Aggregate Planning (Sales

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Aggregate Planning(Sales Operations Planning)
Planning the resource capacity that a firm will
need to meet its demand.
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Planning Overview

• Long-range planning (Strategic)
• Greater than one year planning horizon
• Intermediate-range planning (Tactical)
• Months out (roughly 2-18 months)
• Big Picture approach to planning
• Families or groups (aggregation) of
• Products
• Resources
• Technologies or skills
• Provide rough estimates
• Short-range planning (Detailed Planning)
• Days weeks out

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(No Transcript)
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Production Planning
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Planning Approaches

• Top-Down

• Bottom-Up

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Top-Down Planning

• Develop the aggregate sales forecast and planning
  values.
• Translate the sales forecast into resource
  requirements.
• Personnel, equipment, materials
• Generate alternative production plans.
• Chase, level, mixed
• Select the best of the plans.
• Lowest cost, best fit to capability

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Top-Down Example II(Average Products)
Product of Total Labor/Unit
A100 10 40 hours
B200 50 20 hours
C300 20 15 hours
D400 5 10 hours
E500 10 20 hours
F600 5 10 hours
Weighted Planning Value for labor/unit?
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Top-Down Example Ill(Demand Forecast for 6
months)
Month Demand (units) Worker Hours Workers
March 1592
April 1400
May 1200
June 1000
July 1504
August 1992
Average unit requires 20 worker hours Each
worker works 160 hours per month Convert to
workers needed
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APP

• Inputs Strategic objectives, demand forecasts,
  company policy, financial constraints, capacity
  constraints.
• Outputs Size of workforce, production per month
  (units or ), Inventory levels, and Units or
  dollars subcontracted, back ordered, or lost.
• APP What is the company wide game plan for
  allocation of resources?

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APP Objectives

• Minimize Costs/Maximize Profits
• Maximize Customer Service
• Minimize Inventory Investment
• Minimize Changes in Production Rates
• Minimize Changes in Work-force Levels
• Maximize Utilization of Plant and Equipment

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Aggregate Planning Costs

• Regular-time Costs
• Overtime Costs
• Hiring and Layoff Costs
• Inventory Holding Costs
• Backorder and Stockout Costs

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What are the alternatives to meeting seasonal
demand?

• Pure Strategies
• Level
• Constant Production or output rate (workforce can
  fluctuate)
• Constant Workforce (output can fluctuate)
• What else vary if there is still seasonal demand?
  Costs?
• Reactive or Chase
• Vary Production rates or output
• Vary Workforce
• What will stay constant? Costs?
• Mixed Strategies

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Pure Level Strategy
13-10
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Pure Chase Strategy
13-9
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Good and Rich Candy Company
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Costs and starting information

• Hiring cost 100 per worker
• Firing cost 500 per worker
• Inventory carrying cost0.50 per pound/quarter
• Production per employee1000 pounds per quarter
  (constant)
• Beginning work force100 workers

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Bottom Down Iterative Approach(Similar to Top
Down)
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Detail from Bottom Up Plan
Bill of Labor Product A Product B
Assembly 50 2
Painting 2 3
Hours of Assembly Hours of Hours of Painting
Month Product A Product B Assembly Maximum Painting Painting Maximim
1 January 30 200 1900 2200 660 660 750
2 February 25 205 1660 2200 665 665 750
3 March 20 210 1420 2200 670 670 750
4 April 15 215 1180 2200 675 675 750
5 May 20 210 1420 2200 670 670 750
6 June 50 180 2860 2200 640 640 750
Total 160 1220
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and Load Profile for Assembly
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Change to Bottom Up Plan?
Bill of Labor Product A Product B
Assembly 50 2
Painting 2 3
Hours of Assembly Hours of Hours of Painting
Month Product A Product B Assembly Maximum Painting Painting Maximim
1 January 30 200 1900 2200 660 660 750
2 February 25 205 1660 2200 665 665 750
3 March 20 210 1420 2200 670 670 750
4 April 215 2200 750
5 May 210 2200 750
6 June 180 2200 750
Total 1220
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Services?

• Inventory?
• Ability to predict demand?
• Restaurant
• Grocery
• Airlines