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Transcript of OM - Aggregate Planning
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12-1 Aggregate Planning
William J. Stevenson
Operations Management
9th edition
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12-2 Aggregate Planning
Chapter 12Chapter 12
Aggregate planning
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12-3 Aggregate Planning
Planning HorizonPlanning Horizon
Aggregate planning : Intermediate-rangecapacity planning, usually covering 2 to 12 months.The goal of aggregate planning is to achieve a
production plan that will effectively utilize the
organization’s resources to satisfy expecteddemand.
Shortrange
Intermediaterange
Long range
Now 2 months 1 Year
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12-4 Aggregate Planning
Organizations make capacity decisions on three levels:• Short-range plans (etailed plans!
• "achine loading
•
#o$ assignments• Intermediate plans (%eneral levels!
• &mployment
•
Output, and inventories• Long-range plans
• 'ong term capacity
•
'ocation layout
Overview of Planning LevelsOverview of Planning Levels
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12-5 Aggregate Planning
Planning SequencePlanning Sequence
Business PlanEstablishes operationsand capacity strategies
Establishes operationsand capacity strategies
Aggregate plan
Establishes
operations capacity
Establishes
operations capacity
aster schedule Establishes schedules!or speci!ic products
Establishes schedules!or speci!ic products
"orporatestrategies
and policies
Economic#competiti$e#and politicalconditions
Aggregatedemand
!orecasts
Figure 12.1
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12-6 Aggregate Planning
Overview of aggregate planningOverview of aggregate planning
• Aggregate planning $egins )ith a *orecast o* aggregate
demand *or the intermediate range.
• +his is *ollo)ed $y a general plan to meet demand
reuirements $y setting output, employment, and *inished-
goods inventory or service capacities.• "anagers must consider a num$er o* plans, each o* )hich
must $e eamined in light o* *easi$ility and cost.
• I* a plan is reasona$ly good $ut has minor di**iculties, it
may $e re)orked.
• Aggregate plans are updated periodically, o*ten monthly,
to take into account updated *orecast and other changes.
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12-7 Aggregate Planning
•
esources• /ork*orceproduction rate
• 0acilities and euipment
• emand *orecast• olicies
• u$contracting
• Overtime
• Inventory levels
• 3ack orders
•
4osts• Inventory carrying
• 3ack orders
• 5iring*iring• Overtime
• Inventory changes
• su$contracting
Aggregate Planning InputsAggregate Planning Inputs
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12-8 Aggregate Planning
•
+otal cost o* a plan• ro6ected levels o*:
• Inventory
• Output• &mployment
• u$contracting
• 3ackordering
Aggregate Planning OutputsAggregate Planning Outputs
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12-9 Aggregate Planning
Aggregate Planning StrategiesAggregate Planning Strategies
•
roactive• Involve demand options: Attempt to alter
demand to match capacity
•
eactive• Involve capacity options: attempt to alter
capacity to match demand
•
"ied• ome o* each
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12-10 Aggregate Planning
•
ricing
• romotion
• 3ack orders
• 7e) demand
Dean! OptionsDean! Options
l
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12-11 Aggregate Planning
PricingPricing
• ricing di**erential are commonly used to shi*t demand
*rom peak periods to o**-peak periods, *or eample:• ome hotels o**er lo)er rates *or )eekend stays
• ome airlines o**er lo)er *ares *or night travel
•
"ovie theaters o**er reduced rates *or matinees• ome restaurant o**er early special menus to shi*t some o*
the heavier dinner demand to an earlier time thattraditionally has less tra**ic.
•
+o the etent that pricing is e**ective, demand )ill $eshi*ted so that it correspond more closely to capacity.
• An important *actor to consider is the degree o* priceelasticity o* demand8 the more the elasticity, the more
e**ective pricing )ill $e in in*luencing demand patterns.
12 12 A Pl
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12-12 Aggregate Planning
ProotionProotion
• Advertising and any other *orms o* promotion,such as displays and direct marketing, cansometimes $e very e**ective in shi*ting demandso that it con*orms more closely to capacity.
• +iming o* promotion and kno)ledge o*response rates and response patterns )ill $eneeded to achieve the desired result.
•
+here is a risk that promotion can )orsen thecondition it )as intended to improve, $y $ringing in demand at the )rong time.
12 13 A Pl i
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12-13 Aggregate Planning
"ac# or!er"ac# or!er
• An organization can shi*t demand to other periods
$y allo)ing $ack orders. +hat is , orders are taken
in one period and deliveries promised *or a later
period.
• +he success o* this approach depends on ho)
)illing the customers are to )ait *or delivery.
• +he cost associated )ith $ack orders can $e
di**icult to pin do)n since it )ould include lost
sales, annoyed or disappointed customers, and
perhaps additional paper)ork.
12 14 A t Pl i
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12-14 Aggregate Planning
$ew !ean!$ew !ean!
•
"anu*acturing *irms that eperienceseasonal demand are sometimes a$le
to develop a demand *or a
complementary product that makesuse o* the same production process.
0or eample, the *irms that produce
)ater ski in the summer , produce
sno) ski in the )inter.
12 15 A t Pl i
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12-15 Aggregate Planning
•
5ire and layo** )orkers• Overtimeslack time
• art-time )orkers
• Inventories• u$contracting (in- out!
Capacit% OptionsCapacit% Options
12 16 A t Pl i
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12-16 Aggregate Planning
Aggregate Planning StrategiesAggregate Planning Strategies
for eeting uneven !ean!for eeting uneven !ean!
• Maintain a level worforce
• Maintain a steady output rate
• Match demand period !y period
• "se a com!ination of decision varia!les
12 17 Aggregate Planning
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12-17 Aggregate Planning
"asic Strategies"asic Strategies
• 'evel capacity strategy:• "aintaining a steady rate o* regular-time
output )hile meeting variations in demand $y a
com$ination o* options such as: inventories,overtime, part-time )orkers, su$contractingand $ack orders.
•
4hase demand strategy:• "atching capacity to demand8 the planned
output *or a period is set at the epecteddemand *or that period.
12 18 Aggregate Planning
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12-18 Aggregate Planning
Chase ApproachChase Approach
•
Advantages• Investment in inventory is lo)
• 'a$or utilization is high
• isadvantages
• +he cost o* ad6usting output rates andor
)ork*orce levels
12 19 Aggregate Planning
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12-19 Aggregate Planning
Level ApproachLevel Approach
•
Advantages• ta$le output rates and )ork*orce levels
• isadvantages
• %reater inventory costs
• Increased overtime and idle time
• esource utilizations vary over time
12 20 Aggregate Planning
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12-20 Aggregate Planning
+echniues *or aggregate planning are classi*ied into
t)o categories:
• In*ormal trial-and-error techniues (*reuently
used!
• "athematical techniues
&echniques for Aggregate Planning &echniques for Aggregate Planning
12 21 Aggregate Planning
A l ! f AA l ! f A t
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12-21 Aggregate Planning
1. etermine demand *or each period2. etermine capacities (regular time, over time, and
su$contracting! *or each period
9. Identi*y policies that are pertinent
. etermine units costs *or regular time, overtime,
su$contracting, holding inventories, $ack orders, layo**s,
and other relevant costs;. evelop alternative plans and compute the costs *or each
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12-24 Aggregate Planning
'atheatical &echniques'atheatical &echniques
Linear programming : "ethods *or o$taining optimalsolutions to pro$lems involving allocation o* scarce
resources in terms o* cost minimization.
Linear decision rule: Optimizing techniue that seeks tominimize com$ined costs, using a set o* cost-
approimating *unctions to o$tain a single uadratic
euation.
imulation models: eveloping a computerized models that
can $e tested under a variety o* conditions in an attempt
to identi*y reasona$ly accepta$le (although not al)ays
optimal! solutions to pro$lem.
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12 25 Aggregate Planning
Suar% of Planning &echniquesSuar% of Planning &echniques
%echni&ue Solution "haracteristics
'raphical(charting %rial and
error
Intuiti$ely appealing# easy to
understand) solution not
necessarily optimal*
Linearprogramming
+ptimi,ing "omputeri,ed) linearassumptions not always $alid*
Linear
decision rule
+ptimi,ing "omple-# re&uires considerable
e!!ort to obtain pertinent cost
in!ormation and to construct
model) cost assumptions notalways $alid*
Simulation %rial and
error
"omputeri,ed models can be
e-amined under a $ariety o!
conditions*
Table 12.7
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12 26 Aggregate Planning
Linear prograingLinear prograing
• 'inear programming models are methods *or o$taining
optimal solutions to pro$lems involving the allocation o*scarce resources in terms o* cost minimization or pro*itmaimization.
• /ith aggregate planning, the goal is usually to minimize
the sum o* costs related to regular la$or time, overtime,su$contracting, carrying inventory, and cost associated)ith changing the size o* the )ork*orce. 4onstraintsinvolve the capacities o* the )ork*orce, inventories, and
su$contracting.• +he aggregate planning pro$lem can $e *ormulated as a
transportation pro$lem (special case o* linear programming.
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12 27 Aggregate Planning
Aggregate planning notationAggregate planning notation
r = regular production cost per unitt = overtime cost per unit
s = su$contracting cost per unit
h = holding cost per unit $ = $ackorder cost per unit per period
n = num$er o* periods in planning horizon
12-28 Aggregate Planning
& t ti t ti f t& t ti t ti f t
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12 28 Aggregate Planning
&ransportation notation for aggregate &ransportation notation for aggregate
planningplanningeriod
1eriod
2eriod
9> eriod n ?nused
capacitycapacity
eriod 3eginninginventory
@ h 2h (n-1!h @ I@
1 egular r rh r2h r(n-1!h @ 1
Overtime t th t2h t(n-1!h @ O1
su$contract s sh s2h s(n-1!h @ 1
2 egular r$ r rh r(n-2!h @ 2
Overtime t$ t th t(n-2!h @ O2
su$contract s$ s sh s(n-2!h @ 2
9 egular r2$ r$ r r(n-9!h @ 9
Overtime t2$ t$ t t(n-9!h @ O9
su$contract s2$ s$ s s(n-9!h @ 9
demand 1 2 9 n total
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12 29 Aggregate Planning
notesnotes
• egular cost, overtime cost, and su$contracting cost are at
their lo)est level )hen output is consumed in the same period it is produced.
• I* goods are made availa$le in one period $ut carried overto later period, holding costs are incurred at the rate o* (h!
per period.• 4onversely, )ith $ack orders, the unit cost increases as
you move across a ro) *rom right to le*t, $eginning at theintersection o* a ro) and column *or the same period.
•
3eginning inventory is given a unit cost o* @ i* it is usedto satis*y demand in period 1. ho)ever, i* it is held over*or use in later periods, a holding cost o* h per unit isadded *or each period.
12-30 Aggregate Planning
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gg g g
()aple()aple• %iven the *ollo)ing in*ormation set up the pro$lem in a transportation ta$le and
solve *or the minimum cost plan.
period
1 2 9
demand ;;@ B@@ B;@
#apacity
egular ;@@ ;@@ ;@@
Overtime ;@ ;@ ;@
su$contract 12@ 12@ 1@@
3eginning inventory 1@@
#osts egular time C
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gg g g
SolutionSolution
• +he transportation ta$le and solution are sho)n in the net slide.
ome entries reuire additional eplanation:a. Inventory carrying cost, h = C1 per unit per period. 5ence, units
produced in one period and carried over to a later period )illincur a holding cost that is a linear *unction o* the length o* timeheld.
$. 'inear programming models o* this type reuire that supply(capacity! and demand $e eual. A dummy column has $eenadded (noneistent capacity! to satis*y that reuirement. ince itdoes not FcostG anything etra to not use capacity in this case,cell costs o* C@ have $een assigned.
c. 7o $acklogs )ere needed in this eampled. +he uantities (e.g., 1@@, ;@ in column 1! are the amounts o*
output or inventory that )ill $e used to meet demandreuirements. +hus, the demand o* ;;@ units in period 1 )ill $emet using 1@@ units *rom inventory and ;@ o$tained *rom
regular time output.
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gg g g
Initial solution using northwest cornerInitial solution using northwest corner
eriod1 eriod2 eriod9 ?nusedcapacity capacity
eriod 3eginninginventory
@ 1 2 @ 1@@
1 egular
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gg g g
Optial solutionOptial solution
eriod
1
eriod
2
eriod
9
?nused
capacity
capacity
eriod 3eginninginventory
@ 1 2 @ 1@@
1 egular
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gg g g
&rial an! error techniques &rial an! error techniques
• +rial and error approaches consist o* developing
simple ta$les or graphs that ena$le planners to
visually compare pro6ected demand reuirements
)ith eisting capacity.
• i**erent plans are conducted and evaluated in
terms o* their overall costs. +he one )ith the
minimum cost )ill $e chosen.
• +he disadvantage o* such techniues is that theydo not necessarily result in the optimal aggregate
plan.
12-35 Aggregate Planning
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AssuptionsAssuptions
1. +he regular output capacity is the same in all periods.
2. 4ost ( $ack order, inventory, su$contracting, etc! is a linear*unction composed o* unit cost and num$er o* units.
9. lans are *easi$le8 that is, su**icient inventory capacity eists toaccommodate a plan, su$contractors )ith appropriate uality and
capacity are standing $y, and changes in output can $e made asneeded.
. All costs associated )ith a decision option can $e represented $y alump sum or $y unit costs that are independent o* the uantityinvolved
;. 4ost *igures can $e reasona$ly estimated and are constant *or the planning horizon.
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Soe iportant relationshipsSoe iportant relationships
7um$er o* num$er o* num$er o* ne) num$er o* laid-o**
/orkers in = )orkers at end o* )orkers at start - )orkers at start o* A period the previous period o* the period the period
Inventory inventory production amount used to
At the end o* = at the end o* in the - satis*y demand in
A period previous period current period current period
4ost *or output cost hirelayo** inventory $ack order = a period (eg O+ su$contract! cost cost cost
A$eragein$entory
Beginning In$entory 4 Ending In$entory2
5
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Cost calculationCost calculation
Type of cost $ow to calculate
%utput
egular egular cost per unit * +uantit% of regular output
Overtime Overtime cost per unit * Overtie quantit%
u$contract u$contract cost per unit * su,contract quantit%
$ire&layoff
5ire 4ost per hire * nu,er hire!
'ayo** 4ost per layo** * nu,er lai! o-
Inventory 4arrying cost per unit * average inventor%
3ack order 3ack-order cost per unit * nu,er of ,ac# or!erunit
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()aple 1()aple 1
• lanners *or a company that makes several models o* skate$oards are a$out to prepare theaggregate plan that )ill cover si periods. +hey no) )ant to evaluate a plan that calls *ora steady rate o* regular output, mainly using inventory to a$sor$ the uneven demand $utallo)ing some $acklog. Overtime and su$contracting are not used $ecause they )ant asteady output. +hey intend to start )ith zero inventory on hand in the *irst period. reparean aggregate plan and determine its cost using the *ollo)ing in*ormation. Assume a levelo* output rate o* 9@@ unit per period )ith regular time. 7ote that the planned endinginventory is zero. +here are 1; )orkers, and each can produce 2@ units per period.
period ' ( ) * + , total
*orecast 2@@ 2@@ 9@@ @@ ;@@ 2@@ 1D@@
"ost#
$egular time % &2 per s'ateboar(Overtime % &! per s'ateboar(
Sub)ontra)t % &* per s'ateboar(
+nventor, % &1 per s'ateboar( per perio( on average inventor,
-a)' or(ers % &5 per s'ateboar( per perio(
12-39 Aggregate Planning
l i l
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Solution. e)aple 1Solution. e)aple 1
eriod ' ( ) * + , total
0orecast 2@@ 2@@ 9@@ @@ ;@@ 2@@ 1D@@%utput
egular 9@@ 9@@ 9@@ 9@@ 9@@ 9@@ 1D@@
Overtime - - - - - -
u$contract - - - - - -Output-*orecast 1@@ 1@@ @ (1@@! (2@@! 1@@ @
Inventory
3eginning @ 1@@ 2@@ 2@@ 1@@ @
&nding 1@@ 2@@ 2@@ 1@@ @ @ Average ;@ 1;@ 2@@ 1;@ ;@ @
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()aple 2()aple 2
A*ter revie)ing the plan developed in the preceding
eample, planners have decided to develop an
alternative plan. +hey have learned that one is
a$out to retire *rom the company. ather than
replace that person, they )ould like to stay )iththe smaller )ork*orce and use overtime to make
up *or lost output. +he reduced regular time output
is 2D@ units per period. +he maimum amount o*overtime output per period is @ units. evelop a
plan and compare it to the previous one.
12-41 Aggregate Planning
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Solution. e)aple 2Solution. e)aple 2
eriod ' ( ) * + , total
0orecast 2@@ 2@@ 9@@ @@ ;@@ 2@@ 1D@@%utput
egular 2D@ 2D@ 2D@ 2D@ 2D@ 2D@ 1
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Coent. e)aple 2Coent. e)aple 2
• +he amount o* overtime that must $e scheduled has to
make up *or lost output o* 2@ units per period *or si periods, )hich is 12@. this is scheduled to)ard the centero* the planning horizon since that is )here the $ulk o*demand occurs. cheduling it earlier )ould increaseinventory carrying costs8 scheduling it later )ouldincrease $acklog cost.
• Overall the total cost *or this plan is
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• Aggregate planning *or services takes into account
pro6ected customer demands, euipment, capacities, andla$or capa$ilities. +he resulting plan is a time-phased
pro6ection o* service sta** reuirements.
• Aggregate planning *or manu*acturing and aggregate planning *or services share similarities in some respect, $ut there are some important di**erences )hich are:
• ervices occur )hen they are rendered
• emand *or service can $e di**icult to predict
• 4apacity availa$ility can $e di**icult to predict
• 'a$or *lei$ility can $e an advantage in services
Aggregate Planning in ServicesAggregate Planning in Services
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Disaggregating the aggregate planDisaggregating the aggregate plan
• 0or the production plan to $e translated into meaning*ul terms o*
production, it is necessary to disaggregate the aggregate plan.• +his means $reaking do)n the aggregate plan into speci*ic product
reuirements in order to determine la$or reuirements (skills, sizeo* )ork*orce!, materials, and inventory reuirements.
• +o put the aggregate production plan into operation, one mustconvert, or decompose, those aggregate units into units o* actual
product or services that are to $e produced or o**ered.
• 0or eample, televisions manu*acturer may have an aggregate planthat calls *or 2@@ television in #anuary, 9@@ in 0e$ruary, and @@ in
"arch. +his company produce 21, 2
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'aster sche!uling'aster sche!uling
• +he result o* disaggregating the aggregate plan is a master schedule
sho)ing the uantity and timing o* speci*ic end items *or ascheduled horizon, )hich o*ten covers a$out si to eight )eeksahead.
• +he master schedule sho)s the planned output *or individual products rather than an entire product group, along )ith the timing
o* production.• It should $e noted that )hereas the aggregate plan covers an interval
o*, say, 12 months, the master schedule covers only a portion o* this.In other )ords, the aggregate plan is disaggregated in stages , or
phases, that may cover a *e) )eeks to t)o or three months.• +he master schedule contains important in*ormation *or marketing
as )ell as *or production. It reveals )hen orders are scheduled *or production and )hen completed orders are to $e shipped.
12-46 Aggregate Planning
l h ! l
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Aggregate Plan to 'aster Sche!uleAggregate Plan to 'aster Sche!ule
#an 0e$ "ar.
2@@ 9@@ @@
3ggregate
lanning
4isaggregation
Master
Schedule
Figure 12.4
Aggregateplan
+ype #an. 0e$. "ar
21inch
1@@ 1@@ 1@@
2<inch
B; 1;@ 2@@
2Einch
2; ;@ 1@@
asterschedule
12-47 Aggregate Planning
S h ! li' t S h ! li
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'aster Sche!uling'aster Sche!uling
•
"aster schedule• etermines uantities needed to meet demand
• Inter*aces )ith
•
"arketing: it ena$les marketing to make validdelivery commitments to )arehouse and *inal
customers.
• 4apacity planning: it ena$les production to evaluate
capacity reuirements
• roduction planning
• istri$ution planning
12-48 Aggregate Planning
' S h ! l' t S h ! l
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'aster Sche!uler'aster Sche!uler
+he duties o* the master scheduler generallyinclude:
• &valuates impact o* ne) orders
•
rovides delivery dates *or orders• eals )ith pro$lems such as:
• roduction delays
• evising master schedule• Insu**icient capacity
12-49 Aggregate Planning
' S h ! li P' t S h ! li P
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'aster Sche!uling Process'aster Sche!uling Process
aster Scheduling
Beginning in$entory
6orecast
"ustomer orders
Inputs +utputs
Pro7ected in$entory
aster production schedule
8ncommitted in$entory
Figure 12.*
12-50 Aggregate Planning
' h ! li' t h ! li
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'aster sche!uling process'aster sche!uling process
• !aster production schedule "!P#$ indicates the uantity
and timing o* planned production, taking into accountdesired delivery uantity and timing as )ell as on-hand
inventory. +he " is one o* the primary outputs o* the
master scheduling process.
• %ough-cut capacit& Planning "%''P#$ it involves testing
the *easi$ility o* a proposed master relative to availa$le
capacities, to assure that no o$vious capacity constraints
eist. +his means checking capacities o* production)arehouse *acilities, la$or, and vendors to ensure that no
gross de*iciencies eist that )ill render the master
schedule un)orka$le
12-51 Aggregate Planning
' t h ! l' t h ! l
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'aster sche!ule'aster sche!ule
• Inputs:• 3eginning inventory8 )hich is the actual inventory
on hand *rom the preceding period o* the schedule
• 0orecasts *or each period demand
• 4ustomer orders8 )hich are uantities alreadycommitted to customers.
• Outputs•
ro6ected inventory• roduction reuirements
• +he resulting uncommitted inventory )hich isre*erred to as availa$le-to-promise (A+! inventory
12-52 Aggregate Planning
P / t ! O h ! I tP / t ! O h ! I t
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Pro/ecte! On0han! Inventor%Pro/ecte! On0han! Inventor%
ro6ected on-hand
inventory
Inventory *rom
previous )eek
4urrent )eeks
reuirements-5
12-53 Aggregate Planning
( l ' t S h ! l( l ' t S h ! l
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()aple. 'aster Sche!ule()aple. 'aster Sche!ule
A company that makes industrial pumps )ants to prepare a
master production schedule *or #une and #uly. "arketing has*orecasted demand o* 12@ pumps *or #une and 1
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Solution. 'aster sche!uleSolution. 'aster sche!ule
9/ 1 2 3 / : 9 ;
6orecast !0 !0 !0 !0 40 40 40 40
"ustomer Or(ers.)ommitte(/ !! 20 10 4 2
roe)te( on3an(
inventor, !1 1 2
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Solution. &he aster sche!uleSolution. &he aster sche!ule
• +he *irst step you have to calculate the on hand inventory
7ee Inventoryfrom previouswee
8e9uirements etinventory!efore MS
MS ro;ectedinventory
1
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Solution. 'aster Sche!uleSolution. 'aster Sche!ule
• +he pro6ected on-hand inventory and " are added to the master
scheduleInitial inventory
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$otes$otes
• +he reuirements euals the maimum o* the
*orecast and the customer orders
• +he net inventory $e*ore " euals the
inventory *rom previous )eek minus the
reuirements.
• +he " = run size, )ill $e added )hen the net
inventory $e*ore " is negative ( )eeks 9, ;, B,
and D!.• +he pro6ected inventory euals the net inventory
$e*ore " plus the " (B@!.
12-58 Aggregate Planning
S l ti ' t S h ! lSolution 'aster Sche!ule
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Solution. 'aster Sche!uleSolution. 'aster Sche!ule
• +he amount o* inventory that is uncommitted, and,
hence, availa$le to promise is calculated as *ollo)s:
um $ooked customer orders )eek $y )eek until
($ut not including! a )eek in )hich there is an "
amount. 0or eample, in the *irst )eek, this procedure results in summing customer orders o* 99
()eek 1! and 2@ ()eek 2! to o$tain ;9. in the *irst
)eek, this amount is su$tracted *rom the $eginninginventory o*
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&ie ences in 'PS &ie ences in 'PS
Period
ro6enirm or
=slushy>somewhat
li9ui(open/
1 2 9 ; < B D E
%ime !ences di$ide a scheduling time hori,on into three sections or phases#sometimes re!erred as !ro,en# slushy# and li&uid# in re!erence to the !irmness o!schedule?
6ro,en phase? is the near@term phase that is so soon that deli$ery o! a new orderwould be impossible# or only possible using $ery costly or e-traordinary optionssuch as delaying another deli$ery*
Slushy phase? is the ne-t phase# and its time !ence is usually a !ew periods beyondthe !ro,en phase* +rder entry in this phase necessitate trade@o!!s# but is less costly
or disrupti$e than in !ro,en phase*Li&uid phase? is the !arthest out on the time hori,on* New orders or cancellationscan be entered with ease