Chapter 13 Aggregate Planning McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc All Rights Reserved Chapter 13: Learning Objectives • You should be able to: – Explain what aggregate planning is and how it is useful – Identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use – Describe some of the graphical and quantitative techniques planners use – Prepare aggregate plans and compute their costs 13-2 Aggregate Planning • Aggregate planning – Intermediate-range capacity planning that typically covers a time horizon of to 18 months – Useful for organizations that experience seasonal, or other variations in demand – Goal: • Achieve a production plan that will effectively utilize the organizations’ resources to satisfy demand 13-3 Why Use Aggregate Planning • Why organizations need to aggregate planning? – Planning • It time to implement plans – Strategic • Aggregation is important because it is not possible to predict with accuracy the timing and volume of demand for individual items – It is connected to the budgeting process – It can help synchronize flow throughout the supply chain; it affects costs, equipment utilization; employment levels; and customer satisfaction 13-4 Aggregate Planning Inputs •Resources – Workforce/production rates – Facilities and equipment •Demand forecast •Policies – – – – – Workforce changes Subcontracting Overtime Inventory levels/changes Back orders •Costs – – – – – – Inventory carrying Back orders Hiring/firing Overtime Inventory changes subcontracting 13-5 Aggregate Planning Outputs • Total cost of a plan • Projected levels of – Inventory – Output – Employment – Subcontracting – Backordering 13-6 Aggregate Planning Strategies • Typical aggregate planning strategies Maintain a level workforce Maintain a steady output rate Match demand period by period Use a combination of decision variables 13-7 Techniques for Aggregate Planning • General procedure: 1.Determine demand for each period 2.Determine capacities for each period 3.Identify company or departmental policies that are pertinent 4.Determine unit costs 5.Develop alternative plans and costs 6.Select the plan that best satisfies objectives Otherwise return to step 13-8 Disaggregating the Aggregate Plan • Master schedule: – The result of disaggregating an aggregate plan – Shows quantity and timing of specific end items for a scheduled horizon 13-9 The Master Scheduling Process Inputs Outputs Beginning inventory Forecast Customer orders Projected inventory Master Production Schedule Master production schedule Uncommitted inventory 13-10 MPS – Forecasts and Customer Orders 13-11 MPS – Projected On Hand 13-12 Determining MPS and Projected On Hand 13-13 Adding MPS and Projected On Hand to the MPS 13-14 Available to Promise 13-15 ... Uncommitted inventory 13- 10 MPS – Forecasts and Customer Orders 13- 11 MPS – Projected On Hand 13- 12 Determining MPS and Projected On Hand 13- 13 Adding MPS and Projected On Hand to the MPS 13- 14 Available... Inventory changes subcontracting 13- 5 Aggregate Planning Outputs • Total cost of a plan • Projected levels of – Inventory – Output – Employment – Subcontracting – Backordering 13- 6 Aggregate Planning... Maintain a level workforce Maintain a steady output rate Match demand period by period Use a combination of decision variables 13- 7 Techniques for Aggregate Planning • General procedure: 1.Determine