Académique Documents
Professionnel Documents
Culture Documents
AGGREGATE PLANNING
Teaching Notes
In the earlier chapters, we have looked at certain problems that involve long range planning such as
facility location, layout and major equipment purchase decisions. Aggregate planning involves medium
range planning. The planning horizon for medium range plans varies from a couple of months to 18
months. A major component of aggregate planning is to plan aggregate production and inventory levels to
achieve a desired level of customer service. In preparing the aggregate plan, a major consideration is to
check the desired production plan against the estimated capacity. On the other hand, in determining the
estimated capacity, we must take into account the expected demand and the resulting medium range
production plan.
We use the term aggregate plan in lieu of medium range production plan for two reasons:
1. It generally involves the production plan for a group or a family of products (aggregation of
products).
2. It aggregates daily or weekly (short-range) demand and the resulting production plan
(aggregation of time periods).
Even though the aggregate plan is a function of many different factors, the key factor is the forecasted
demand over the length of the medium-range planning horizon. After developing an aggregate plan
consistent with the forecasted demand and capacity, it is disaggregated into shorter time periods. The
process of disaggregation is the beginning of short range planning using master scheduling and operations
scheduling. Both master scheduling and operations scheduling are designed to implement the medium
range plan on the shop floor.
In determining the aggregate plan, integration and communication between various functions of the firm
are vital. Expected changes in the work force levels need to be communicated to the human resources
department, while any major equipment purchases, layout changes and capacity additions must involve
the approval of the finance department. On the other hand, changes in anticipated inventory levels and
especially, expected stockouts must be discussed with the marketing department.
Taking Stock
1. When we freeze a portion of the master schedule, we make the schedule more stable and reduce the
“nervousness” of the schedule. However, freezing the schedule also leads to inflexibility and
reduced customer service because we will not be able to respond to the demands of the customers
in a timely fashion.
2. Purchasing agents, production planning and control manager, planners, schedulers, and marketing
personnel need to interface with the master schedule. Purchasing agents, planners and schedulers
need direct information from the MPS to order the parts, manage the inventories of the parts and
schedule the machines in producing the parts going into the end items master scheduled. The
Costs:
Output
Regular $600 600 600 0 900 900 3,600
Overtime
Subcontract
Inventory 50 150 200 100 0 0 500
Backorder @ 5 0 0 0 1,000 1,250 0 2,250
Costs:
Regular @ 2 $580 580 580 580 580 580 $3,480
Overtime @ 3 0 0 60 60 60 0 180
Inventory @ 1 45 135 185 145 50 0 560
Backorder @ 5 0 0 0 0 450 0 450
Costs:
Regular @ 2 $580 580 580 580 580 580 $3,480
Costs:
Output
Regular @ 2 $560 560 560 560 560 560 $3,360
Overtime @ 3 0 0 120 120 120 0 360
Subcontract @ 6 0 0 0 0 0 0 0
Inventory @ 1 40 120 170 140 50 0 520
Backorder @ 5 0 0 0 0 400 0 400
Costs:
Regular @ 2 $560 560 560 560 560 560 $3,360
Subcontract @ 6 0 0 120 300 300 0 720
Inventory @ 1 40 120 160 125 45 0 490
Backorder @ 5 0 0 0 0 400 0 400
b.
Period 1 2 3 4 5 6 7 8 Total
Forecast 120 135 140 120 125 125 140 135 1,040
Output
Regular 130 130 130 130 130 130 130 130 1,040
Overtime
Subcontract
Output - Forecast 10 (5) (10) 10 5 5 (10) (5)
Inventory
Beginning 0 10 5 0 5 10 15 5
Ending 10 5 0 5 10 15 5 0
Average 5 7.5 2.5 2.5 7.5 12.5 10 2.5
Backlog 5
Costs:
Output
Regular @ 60 $7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800 $62,400
Overtime
Subcontract @ 50
Inventory @ $2 10 15 5 5 15 25 20 5 100
Backorder @ $90 450 450
Total $7,810 7,815 8,255 7,805 7,815 7,825 7,820 7,805 $62,950
b.
Period 1 2 3 4 5 6 7 Total
Forecast 250 300 250 300 280 275 270 1,925
Output
Regular 275 275 275 275 275 275 250 1,900
Overtime
Subcontract 5 20 25
Output - Forecast 25 –25 25 –25 0 0 0
Inventory
Beginning 0 25 0 25 0 0 0
Ending 25 0 25 0 0 0 0
Average 12.5 12.5 12.5 12.5 0 0 0 50
Backlog 0 0 0 0 0 0 0 0
Costs:
Regular 11,000 11,000 11,000 11,000 11,000 11,000 10,000 76,000
Overtime 0
Subcontract 250 1,000 1,250
Inventory 25 25 25 25 100
Backorder 0
Total 11,025 11,025 11,025 11,025 11,250 11,000 11,000 77,350
b. Level strategy
Period Mar. Apr. May Jun. July Aug. Sep. Total
Forecast 50 44 55 60 50 40 51 350
Output
Regular 40 40 40 40 40 40 40 280
Overtime 8 8 8 8 8 8 8 56
Subcontract 2 2 2 2 2 2 2 14
Output - Forecast 0 6 –5 –10 0 10 –1
Inventory
Beginning 0 0 6 1 0 0 1
Ending 0 6 1 0 0 1 0
Average 0 3 3.5 .5 0 .5 .5 8
Backlog 0 0 0 9 9 0 0 18
Costs:
Regular 3,200 3,200 3,200 3,200 3,200 3,200 3,200 22,400
Overtime 960 960 960 960 960 960 960 6,720
Subcontract 280 280 280 280 280 280 280 1,960
Inventory 30 35 5 0 5 5 80
Backlog 180 180 360
Total 4,440 4,470 4,475 4,625 4,620 4,445 4,445 31,520
We should choose the plan generated in part a because $350,800 < 353,700 < 356,200.
9.
Period 1 2 3 4 5 6 Total
Forecast 160 150 160 180 170 140 960
Output
Regular 150 150 150 150 160 160 920
Overtime 10 10 0 10 10 10 50
Subcontract 0 0 10 10 0 0 20
Output- Forecast 0 10 0 –10 0 0
Inventory
Beginning 0 0 10 10 0 0
Ending 0 10 10 0 0 0
Average 0 5 10 5 0 0 20
Backlog 0 0 0 0 0 0 0
Costs:
Regular 7,500 7,500 7,500 7,500 8,000 8,000 46,000
Overtime 750 750 0 750 750 750 3,750
Subcontract 0 0 800 800 0 0 1,600
Inventory 20 40 20 80
Backlog 0 0 0 0 0 0
Total 8,250 8,270 8,340 9,070 9,050 8,750 51,430
Costs:
Output
Regular @ 6 $1,260 1,260 1,260 1,260 1,260 1,260 1,260 1,260 1,260 $11,340
Overtime
Subcontract @ 8 80 160 160 0 0 0 0 0 0 $400
Inventory @ 5 75 150 75 0 0 0 50 50 0 $400
Backorder @ 10 0 0 0 700 700 300 0 300 0 $2,000
Total $1,415 1,570 1,495 1,960 1,960 1,560 1,310 1,610 1,260 $14,140
The total cost for Plan B is $14,140 plus $200 to hire one additional worker. Total = $14,340.
Plan C: No additional workers are to be hired. It is assumed that the present workforce is retained. Only
subcontracting is to be used with a maximum of 20 per period.
Period 1 2 3 4 5 6 7 8 9 Total
Forecast 190 230 260 280 210 170 160 260 180 1,940
Output
Regular 200 200 200 200 200 200 200 200 200 1,800
Overtime – – – – – – – – –
Subcontract 20 20 20 20 20 20 0 20 0 140
Output-
Forecast 30 (10) (40) (60) 10 50 40 (40) 20
Inventory
Beginning 0 30 20 0 0 0 0 20 0
Ending 30 20 0 0 0 0 20 0 0
Average 15 25 10 0 0 0 10 10 0 70
Backlog 0 0 20 80 70 20 0 20 0 210
Costs:
Output
Regular @ 6 $1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 $10,800
Overtime
Subcontract @ 8 160 160 160 160 160 160 0 160 0 $1,120
Inventory @ 5 75 125 50 0 0 0 50 50 0 $350
Backorder @ 10 0 0 200 800 700 200 0 200 0 $2,100
Total $1,435 1,485 1,610 2,160 2,060 1,560 1,250 1,610 1,200 $14,370
Plan Total Cost Rank
A $14,290 3
B 14,370 2
C 14,370 1
The lowest cost is for Plan A = $14,290.
Costs:
Output
Regular @ 6 $1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 $10,800
Part-Time @ 11 550 550 550 $1,650
Subcontract
Inventory @ 5 25 100 125 50 0 25 150 125 25 $625
Backorder @ 10 0 0 0 100 200 0 0 100 0 $400
Total $1,225 1,850 1,875 1,900 1,400 1,225 1,350 1,425 1,225 $13,475
20 x 9 = 180 The same number of part-time workers must be used in any period where they are used.
30 x 6 = 180 It is assumed that a worker (part-time) will work for the entire period producing 10 units.
40 x 5 = 200 With these constraints it is necessary to produce more than 170 units by using part-time
50 x 4 = 200 workers. Employ 5 temporary workers during periods 2, 3, and 4 with a total cost of
60 x 3 = 180
70 x 3 = 210 $13,475.
Period 1 2 3 4 5 6 7 8 9 Total
Forecast 190 230 260 280 210 170 160 260 180 1,940
Output
Regular 210 210 210 210 210 180 180 180 180 1,770
Overtime 10 25 25 10 70
Subcontract 20 20 20 20 20 100
Output-
Forecast 20 10 (5) (25) 0 10 40 (50) 0
Inventory
Beginning 0 20 30 25 0 0 10 50 0
Ending 20 30 25 0 0 10 50 0 0
Average 10 25 27.5 12.5 0 5 30 25 0 135
Backlog 0 0 0 0 0 0 0 0 0
Costs:
Output
Regular @ 6 $1,260 1,260 1,260 1,260 1,260 1,080 1,080 1,080 1080 $10,620
Overtime @ 9 0 90 225 225 0 0 0 90 0 $630
Subcontract @ 8 0 160 160 160 0 0 160 160 0 $800
Hiring @ 200 200 0 0 0 0 0 0 0 0 $200
Layoff-firing @100 0 0 0 0 0 300 0 0 0 $300
Inventory @ 5 50 125 137.5 62.5 0 25 150 125 0 $675
Backorder @ 10 0 0 0 0 0 0 0 0 0 $0
Total 1,510 1,635 1,782.5 1,707.5 1,260 1,405 1,390 1,455 1,080 $13,225
Destinations
1 2 3 4 Supply
1 0 1 2 0 100
2 60 61 62 0 500
3 80 81 82 0 50
4 90 91 92 0 120
5 63 60 61 0 500
Sources 6 83 80 81 0 50
7 93 90 91 0 120
8 66 63 60 0 440
9 86 83 80 0 50
10 96 93 90 0 100
Demand 550 700 750 30
Iteration: 3 Total cost: $126,650
Destinations
1 2 3 4 Supply
1 ( 100 ) 0 0 90 100
2 ( 450 ) ( 50 ) 0 30 500
3 0 ( 50 ) 0 10 50
4 0 ( 90 ) 0 ( 30 ) 120
5 4 ( 500 ) 0 31 500
Sources 6 4 ( 10 ) ( 40 ) 11 50
7 4 0 ( 120 ) 1 120
8 8 4 ( 440 ) 32 440
9 8 4 ( 50 ) 12 50
10 8 4 ( 100 ) 2 100
Optimal solution:
Iteration: 3
Total shipping cost : $126,650
Ship 100 units from source 1 to dest. 1
Ship 450 units from source 2 to dest. 1
Ship 50 units from source 2 to dest. 2
Ship 50 units from source 3 to dest. 2
Ship 90 units from source 4 to dest. 2
Ship 500 units from source 5 to dest. 2
Ship 30 units from source 4 to dest. 4
Ship 40 units from source 6 to dest. 3
Ship 120 units from source 7 to dest. 3
Ship 440 units from source 8 to dest. 3
Ship 50 units from source 9 to dest. 3
Ship 100 units from source 10 to dest. 3
Ship 10 units from source 6 to dest. 2
Optimal solution:
Iteration: 3
Total shipping cost: $127,00
Ship 100 units from source 1 to dest. 1
Ship 450 units from source 2 to dest. 1
Ship 50 units from source 2 to dest. 2
Ship 50 units from source 3 to dest. 2
Ship 90 units from source 4 to dest. 2
Ship 500 units from source 5 to dest. 2
Ship 30 units from source 4 to dest. 4
Ship 40 units from source 6 to dest. 3
Ship 120 units from source 7 to dest. 3
Ship 440 units from source 8 to dest. 3
Ship 50 units from source 9 to dest. 3
Ship 100 units from source 10 to dest. 3
Ship 10 units from source 6 to dest. 2
Since $4,660 < $4,680 < $4,740, the company should choose the third strategy.