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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 . Linkages.

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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
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
aggregate planning strategies
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
examples of different strategies tool and die shops
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
examples diecast
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
examples grand rapids mold and die
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
aggregate planning options capacity
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
outsourcing pluses and minuses
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
aggregate planning options demand management
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
level verses chase strategies
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?
methods of aggregate planning
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
a level demand strategy
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
another option outsourcing
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)
outsourcing costs
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
your turn
Your turn
  • Do a chase demand plan
  • Use only whole employees
  • Remember to include hire and fire costs
  • Use overtime not idle time
try this
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?
aggregate planning conclusions
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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