Aggregate (Sales & Operations) Planning

7/25/2019 Aggregate (Sales & Operations) Planning

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Tata McGraw

CHAPTER 16

Aggregate Sales &Operations Planning


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Learning Outcomes

After discussion of this chapter students

should be able to:

Develop an aggregate plan for the resources

Adopt a chase strategy

Adopt a level strategy

Assist the upper-middle-level managers in

formulating SOP in their respective jobs


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Sales and Operations Planning

The Aggregate Operations Plan

Eamples on !hase and "evel strategies

OBJECTIVES

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1-4

Process planning

Strategic capacity

planning

Sales and operations

&aggregate' planning

Sales

plan

Aggregate

operations

plan

Supply net(or)

planning

*orecasting and

demand management

+aster scheduling

+aterial re,uirements

planning

Order scheduling

ehicle capacity

planning

ehicle loading

ehicle dispatching

.arehouse

receipt

planning

.ee)ly (or)force

scheduling

Daily (or)force

scheduling

+anufacturing "ogistics Services

"ong

range

+edium

range

Short

range

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Sales and Operations Planning hori0ons

Long-range planning Greater than one ear planning hori!on "suall per#orme$ in annual increments

%e$ium-range planning Si to eighteen months "suall 'ith 'ee(l) monthl or *uarterl

increments

Short-range planning One $a to less than si months "suall 'ith 'ee(l or $ail increments

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The Aggregate Operations Plan

%ain purpose+ Specify the optimal combination of production rate &units completed per unit of

time' (or)force level &number of (or)ers' inventory on hand &inventory carried from

previous period'

Product group or broad category&Aggregation'

This planning is done over an intermediate-range planning period of % to#2 months

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3alancing Aggregate Demandand Aggregate Production !apacity

0

2000

4000

6000

8000

10000

Jan Feb Mar Apr May Jun

45005500

7000

10000

8000

6000

0

2000

4000

6000

8000

10000

Jan Feb Mar Apr May Jun

4500 4000

90008000

4000

6000

Suppose the #igure tothe right represents#orecast $eman$ inunits

Suppose the #igure tothe right represents#orecast $eman$ inunits

,o' suppose thislo'er #igure representsthe aggregate capacito# the compan tomeet $eman$

,o' suppose thislo'er #igure representsthe aggregate capacito# the compan tomeet $eman$

hat 'e 'ant to $o is.alance out thepro$uction rate)'or(#orce le/els) an$in/entor to ma(ethese #igures match up

hat 'e 'ant to $o is.alance out thepro$uction rate)'or(#orce le/els) an$in/entor to ma(ethese #igures match up

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5e,uired 6nputs to the Production Planning System

Planningfor

production

External

capacity

Competitorsbea!ior

"a# materiala!ailability

$ar%etdemand

Economic

conditions

Current

pysical

capacity

Current

#or%force

In!entory

le!els

&cti!ities

re'uired

for

production

External

to firm

Internal

to firm

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7ey Strategies for +eeting Demand

Chase strateg

Sta.le 'or(#orce 0/aria.le 'or( hrs

Le/el strateg

%ie$ strateg

Su.contracting

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5elevant !osts

2asic pro$uction cost 3ie$-/aria.le) $irect-in$irect la.or) regular-o/ertime

Costs associate$ 'ith change in pro$uction rate

Hiring 0regular 4 temporar) training) laing-o##

5n/entor hol$ing cost

Cost o# capital tie$-up) storing) insurance) taes)spoilage) pil#erage) o.solescence

2ac( or$ering cost

Epe$iting) loss o# goo$'ill) loss o# sales

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Aggregate Planning Eamples: nit Demand and !ost Data

Materials $5/unitHoldin !osts $1/unit per "o#

Marinal !ost o sto!%out $1#25/unit per "o#

Hirin and trainin !ost $200/&or%er

'ayo !osts $250/&or%er

'abor (ours re)uired #15 (rs/unit*trai(t ti"e labor !ost $8/(our

+einnin in,entory 250 units

-rodu!ti,e (ours/&or%er/day 7#25

-aid strai(t (rs/day 8

Suppose 'e ha/e the #ollo'ing unit

$eman$ an$ cost in#ormation+

Suppose 'e ha/e the #ollo'ing unit

$eman$ an$ cost in#ormation+

.e"and/"o Jan Feb Mar Apr May Jun

4500 5500 7000 10000 8000 6000

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-rodu!ti,e (ours/&or%er/day 7#25

-aid strai(t (rs/day 8

.e"and/"o Jan Feb Mar Apr MayJun

4500 5500 7000 10000 8000 6000

Gi/en the $eman$ an$ cost in#ormation .elo') 'hat

are the aggregate hours4'or(er4month) units4'or(er) an$$ollars4'or(er

Gi/en the $eman$ an$ cost in#ormation .elo') 'hatare the aggregate hours4'or(er4month) units4'or(er) an$$ollars4'or(er

7#25 22 159#5

7#25 / 0#1548#

48#22106#228(rs$8$1408

!ut-and-Try Eample: DeterminingStraight "abor !osts and Output

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Chase Strateg&>=>8??7 or 9 'or(ers

3inall) $etermine the num.er o#'or(ers to hire4#ire8 5n this case 'eonl nee$ 9 'or(ers) 'e ha/e 7) so> can .e #ire$8

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Jan

Days/mo 22

Hrs/worker/mo 159.5

Units/worker 1,063.33

$/worker $1,408

Jan

Demand 4,500

Be. in". 250

#et re. 4,250%e. workers 3.99&

Hired

'ired 3

(ork)or*e 4

+ndin in"entory 0

#$ #/


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2elo' are the complete calculations #or the remainingmonths in the si month planning hori!on


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Jan 'e -ar r -ay JnDays/mo 22 19 21 21 22 20

Hrs/worker/mo 159.5 13&.&5 152.25 152.25 159.5 145

Units/worker 1,063 918 1,015 1,015 1,063 96&

$/worker $1,408 1,216 1,344 1,344 1,408 1,280

Jan 'e -ar r -ay Jn

Demand 4,500 5,500 &,000 10,000 8,000 6,000

Be. in". 250

#et re. 4,250 5,500 &,000 10,000 8,000 6,000

%e. workers 3.99& 5.989 6.89& 9.852 &.524 6.20&

Hired 2 1 3

'ired 3 2 1

(ork)or*e 4 6 & 10 8 &

+ndin in"entory 0 0 0 0 0 0

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2elo' are the complete calculations #or the remaining months inthe si month planning hori!on 'ith the other costs inclu$e$

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Jan 'e -ar /r -ay Jn

Demand 4,500 5,500 &,000 10,000 8,000 6,000Be. in". 250

#et re. 4,250 5,500 &,000 10,000 8,000 6,000

%e. workers 3.99& 5.989 6.89& 9.852 &.524 6.20&

Hired 2 1 3

'ired 3 2 1(ork)or*e 4 6 & 10 8 &

+ndin in"entory 0 0 0 0 0 0

Jan 'e -ar /r -ay Jn osts-ateria $21,250.00 $2&,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00 203,&50.00

aor 5,62&.59 &,282.&6 9,268.9& 13,241.38 10,593.10 &,944.83 53,958.62

Hirin *ost 400.00 200.00 600.00 1,200.00

'irin *ost &50.00 500.00 250.00 1,500.00

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Le/el or(#orce Strateg&Surplus and Shortage Allo(ed'

Lets ta(e the same pro.lem as.e#ore .ut this time use theLe/el or(#orce strateg

Lets ta(e the same pro.lem as.e#ore .ut this time use theLe/el or(#orce strateg

This time 'e 'ill see( to usea 'or(#orce le/el o# 6 'or(ersThis time 'e 'ill see( to usea 'or(#orce le/el o# 6 'or(ers

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Jan

Demand 4,500

Be. in". 250

#et re. 4,250

(orkers 6

rod*tion 6,380+ndin in"entory 2,130

rs 2,130

ortae

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>ote? if (e recalculate this sheet (ith 4 (or)ers

(e (ould have a surplus

>ote? if (e recalculate this sheet (ith 4 (or)ers

(e (ould have a surplus



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@an *eb +ar Apr +ay @un

Demand /?199 1?199 4?999 #9?999 2?999 $?999

3eg inv ;19 ;?#%9 ;?#/9 #?;%9 -;?$29 -#?%99

>et re, /?;19 %?%49 /?2$9 2?449 #9?$29 4?%99

.or)ers $ $ $ $ $ $

Production $?%29 1?1#9 $?989 $?989 $?%29 1?299

Ending inventory ;?#%9 ;?#/9 #?;%9 -;?$29 -#?%99 -#?199

Surplus ;?#%9 ;?#/9 #?;%9

Shortage ;?$29 #?%99 #?199

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Belo# are te complete calculations for te

remaining monts in te six mont planning

ori(on #it te oter costs included

Belo# are te complete calculations for te

remaining monts in te six mont planning

ori(on #it te oter costs included

,ote) totalcosts un$erthis strategare less thanChase at@


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Cuestion 3o(l

Sales an$ Operations Planning

acti/ities are usuall con$ucte$$uring 'hich planning timehori!on

a8 Long-range.8 5nterme$iate-rangec8 Short-range

$8 Reall short-rangee8 ,one o# the a.o/e

&ns#er) b* Intermediate+range ,i*e*- . to

/0 monts1

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Cuestion 3o(l

hich o# the #ollo'ing are

Pro$uction Planning Strategiescan in/ol/e tra$e-o##s among the'or(#orce si!e) 'or( hours)

in/entor) an$ .ac(logsa8 Chase strateg.8 Sta.le 'or(#orce-/aria.le 'or(

hours

c8 Le/el strateg$8 All o# the a.o/ee8 ,one o# the a.o/e

&ns#er) d* &ll of te abo!e

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Cuestion 3o(l

hich o# the #ollo'ing are consi$ere$Brele/ant costs in the AggregatePro$uction Plan

a8 Costs associate$ 'ith changes inthe pro$uction rate

.8 5n/entor hol$ing costsc8 2ac(or$ering costs

$8 2asic pro$uction costse8 All o# the a.o/e

&ns#er) e* &ll of te abo!e

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Cuestion 3o(l

hich o# the #ollo'ing AggregatePlanning Techni*ues can .eper#orme$ using simplesprea$sheets

a8 Cut-an$-tr.8 Linear programmingc8 Transportation metho$$8 All o# the a.o/e

e8 ,one o# the a.o/e

&ns#er) a* Cut+and+try ,Te oter t#o in!ol!e more

complex computational effort tan simple

spreadseets*1

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En$ o# Chapter 16

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Aggregate (Sales & Operations) Planning

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