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Aggregate planning / scheduling PowerPoint PPT Presentation


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Aggregate planning / scheduling. 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 does not include investments in facilities . Linkages.

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Aggregate planning / scheduling

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Aggregate planning / scheduling

  • 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

    • does not include investments in facilities


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Linkages

  • Marketing:

    • when will products be available ? Lead times ? Excess inventory (good time for a sale?)

  • Accounting and Finance:

    • cash flows- will we be making more than we are selling?

    • do we have to finance inventory?

    • when will suppliers need to be paid?

  • Human resources

    • timing of hiring, firing and training

  • Information Systems

    • what to track

    • linkages to other supply chain members


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Aggregate planning strategies

Companies can do any or all of the following:

  • Use inventory to absorb changes in demand

  • Vary the size of the workforce

  • Vary work hours

    • part timers

    • overtime

  • Outsource

    • parts they could make

    • the entire product

  • Demand management


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Examples of different strategies: tool and die shops

1) Atlas Tool and Die (competes on cost)

  • as demand increases working hours increase - until both shifts are working 65 hours a week

  • once the shop is effectively running 24 a day they start to outsource. If there is enough demand they will outsource the entire project.

  • as demand decrease they bring work back in house and then cut work hours


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Examples: DieCast

2) DieCast (competes on innovation / knowledge)

  • work hours set at 50 a week

    • size of workforce driven by decision to keep people working 50 hours a week all the time.

  • 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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Examples: Grand Rapids Mold and Die

3) GRMD (competes on speed)

  • machine capacity set at maximum level of demand

  • hire workers as they get busier and fire when work slows down

  • only outsource if every machine is running 24 hours a day- and then only until they can get another machine


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Aggregate planning options: capacity

  • Changing inventory levels

  • Varying workforce size by hiring or firing

    • Grand Rapids

    • Construction unions

  • Over and idle time

    • why do companies prefer overtime to hiring new people?

  • Part time or temps

    • Adjunct faculty members

  • Outsourcing


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Outsourcing pluses and minuses

  • Pluses

    • increased flexibility

    • increased quality (?)

    • decreased costs (?)

  • Minuses

    • decreased control

    • can be very expensive in certain situations

    • suppliers can become competitors


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Aggregate planning options: demand management

  • Directly influence demand

    • promotions

    • early bird specials and happy hour

  • Back-orders

    • MTO verses MTS

  • Product mixing

    • Sea-doo / Ski-doo

    • The golf / ski shop


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Level verses chase strategies

  • Level production strategies: if possible the best plan is to keep production level and use inventory or backlogs (note DieCast is level with no inventory) to act as a buffer between production and demand.

    • requires fairly stable demand (or very low inventory / backorder costs)

    • why is this preferred

  • Chase demand production strategies: vary the level of production to match demand using a combination of the previously discussed options.

    • What must our capacity be to chase?


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Methods of aggregate planning

  • 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


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Cost info. for example


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A level demand strategy

  • Produce 50 units a day - increasing inventory in Jan., Feb., and Mar., and decreasing it the last 3 months

  • Workers required = 10 per day no O.T.

  • Beginning inventory and ending inventory = 0


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The level plan


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Costs of level plan


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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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Try this

  • Use the same cost data but

    • Add backorder costs of $10 a unit

  • 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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Aggregate planning conclusions

  • These were only a few of a number of options.

  • We focused on price are there other goals besides lowest price ?

    • customer service

    • employee morale

    • etc.

    • Should be linked to strategy


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