Aggregate planning in class
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Aggregate production planning determines production levels over the next 6-18 months. It aims to balance objectives like customer service, workforce stability, costs and profits. Inputs include demand forecasts and the business plan. Outputs include a master schedule. Common strategies are level output, chase, and varying utilization plans. Level output keeps workforce stable but inventory costs may rise. Chase varies the workforce but hiring/laying off costs are incurred. Varying utilization keeps workforce stable but idle time or overtime costs occur. Ideally a combination of strategies is used.
Aggregate planning in class
- 2. Aggregate production planning Aggregate Production Planning is planning about how many units of the product are to be produced on a weekly or monthly basis for the coming six to eighteen months. This plan should be in line with the overall business plan of the company. • Objectives of Aggregate Planning i. The overall objective is to balance conflicting objectives involving customer service, work force stability, cost and profit. ii. To establish company-wide strategic plan for allocating resources. iii.To develop an economic strategy to meet customer demand.
- 3. Inputs to and Outputs from Aggregate Production Planning
- 4. Steps in Effective Aggregate Planning Steps in Effective Aggregate Planning Process Process Demand Forecasts Business Plan provided by the Marketing provided by the Top Department Management Strategies for Pure Aggregate Planning considered by the Production Manager Production planning Level Output Rate Plan Chase Plan Varying Utilization Rate Plan strategies A combination of the pure planning strategies called the Intermediate Plan is prepared by the Production Manager Disaggregating of the Aggregate Production Plan (Intermediate Plan) is done in order to arrive at a Master Schedule Beginning Inventory Status Master Scheduling Customer orders Process committed Tentative Master Projected on-hand Production Schedule Available-to-promise Inventory (MPS) Inventory Tentative MPS is run through the Material Requirements Planning (MRP) Rough-cut capacity planning Processing Logic to test for feasibility Revised Master Production Schedule is 4 fixed by using Time Fences
- 5. Level out put rate plan: • The inventory size is varied keeping the workforce size and utilization of workers constant. • The number of workers is kept constant throughout the time period under consideration. • During months of low demand , the excess units produced over demand are accumulated as inventory. • The advantage of this plan is that the cost of hiring and training new workers is zero. • Also the cost of laying off workers is zero, as the workforce size is constant. • The employee moral is high due to sense of job security. • The disadvantage is , in low demand period, the inventory cost will be high due to its large size.
- 6. Chase plan • The work force size is varied accordingly demand, keeping utilization of workers and inventory size constant. • During months of low demand, the workforce size is decreased and extra workers are laid off, and vis a vis. • The hiring and laying off costs are substantial in this plan. • The workers moral is low due to sense of un security. • The inventory is almost negligible as the production of items is in tune with demand. • During the month of heavy demand, overtime may be required on the part of workers, for which the company incurs overtime cost.
- 7. Varying utilization plan • The utilization of workers is varied keeping the workforce size and inventory size constant. • The number of workers is kept constant in this plan. • During the months of low demand, the workers produces less so as to match the demand and they have a lot of ideal time. • On other hand, during the months of high demand, the excess units required over regular production are produced by overtime on the part of workers. • The ideal time on the part of workers during the months of low demand is a loss to the company and same way again company incur loss in time of high demand due to overtime. • Still company incur negligible cost as far as inventory, as there is no inventory accumulation. Ideally, company should chose all these plan as a combination, as all individual Ideally, company should chose all these plan as a combination, as all individual strategies have their own draw backs. . strategies have their own draw backs