13: Aggregate Plan

Question 1

Objective: meet forecasted demand while minimizing cost over planning period

Aggregate demand: concerned with determining quantity and timing of production for intermediate future.

Uses info regarding families or product lines, not individual products

Manufacturers: AP ties strategic goals to production plans

Service orgs: AP ties strategic goals to workforce schedule

Answer 1

Objectives of AP:

1. Minimize cost
2. Maximize customer service
3. Minimize inventory investment
4. Minimize changes in workforce levels
5. Minimize changes in production rates

Question 2

Characteristics of AP:

1. Considers a planning horizon.
2. Looks at aggregate product demand
3. Looks at aggregate resource quantities

Answer 2

Required inputs for AP:

1. Info (resources and facilities)
2. Demand forecast
3. Cost (alternatives and resources)
4. Organizational policies (usage of alternatives)

Question 3

Required for AP:

1. Unit for measuring sales and output
2. Forecast of demand
3. Method for determining costs
4. Model that combines forecasts and costs

Answer 3

3 dimensions of AP:

1. Product families
2. Labor
3. Timing

Question 4

Sales & Operations Planning:

Coordination and integration of the internal and external resources necessary for a successful AP.

AP:

• part of larger production planning system
• disaggregation: process of breaking AP into greater detail = Master Production Schedule

Answer 4

MPS = timetable that specifies what is to be made and when.

MPS provides input to MRP systems

Question 5

Aggregate Planning Strategies:

Capacity Options

1. Changing Inventory levels
2. Varying workforce size by hiring or layoffs
3. Varying production rate through overtime or idle time
4. Subcontracting
5. Part-time workers

Answer 5

Demand Options:

1. Influencing demand
2. Back ordering during high-demand periods
3. Counter-seasonal product and service mixing

Question 6

Mixing Options to Develop a Plan:

1. Chase Strategy (production = demand)

Keep up with changing demand by varying production rate.

“Chase” demand forecasts using temporary workers, overtime.

Vary workforce or production rate to match capacity to demand.

Answer 6

2. Level Strategy (production rate constant)

Use other techniques to keep up with demand changes. (Pricing, promotion, back orders)

This strategy maintains a steady rate of regular time output while meeting variations in demand by a combination of inventories, overtime, part-time, subcontracting and backorders.

Question 7

Methods for AP:

1. Graphical (popular, easy, trial and error)

• determine demand
• determine capacity
• find labor costs
• consider company policy on workers and stock levels
• develop alternate plans

Answer 7

2. Mathematical Approach:

• Transportation Method of Linear Programming (produce optimal plan)
• Management Coefficients Model (managers experience and performance)
• Linear decision (minimizes costs)
• Simulation (uses search procedures to try different combinations of variables)

Question 8

AP in Services:

Controlling cost of labor critical

1. Accurate scheduling of labor hours, assure quick response to customer demand
2. On call labour resource, unexpected demand
3. Flexibility of individual worker skills

Answer 8

5 service scenarios:

1. Restaurants
2. Hospitals
3. National chains of small service firms
4. Miscellaneous services
5. Airline industry