Chapter 13 – Aggregate Planning
Chapter 13 – Aggregate Planning
Operations Management by R. Dan Reid & Nada R. Sanders 4th Edition © Wiley 2010
© Wiley 2010
1
Learning Objectives
Explain business planning Explain sales and operations planning Identify different aggregate planning strategies & options for changing demand and/or capacity in aggregate plans Develop aggregate plans, calculate associated costs, and evaluate the plan in terms of operations, marketing, finance, and human resources Describe differences between aggregate plans for service and manufacturing companies
© Wiley 2010 2
The Role of Aggregate Planning
Integral to part of the business planning process Supports the strategic plan Also known as the production plan Identifies resources required for operations for the next 6-18 months Details the aggregate production rate and size of work force required
© Wiley 2010 3
The Role of the Aggregate Plan
© Wiley 2010
4
Types of Aggregate Plans
Level Aggregate Plans
Maintains a constant workforce Sets capacity to accommodate average demand Often used for make-to-stock products like appliances Disadvantage- builds inventory and/or uses back orders Produces exactly what is needed each period Sets labor/equipment capacity to satisfy period demands Disadvantage- constantly changing short term capacity
© Wiley 2010 5
Chase Aggregate Plans
Level Plan Example
Level production rate= 28,000 units/7 periods= 4000 units Level workforce= (4000 units x .64 std.)/160 = 16 people
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6
Chase Plan Example
Chase hires and fires staff to exactly meet each periods demand Period 1 = (500 units x .64 std.)/160 = 2 people, need to fire 16 people
© Wiley 2010
7
Types of Aggregate Plans con’t
Hybrid Aggregate Plans
Uses a combination of options Options should be limited to facilitate execution May use a level workforce with overtime & temps
Operations Management by R. Dan Reid & Nada R. Sanders 4th Edition © Wiley 2010
© Wiley 2010
1
Learning Objectives
Explain business planning Explain sales and operations planning Identify different aggregate planning strategies & options for changing demand and/or capacity in aggregate plans Develop aggregate plans, calculate associated costs, and evaluate the plan in terms of operations, marketing, finance, and human resources Describe differences between aggregate plans for service and manufacturing companies
© Wiley 2010 2
The Role of Aggregate Planning
Integral to part of the business planning process Supports the strategic plan Also known as the production plan Identifies resources required for operations for the next 6-18 months Details the aggregate production rate and size of work force required
© Wiley 2010 3
The Role of the Aggregate Plan
© Wiley 2010
4
Types of Aggregate Plans
Level Aggregate Plans
Maintains a constant workforce Sets capacity to accommodate average demand Often used for make-to-stock products like appliances Disadvantage- builds inventory and/or uses back orders Produces exactly what is needed each period Sets labor/equipment capacity to satisfy period demands Disadvantage- constantly changing short term capacity
© Wiley 2010 5
Chase Aggregate Plans
Level Plan Example
Level production rate= 28,000 units/7 periods= 4000 units Level workforce= (4000 units x .64 std.)/160 = 16 people
© Wiley 2010
6
Chase Plan Example
Chase hires and fires staff to exactly meet each periods demand Period 1 = (500 units x .64 std.)/160 = 2 people, need to fire 16 people
© Wiley 2010
7
Types of Aggregate Plans con’t
Hybrid Aggregate Plans
Uses a combination of options Options should be limited to facilitate execution May use a level workforce with overtime & temps