliers can become competitors
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Mathematical approaches: a number of mathematical approaches to scheduling exist- but they are very complex, often do not work for large problems, and or take a very long time to run. So... Graphical / logical models tend to be used in practice
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An example
Month Jan. Feb. Mar. Apr. May June Total Demand 900 700 800 1200 1500 1100 6200 Production days 22 18 21 21 22 20 124 Demand per day 41 39 38 57 68 55 50
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Calculations
= 1850 units carried * $5 unit / month = 10 workers * 40 per day * 124 days
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Another option: outsourcing In this option we choose to set production at the level of the lowest demand month (like DieCast) and outsource the remaining work. The lowest demand month is March where we make 38 units per day - so 38 units per day is our production plan. In order to achieve this we need 7.6 workers (38 /5)
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Outsourcing costs
In house production = 38 * 124 = 4712 7.6 workers * $ 40 per day * 124 days = 37,696 Outsourced production = 6200 - 4712 = 1488 1488 * 10 unit = 14,880
Total costs =
37.696 + 14,880 = 52,576
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Your turn
Do a chase demand plan Use only whole employees Remember to include hire and fire costs Use overtime not idle time
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Chase strategy
Deman Days d 900 700 800 1200 1500 22 18 21 21 22 Produc Emplo e yee 41 39 38 57 68 8 7 7 11 13 RT 7040 5040 5880 9240 11440 OT 246.4 806.4 705.6 470.4 739.2 Hire costs 0 0 0 2000 1000 Fire costs 0 700 0 0 0 Total 7286.4 6546.4 6585.6 11710. 4 13179. 2
1100
20
55
11
8800
1400
10200
55508
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Plan split level: 1 level of production for Jan- March, a second for April June Use overtime not idle time If you did not want to have backorders what could you do?
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6160 5040
1070..4 3 875.80
0 0
0 0
7574.69 6178.1
7
12 12
5880
10080 10560
1021.77 0
74.67 78.22 66.67 -106.35
0
333 0
0
0 1063
6901.77
12988 11701.71
2500 0 0 0
12
9600
71.11
9671.11
55015.38
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These were only a few of a number of options. We generally focused on the price Other goals besides lowest price ?
customer service employee morale etc. Should be linked to strategy
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