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Lecture Outline
Aggregate Planning Process Strategies for Adjusting Capacity Strategies for Managing Demand Quantitative Techniques for Aggregate Production Planning Hierarchical Nature of Planning Aggregate Planning for Services
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Aggregate Planning
Determine the resource capacity needed to meet demand over an intermediate time horizon
Aggregate refers to product lines or families Aggregate planning matches supply and demand Establish a company wide game plan for allocating resources Develop an economic strategy for meeting demand
Objectives
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Resources necessary to meet demand are acquired and maintained over the time horizon of the plan Minor variations in demand are handled with overtime or under-time
Managing demand
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Producing at a constant rate Increasing or decreasing and using inventory to working hours absorb fluctuations in Subcontracting demand Let outside companies Chase demand complete the work Hiring and firing workers to Part-time workers match demand Hiring part time workers to Peak demand complete the work Maintaining resources for Backordering high-demand levels Providing the service or product at a later time period
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Level Production
Demand Production Units
Time
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Chase Demand
Demand Production Units
Time
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Offering products or services with countercyclical demand patterns Partnering with suppliers to reduce information distortion along the supply chain
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Pure Strategies
Example:
QUARTER
Spring Summer Fall Winter
Hiring cost = $100 per worker Firing cost = $500 per worker Regular production cost per pound = $2.00 Inventory carrying cost = $0.50 pound per quarter Production per employee = 1,000 pounds per quarter Beginning work force = 100 workers
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100,000 100,000 100,000 100,000 400,000 Cost of Level Production Strategy (400,000 X $2.00) + (140,00 X $.50) = $870,000
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80 50 120 150
0 0 70 30 100
20 30 0 0 50
Cost of Chase Demand Strategy (400,000 X $2.00) + (100 x $100) + (50 x $500) = $835,000
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Mixed Strategy
Combination of Level Production and Chase Demand strategies Examples of management policies
no more than x% of the workforce can be laid off in one quarter inventory levels cannot exceed x dollars
Many industries may simply shut down manufacturing during the low demand season and schedule employee vacations during that time
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Wt = workforce size for period t Pt =units produced in period t It =units in inventory at the end of period t Ft =number of workers fired for period t Ht = number of workers hired for period t
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LP MODEL
Minimize Z = $100 (H1 + H2 + H3 + H4) + $500 (F1 + F2 + F3 + F4) + $0.50 (I1 + I2 + I3 + I4)
Subject to
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
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Transportation Method
QUARTER EXPECTED DEMAND REGULAR CAPACITY OVERTIME CAPACITY SUBCONTRACT CAPACITY
1 2 3 4
Regular production cost per unit Overtime production cost per unit Subcontracting cost per unit Inventory holding cost per unit per period Beginning inventory
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Transportation Tableau
PERIOD OF USE Unused Capacity 9 300 PERIOD OF PRODUCTION Beginning Inventory 1 Regular Overtime Subcontract 2 Regular Overtime Subcontract 3 Regular Overtime Subcontract 4 Regular Overtime Subcontract Demand 900 1500 1600 300 600 1 0 2 3 3 6 4 Capacity
20
25 28
300
23
28 31
100
26
31 34
100
29
34 37
1000 100 500 1200 150 250 500 1300 200 500 1300 200 500 250 18
1200
20 25 28
23 28 31
26 31 34 23 28 31 20 25 28
1300 200
20 25 28
1 2 3 4 Total
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13-20
Production Planning
Aggregate production plan
Capacity Planning
Resource requirements plan
Resource Level
Plants
Individual products
Components
Manufacturing operations
Individual machines
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