8

Aggregate Scheduling
Weeks 8 (chapter 13)

Operations Management, Sustainability and Supply Chain Management,

Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander © 2014 Pearson Education
 Textbook for
Used

Operations Management, Sustainability and

Supply Chain Management,
Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander (2014)
 Outline

► Global Company Profile:

Frito-Lay
► The Planning Process
► Sales and Operations Planning
► The Nature of Aggregate Planning
► Aggregate Planning Strategies
© 2014 Pearson Education
Global Company Profile
Frito-Lay © 2014 Pearson Education
 10
OM
▶ Design of Goods and Services
STRATEGY
▶ Managing Quality DECISION
▶ Process Strategy
▶ Location Strategy
▶ Layout Strategy
▶ Human Resources
▶ Supply Chain Management
▶ Inventory Management
▶ Scheduling
 Aggregate Planning
 Short-term
▶ Maintenace 5
© 2014 Pearson Education
 The Planning
Process
Long-range plans (over one year)
Capacity decisions critical to long range plans
Issues:
Research and Development
New product plans
Capital investments
Facility location/expansion
Top
executives Intermediate-range plans (3 to 18 months)
Issues:
Sales and operations planning
Production planning and budgeting
Operations Setting employment, inventory,
managers with subcontracting levels
sales and Analyzing operating plans
operations Short-range plans (up to 3 months)
planning team Scheduling techniques
Issues:
Job assignments
Operations Ordering
managers, Job scheduling
supervisors, Dispatching
foremen Overtime
Part-time help
Responsibility Planning tasks and time horizons
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 Sales and Operations
Planning

 Coordination of demand forecasts with functional areas

and the supply chain
 Typically done by cross-functional teams
 Determine which plans are feasible
 Limitations must be reflected
 Provides warning when resources do not match
expectations
 Output is an aggregate plan
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 S&OP and the
Aggregate Plan

© 2014 Pearson Education

 S&OP
Sales and Operations
Planning

A process of balancing resources and forecasted demand,

aligning and organization’s competing demand from supply
chain to final customer, while linking strategic planning with
operations over all planning horizons

© 2014 Pearson Education

 aggregate
PLANNING

A plan that includes forecast levels for families of

products of finished goods, inventory, shortages and
changes in the workforce

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 the nature of
AGGREGATE PLANNING
The objective of aggregate planning is usually to meet forecast
demand while minimizing cost over the planning period

Disaggregation
The process of breaking an aggregate plan into greater detail

Master Production Schedule (MPS)

A timetable that specifies what is to be made and when

© 2014 Pearson Education

 aggregate planning
STRATEGY
The operations manager must answer several
questions:
 Should inventories be used to absorb changes in demand during the
planning period?
 Should changes be accommodated by varying the size of the workforce?
 Should subcontractors be used on fluctuating orders so a stable workforce
can be maintained?
 Should prices or other factors be changed to influence demand?
© 2014 Pearson Education
 capacity
OPTIONS
Basic capacity (production) options:
 Changing inventory levels
 Varying workforce size by hiring or layoffs
 Varying production rates through overtime or idle time
 Subcontracting
 Using part-time workers

© 2014 Pearson Education

 demand
OPTIONS

Basic demand options:

 Influencing demand
 Back ordering during high-demand periods
 Counterseasonal product and service mixing

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 mixing options to
DEVELOP A PLAN

 Chase Strategy
A planning strategy that sets production equal to forecast demand.
 Level Schedulling
Maintaining a constant output rate production rate or workforce level
over the planning horizon.
 Mixed Strategy
A planning strategy that uses two or more controllable variables to set a
feasible production plan.
© 2014 Pearson Education
 methods for
AGGREGATE PLANNING
1. Graphical Methods
Aggregate planning techniques that work with a few variables at a time
to allow planners to compare projected demand with existing capacity

5 steps in the Graphical Method:

1. Determine the demand for each period
2. Determine the capacity for regular time, overtime, and subcontracting each
period
3. Find labor costs, hiring and layoff costs, and inventory holding costs
4. Consider company policy on workers and stock levels
5. Develop alternative plans and examine their total cost

© 2014 Pearson Education

 methods for
AGGREGATE PLANNING
2. Mathematical Approaches
 Useful for generating strategies
▶ Transportation Method of Linear Programming
Produces an optimal plan
Works well for inventories, overtime, subcontracting
Does not work when nonlinear or negative factors are introduced
 Other Models
▶ General form of linear programming
▶ Simulation
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 aggregate planning
IN SERVICE
Most services use combination strategies and
mixed plans

Controlling the cost of labor is critical

1. Accurate scheduling of labor-hours to assure quick
response to customer demand
2. An on-call labor resource to cover unexpected demand
3. Flexibility of individual worker skills
4. Flexibility in rate of output or hours of work

© 2014 Pearson Education

 aggregate planning
IN SERVICE

5 Service Scenarios
 Restaurants
 Hospitals
 National Chains of Small Service Firms
 Miscellaneous Services
 Airline Industry

© 2014 Pearson Education

 revenue
MANAGEMENT
Capacity decisions that determine the allocation of
resources to maximize revenue or yield

1. Service or product can be sold in advance of consumption

2. Demand fluctuates
3. Capacity is relatively fixed
4. Demand can be segmented
5. Variable costs are low and fixed costs are high

© 2014 Pearson Education

 revenue
MANAGEMENT

To make revenue management work, the company needs

to manage three issue:

1. Multiple pricing structures must be feasible and appear

logical to the customer
2. Forecasts of the use and duration of use
3. Changes in demand

© 2014 Pearson Education

 Thankyou very much
Operations Management, Sustainability and Supply Chain Management,
Global Edition, Eleventh Edition, PEARSON
Jay Heizer and Barry Rander (2014)
© 2014 Pearson Education