DEEPIKA MANOHAR

PRITAM KUDNAVERJAGU MAJEEHIMANSHU

PANDEYMASUD KARIM

GAURAV KR PAL

AGGREGATE PLANNING

Attempts to match the supply of and demand for a product or service by determining the appropriate quantities and timing of inputs, transformation, and outputs.  Decisions made on production, staffing, inventory and backorder levels.

DEFINITION:

Considers a "planning horizon" from about 3 to 18 months, with periodic updating

Looks at aggregate product demand, stated in common terms

Looks at aggregate resource quantities, stated in common terms

Possible to influence both supply and demand by adjusting production rates, workforce levels, inventory levels, etc., but facilities cannot be expanded.

Characteristics Of Aggregate Planning:

Maximize customer service

Minimize inventory investment

Minimize changes in workforce levels

Minimize changes in production rates

Maximize utilization of plant and equipment

Objectives of Aggregate Planning :

A managerial statement of the period-by-period staff sizes and labor-related capacities, given customer requirements and capacity limitations.

Staffing Plan ( Service Aggregate Plan ):

Attempts to handle fluctuations in demand by focusing on demand management

Use pricing strategies and/or advertising and promotion

Develop counter-cyclical products Request customers to backorder or advance-

order Do not meet demand

Aggregate Planning Strategies

Active Strategy:

Attempts to handle fluctuations in demand by focusing on supply and capacity management

Vary size work force size by hiring or layoffs Vary utilization of labour and equipment

through overtime or idle time Build or draw from inventory Subcontract production Negotiate cooperative arrangements with

other firms Allow backlogs, back orders, and/or stockouts

Passive strategy (Reactive Strategy):

Combines elements of both an active strategy and a passive (reactive) strategy

Firms will usually use some combination of the two

Mixed Strategy:

Capacities (workforce levels, production schedules, output rates, etc.) are adjusted to match demand requirements over the planning horizon.

Passive (Reactive) Strategies in Aggregate Planning: Basic ApproachesChase approach

Advantages: Anticipation inventory is not required, and

investment in inventory is low Labor utilization is kept high

Disadvantages: Expense of adjusting output rates and/or

workforce levels Alienation of workforce

Capacities (workforce levels, production schedules, output rates, etc.) are kept constant over the planning horizon.

Level Approach :

Stable output rates and workforce levels

Unlike the rest of Psychology it focuses on how we are different from each other rather than generalizing findings to everybody.

Advantages:

Greater inventory investment is required

Increased overtime and idle time

Resource utilizations vary over time

Disadvantages:

Intuitive methods use management intuition, experience, and rules-of-thumb, frequently accompanied by graphical and/or spreadsheet analysis.

Aggregate Planning Methods: Intuitive Methods :

Easy to use and explain

Advantage:

Many solutions are possible, most of which are not optimal

Disadvantage:

Suppose you have the following forecasts for demand to meet:

Aggregate Planning Example:

Month 1 2 3 4 5 6

Demand

1000 1200 1500 1900 1800 1600

Regular production cost $35/unit

Lost sales $100/unit

Inventory carrying costs $10/unit/month

Subcontracting costs $60/unit

Hiring costs $1500/worker

Firing costs $3000/worker

Beginning workforce level 20 workers

Capacity per worker 50 units/month

Initial inventory level 700 units

Closing inventory level 100 units

Relevant Costs:

Find the requirements for the period of the plan and produce the average amount needed per month to meet the plan.

LEVEL PRODUCTION STRATEGY :

Average Requirements :

total requirements - opening inv. + closing inv.

number of periods

First determine the average requirements per month:

(9000 - 700 + 100)/6 = 1400 units/period

Steps: Enter the production data Determine hire/fire to get to production level

desired Update inventory levels Does the inventory run out - If it does recalculate

average production needed and go to step 1 Calculate totals for each category Calculate costs

Avgerage requirements =

Trial and Error to find a good solution Use Excel to model the problem and test

the impact of different solutions Build the model using proper structure with

key variables at the top and a summary of key results immediately below.

Intuitive (Mixed) Strategy

Aggregate planning problems can be solved optimally using linear programming (LP).

Given the constraints on requirements, production capabilities, allowed workforce changes, overtime and subcontracting limits plus all relevant costs LP will find an optimal solution to the problem which minimizes total costs.

Excel's Solver add-in will perform LP

Finding Optimal Solutions Using Linear Programming

An aggregate plan takes into consideration the overall level of output and the capacity that is required to produce it. There are two basic approaches to estimating the capacity that will be required to produce an aggregation or grouping of a company’s products.

APPROACHES TO AGGREGATE PLANNING :

With this approach, the desirable overall plan is developed for the periods in the planning horizon, with the plan for the first few periods being fairly firm. This approach rests on the assumption that if the proper amount of total capacity is available, the right amount of capacity for all of the parts will be available. With this approach, the desirable overall plan is developed for the periods in the planning horizon, with the plan for the first few periods being fairly firm. This approach rests on the assumption that if the proper amount of total capacity is available, the right amount of capacity for all of the parts will be available.

Top down Aggregate Planning :

This is also called as resource requirement planning (sometimes called rough-cut capacity planning) which is usually used in conjunction with material requirement planning (MRP-1) both capacity and materials must be available for products to be made and hence material plans need to be coordinated with a more detailed production plan.

Bottom-up Aggregate Planning :

This is done in conjunction with the tentative mater production schedule to test its feasibility in terms of capacity before the Master Production Schedule (MPS) is finalized.

This ensures that a proposed MPS does not inadvertently overload any key department, work centre or machine, making the MPS unworkable. Although the check can be applied to all work centers, it is typically applied only to the critical work centers that are most likely to be bottlenecks. It is a quick and inexpensive way to find and correct gross discrepancies between the capacity requirements of the MPS and the available capacity.

Rough-cut Capacity Planning :

For manufacturing firms the luxury of building up inventories during periods of slack demand allows coverage of an anticipated time when demand will exceed capacity. Services cannot be stockpiled or inventoried so they do not have this option. Also, since services are considered "perishable," any capacity that goes unused is essentially wasted. An empty hotel room or an empty seat on a flight cannot be held and sold later, as can a manufactured item held in inventory.

AGGREGATE PLANNING IN SERVICES.

Service capacity can also be very difficult to measure. When capacity is dictated somewhat by machine capability, reasonably accurate measures of capacity are not extremely difficult to develop. However, services generally have variable processing requirements that make it difficult to establish a suitable measure of capacity.

Historically, services are much more labor intensive than manufacturing, where labor averages 10 percent (or less) of total cost. This labor intensity can actually be an advantage because of the variety of service requirements an individual can handle. This can provide quite a degree of flexibility that can make aggregate planning easier for services than manufacturing.

Operations management, also called "operations planning" or "operations scheduling," is a term assigned to the planning of production in all aspects, from workforce activities to product delivery. While this type of planning is almost exclusively seen in manufacturing environments, many of the techniques are used by service-oriented businesses. Simple to implement, operations management can be applied using nothing more than a spreadsheet program.

DEFINITION :

Operations management is primarily concerned with the efficient use of resources. While it is sometimes referred to as production planning and employs many of the same techniques, the primary distinguishing characteristic is that production planning is narrowly focused on the actual production whereas operations management looks at the operation as a whole.

Operations planning is an important part of any business. Effective and efficient management of operations is the hallmark of a successful company. Operations management is an old concept, but as many of the techniques of operations management have gained attention in the business media, the definition has become somewhat unclear, making effective management of operations seem more complicated than it really is.

Operations Planning & Scheduling :

Operations management has a broad focus: inventory levels must be managed, materials ordered/stored, capacity maximized, relationships with suppliers maintained, and the interactions within the system monitored.

2. Aspects of Operations Management :

Capacity planning is focused on maximizing the capacity of a company to make it more efficient and more profitable. Capacity planning at its most basic attempts to match the volume the company is able to produce to the demand to avoid downtime by preventing bottlenecks.

3. Capacity Planning :

Aggregate planning is a static form of production planning. It focuses on satisfying expected demand. This may be in relation to production, the workforce itself or inventory management. Aggregate planning basically ties facility planning in with scheduling decisions and it does so quantitatively, meaning it produces numbers to back up an operations plan.

4.Production Planning:

THANK YOU