Overview
• Aggregate planning in the planning process
Aggregate Planning
• Aggregate planning strategies
– Capacity options
• Chase strategy
• Level strategy
– Demand options
– Mixing options
• Graphical/charting methods
• Linear programming
• Simulation
Planning Horizons
Planning Relationships
Responsible:
Operations
managers
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
Business
or annual
plan
Aggregate plan
– production
and staffing plan
MPS or
workforce
schedule
Today
3 Months
Planning Horizons
5 years
Planning Horizons
Responsible:
Top executives
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
Today
1 year
Planning Horizon
3 Months
1 year
Planning Horizon
Chapter 13 Aggregate Planning
5 years
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen
Today
3 Months
1 year
5 years
Planning Horizon
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What is an aggregate plan?
Planning hierarchy
Long-range
capacity
planning
Aggregate
planning
Aggregate Plan
Master
production
schedule
Production
planning
and control
systems
Pull
systems
(JIT)
Push
systems
(MRP)
Many other
systems
What is an aggregate plan?
Amount to
produce
Demand
forecast
Amount to
outsource
Inventory
Aggregate Plan
Machine
capacities
and costs
Labor
capacities
and costs
Amount of
labor and
overtime
required
Projected
Inventories
Outsourcing
capacities
and costs
Aggregate Planning
Objectives
Managerial Inputs
Operations
Current machine capacities
Plans for future capacities
Workforce capacities
Current staffing level
Materials
Supplier capabilities
Storage capacity
Materials availability
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Engineering
New products
Product design changes
Machine standards
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
Aggregate Planning Strategies
Pure Strategies
• Capacity Options — change capacity:
Minimize Costs/Maximize Profits
Maximize Customer Service
Minimize Inventory Investment
Minimize Changes in Production Rates
Minimize Changes in Workforce
Levels
Maximize Utilization of Plant and
Equipment
Chapter 13 Aggregate Planning
– changing inventory levels
– varying work force size by hiring or
layoffs
– varying production capacity through
overtime or idle time
– subcontracting
– using part-time workers
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Aggregate Planning Strategies
Pure Strategies
Advantage/Disadvantages of Aggregate
Planning Options
• Demand Options — change demand:
See Table 13.1
– influencing demand
– backordering during high demand periods
– counterseasonal product mixing
Mixing the options:
The Extremes
Aggregate Planning Strategies
• Level planning strategy
Level
Strategy
Chase
Strategy
Production rate
is constant
Production
equals
demand
– Produce same amount every month
– Keep work force level constant
• Find alternative work for employees when there is less
demand
– Vary non-work force capacity or demand options
• Inventory levels allowed to fluctuate
– Often results in lowest production costs
– Toyota, Nissan employ this strategy
Aggregate Planning Strategies
• Chase planning strategy
– Output rates match demand
– Vary work force level
• Hiring/laying off
– Vary non-work force capacity or demand options
• Overtime and outsource
• Part time employees
– Service industries often utilize this strategy
• Hospitality, construction, education
Chapter 13 Aggregate Planning
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