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## CHAPTER 3 : AGGREGATE PLANNING

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**CHAPTER 3 : AGGREGATE PLANNING**MOHD HAFIZUL BIN TUKIMIN MOHD SYAFIQ BIN MANSOR MOHD RUBA’I AMIR BIN SALLEH CHE MUHD FIRDAUS BIN CHE MAT**OUTLINE**3.1 Introduction 3.2 Aggregate Planning Option • Demand • Capacity 3.3 Aggregate Unit of Production 3.4 Technique of Aggregate Planning • Linear programming : Transportation Method • Spreadsheet Approach • Disaggregation**3.1 Introduction**Aggregate planning • Operational activity that does an aggregate plan for the production process in advance of 2 to 18 months. • Give an idea to management as to what quantity of materials and other resources are to be procured and when. • To keep the total cost of operations of the organization to the minimum over that period.**3.1.1Goal of aggregate planning**• Determine the quantity and timing of production for the immediate future. • To achieve a production plan which will effectively utilize the organization’s resources to satisfy expected demand**3.1.2 Why Aggregate planning**3.1.2.1 Objectives of Aggregate Planning: • Minimize total cost over the planning horizon. • Maximize customer service • Minimizeinventory investment • Minimizechanges in workforce levels • Minimizechanges in production rates • Maximize utilization of plant and equipment**3.2 Aggregate Planning Option**• Capacity- total number of units per time period that can be produced • Demand - total number of units needed • If capacity and demand are not balance, must decide whether: • To increase or decrease capacity to meet demand or; • Decrease demand to meet capacity**3.4 Aggregate Units of Production**The method is based on notion of aggregate units. They may be actual units of production • Weight (tons of steel) • Volume (gallons of gasoline) • Dollars (Value of sales) • Fictitious aggregate units**3.4.1 Example of fictitious aggregate units:**A plant manager working for a large national appliance firm is considering implementing an aggregate planning system to determine the workforce and production levels in his plant. This particular plant produces 6 models of TVs. The characteristics of the TVs are:**The manager notices that the percentages of the total number**of sales for these six models have been fairly constant:**To find the particular aggregation scheme**(1) Selling price / Number of worker-hours required =$ per Input-Hour**then**what is $78.34? “Average dollars of output / worker-hour input” in this particular production plant**(2) The manager decides to define an aggregate unit of**production as a fictitious TV what is 4.86 hours? “ Average worker-hours required to producea fictitious TV”**What if we like to know**“ how many fictitious TV can one worker – one day (8hrs) produce ? ” [ 1 / 4.86 ] x 8 = 1.646 • Applications of this Avg. worker-hours/ TV ： ～ If the manager can obtain sales forecast of overall models, then he can use this to plan workforce ～**3.4 Technique of Aggregate Planning:**3.4.1 Spreadsheet Approach 3.4.2 Linear Programming 3.4.3 Disaggregation**Example spreadsheet**The Power Star Company makes a variety of cookies . Given the following costs and monthly sales forecasts, formulate a plan that minimizes cost. They have an inventory from March of 5000 lb of cookies. Find the total cost of the production. • Hiring cost = $300 per workerFiring cost = $850 per workerInventory carrying cost = $1.50 per pound per quarterProduction per employee = 1,000 pounds per quarter • Beginning work force = 95 workers Solution 3**Example of Spreadsheet Method**• There are 15 workers and each can produce 20 skateboards per period. • Assume a level of output rate of 300 units. • Find the total cost for this plan?**Description**• Carrying costs are $2/tire/month. If goods are made in one period and held over to the next, holding costs are incurred • Supply must equal demand, so a dummy column called “unused capacity” is added • Because back ordering is not viable in this example, cells that might be used to satisfy earlier demand are not available. • Quantities in each column designate the levels of inventory needed to meet demand requirements • In general, production should be allocated to the lowest cost cell available without exceeding unused capacity in the row or demand in the column**A Dover, Delaware, plant has developed the accompanying**supply, demand cost , and inventory data. The firm has a constant workforce and meets all its demand. Allocate production capacity to satisfy demand at a minimum cost. What is the cost of this plan? Supply capacity available (units) Demand forecast Other data : Initial inventory 50 units Regular- time cost per unit $50 Over time cost per unit $65 Subcontract cost per unit $80 Carrying cost per unit per period $1 Back order cost per unit per period $4**3.4.3 Disaggregation**• Aggregate plans were built to optimal staffing levels for “families” or groups of products • Disaggregation is a means to build specific “Master Production Schedules” • Typically by breaking down the aggregating weights to individual parts – or working on schedules of these families as optimal • Later leads to values similar to Economic Order Quantity(EOQ)which will explore in Chapter 4!