Lecture 7

Question 1

Handling predictable demand variability by

Answer 1

Managing supply & Managing demand

Question 2

Managing supply by

Answer 2

Mangaing capacity:
- Flexibility in workface
- Flexibility in facilites
- Sub-contracting

Managing inventory:
- Using common components for multiple products
- Building inventory for high-demand products

Question 3

Managing demand by

Answer 3

Introducing promotions e.g:
- “Early bird” price discounts
- Bundling options
- After season sales

Accepting and managing backlogs

Question 4

Aggregate planning

Answer 4

Is “Given the demand forecast for each period in the planning horizon, determine the
- production level
- inventory level
- capacity level
- and any backlogs

for each period that maximize the firms profit over the planning horizon”

The planning horizon is often between 3 and 18 months

Question 5

Planning strategies to balance the trade-offs

Answer 5

1. Chase strategy
2. Flexibility strategy
3. Level strategy
4. A hybrid of above stratgeies and ensuring transparency in the supply chain

Question 6

Chase strategy

Answer 6

Adapting the capacity according to the demand

+ Is suitable when inventory costs are high and/or products perishable.
- Can be expensive and difficult to achieve if it is labour intensive

Question 7

Flexibility strategy

Answer 7

Using utilization as the lever

+ Is suitable when inventory costs are high and/or excess capacity is available
- Assumes workforce is flexible or a large degree of automation is used

Question 8

Level strategy

Answer 8

Maintaining a stable output so that invenotry becomes the lever

+ Is sutiable when inventory costs are low and/or backlog costs are low
- Physical handling/storage of large inventories of certain products may pose problems

Question 9

Key steps to prepare for the aggregated planning

Answer 9

1. Identify a sutiable product mix and aggregate unit of production
2. Identify the bottleneck, i.e. the production step is the main limitation of the rate of production through-put
3. Idenity all activites that affect available capacity and production times, including also set-up times and maintenance times
4. Identify a suitable planning horizon, considering seasonal variations

Question 10

Identify a suitable product mix and aggregate unit of production

Answer 10

For example: A dairy company may estimate and aggregate its demand for all fresh milk products e.g. 3%, 1.5%, cream youghurt, etc. The aggregated, artificial product unit is then based on weighted average of the content of all products and their material costs

Question 11

Idenitfy the bottleneck, i.e. the production step that is the main limitation of the rate of production through-put

Answer 11

For example: The dairy company may consider it is the pasteurizing or packaging machines that decides the production flow rate

Question 12

Identify all activites that affect available capacity and production times, including also set-up times and maintenance times

Answer 12

For example: The dairy company plant is running 24/7 but the machines need to be cleaned after each batch of 1000 units. This estimated cleaning time (60/1000) minutes per unit needs to be added to the required net production time per unit to model the associated capacity consumption