Chapter 1, HeizerRender, 5th edition

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Operations ManagementAggregate PlanningChapter
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Outline

• Global Company Profile Anheuser-Busch
• The Planning Process
• The Nature of Aggregate Planning
• Aggregate Planning Strategies
• Capacity Options
• Demand Options
• Mixing Options to Develop a Plan

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Outline - continued

• Methods for Aggregate Planning
• Graphical and Charting Methods
• Mathematical Approaches to Scheduling
• Comparison of Aggregate Scheduling Methods
• Aggregate Planning in Services
• Restaurants
• Miscellaneous Services
• National Chains of Small Service Firms
• Airline Industry
• Hotel Industry
• Hospitals

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Learning Objectives

• When you complete this chapter, you should be
  able to
• Identify or Define
• Aggregate planning
• Tactical scheduling
• Graphic technique for aggregate planning
• Mathematical techniques for aggregate planning
• Describe or Explain
• How to do aggregate planning
• How service firms develop aggregate plans

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Anheuser-Busch

• Anheuser-Busch produces nearly 40 of the beer
  consumed in the U.S.
• Matches fluctuating demand by brand to specific
  plant, labor, and inventory capacity
• High facility utilization requires
• meticulous cleaning between batches
• effective maintenance
• efficient employees
• efficient facility scheduling

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Aggregate Planning Requires

• Logical overall unit for measuring sales and
  outputs
• Forecast of demand for intermediate planning
  period in these aggregate units
• Method for determining costs
• Model that combines forecasts and costs so that
  planning decisions can be made

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Planning

• Setting goals objectives
• Example Meet demand within the limits of
  available resources at the least cost
• Determining steps to achieve goals
• Example Hire more workers
• Setting start completion dates
• Example Begin hiring in Jan. finish, Mar.
• Assigning responsibility

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Figure 13.1
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Planning Horizons
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Relationships of the Aggregate Plan
Marketplace and Demand
Research and Technology
Product Decisions
Work Force
Process Planning Decisions
Raw Materials Available
Inventory On Hand
Aggregate Schedule for Production
Demand Forecasts, orders
External Capacity
Master Production Schedule
Detailed Work Schedules
Plant Capacity
Priority Planning Scheduling
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Whats Needed for Aggregate Planning

• A mathematically based aggregate planning model
  requires considerable
• time
• problem definition
• model development
• model verification
• model application
• expertise
• people who understand the problem
• people who understand both the modeling process,
  and the specific model
• money
• money to pay for all of the above
• often requires funding for several people for
  several months!

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Aggregate Planning

• Provides the quantity and timing of production
  for intermediate future
• Usually 3 to 18 months into future
• Combines (aggregates) production
• Often expressed in common units
• Example Hours, dollars, equivalents (e.g., FTE
  students)
• Involves capacity and demand variables

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Aggregate Planning Goals

• Meet demand
• Use capacity efficiently
• Meet inventory policy
• Minimize cost
• Labor
• Inventory
• Plant equipment
• Subcontract

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Aggregate Planning StrategiesPure Strategies

• Capacity Options change capacity
• changing inventory levels
• varying work force size by hiring or layoffs
• varying production capacity through overtime or
  idle time
• subcontracting
• using part-time workers

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Aggregate Planning StrategiesPure Strategies

• Demand Options change demand
• influencing demand
• backordering during high demand periods
• counterseasonal product mixing

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Aggregate Scheduling Options - Advantages and
Disadvantages
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Advantages/Disadvantages - continued
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Advantages/Disadvantages - continued
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Advantage/Disadvantage - continued
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The Extremes
Chase Strategy
Level Strategy
Production equals demand
Production rate is constant
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Aggregate Planning Strategies

• Mixed strategy
• Combines 2 or more aggregate scheduling options
• Level scheduling strategy
• Produce same amount every day
• Keep work force level constant
• Vary non-work force capacity or demand options
• Often results in lowest production costs

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Aggregate Planning Methods

• Graphical charting techniques
• Popular easy-to-understand
• Trial error approach
• Mathematical approaches
• Transportation method
• Linear decision rule
• Management coefficients model
• Simulation

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The Graphical Approach to Aggregate Planning

• Forecast the demand for each period
• Determine the capacity for regular time,
  overtime, and subcontracting, for each period
• Determine the labor costs, hiring and firing
  costs, and inventory holding costs
• Consider company policies which may apply to the
  workers or to stock levels
• Develop alternative plans, and examine their
  total costs

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Comparison of Aggregate Planning Methods
Techniques Approaches
Aspects
Trial and error Optimization Heuristic
Simple to understand, easy to use. Many
solutions one chosen may not be optimal LP
software availablepermits sensitivity analysis
and constraints. Linear function may not be
realistic Simple, easy to implement tries to
mimic managers decision process uses regression

• Charting/graphical methods
• Transportation method
• Management
• coefficient model

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Controlling the Cost of Labor in Service Firms

• Seek
• Close control of labor hours to ensure quick
  response to customer demand
• On-call labor resource that can be added or
  deleted to meet unexpected demand
• Flexibility of individual worker skills to permit
  reallocation of available labor
• Flexibility of individual worker in rate of
  output or hours of work to meet demand