aggregrate planning

Copyright 2006 John Wiley & Sons, Inc.Copyright 2006 John Wiley & Sons, Inc.Beni AsllaniBeni Asllani

University of Tennessee at ChattanoogaUniversity of Tennessee at Chattanooga

Aggregate PlanningAggregate Planning

Operations Management - 5th EditionOperations Management - 5th Edition

Chapter 13Chapter 13

Roberta Russell & Bernard W. Taylor, IIIRoberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.Copyright 2006 John Wiley & Sons, Inc. 13-13-22

Aggregate PlanningAggregate Planning

Determine the resource capacity needed to meet demand over an intermediate time horizon

Objectives Establish a company wide game plan for allocating

resources Develop an economic strategy for meeting

demand


Meeting Demand StrategiesMeeting Demand Strategies

Adjusting capacityAdjusting capacity Resources necessary to meet demand Resources necessary to meet demand

are acquired and maintained over the are acquired and maintained over the time horizon of the plantime horizon of the plan

Minor variations in demand are handled Minor variations in demand are handled with overtime or under-timewith overtime or under-time

Managing demandManaging demand Proactive demand managementProactive demand management


Strategies for Adjusting Capacity

Level productionLevel production Producing at a constant rate Producing at a constant rate

and using inventory to and using inventory to absorb fluctuations in absorb fluctuations in demanddemand

Chase demandChase demand Hiring and firing workers to Hiring and firing workers to

match demandmatch demand Peak demandPeak demand

Maintaining resources for Maintaining resources for high-demand levelshigh-demand levels

Overtime and under-timeOvertime and under-time Increasing or decreasing Increasing or decreasing

working hoursworking hours SubcontractingSubcontracting

Let outside companies Let outside companies complete the workcomplete the work

Part-time workersPart-time workers Hiring part time workers to Hiring part time workers to

complete the workcomplete the work BackorderingBackordering

Providing the service or Providing the service or product at a later time periodproduct at a later time period


Level ProductionLevel Production

DemandDemand

Un

its

Un

its

TimeTime

ProductionProduction


Chase DemandChase Demand

DemandDemand

Un

its

Un

its

TimeTime

ProductionProduction


Strategies for Managing Demand

Shifting demand into other time periods

Incentives Sales promotions Advertising campaigns

Partnering with suppliers to reduce information distortion along the supply chain

SMILESMILE

A man checked into a hotel in Pretoria. There was a computer in his A man checked into a hotel in Pretoria. There was a computer in his room, so he decided to send an e-mail to his wife. However, he room, so he decided to send an e-mail to his wife. However, he accidentally typed the wrong e-mail address, and without realizing his accidentally typed the wrong e-mail address, and without realizing his error, he sent the e-mail. Meanwhile... somewhere in Cape Town a widow error, he sent the e-mail. Meanwhile... somewhere in Cape Town a widow had just arrived home from her husband's funeral. The widow decided to had just arrived home from her husband's funeral. The widow decided to check her e-mail, expecting messages from relatives and friends. After check her e-mail, expecting messages from relatives and friends. After reading the first message, she fainted. The widow's son rushed into the reading the first message, she fainted. The widow's son rushed into the room, found his mother on the floor, and saw the computer screen which room, found his mother on the floor, and saw the computer screen which Read:Read:

To: My Loving WifeTo: My Loving WifeSubject: I've arrivedSubject: I've arrivedI know you're surprised to hear from me. They have computers here now. I know you're surprised to hear from me. They have computers here now. And you are allowed to send e-mails to your loved ones. I've just arrived And you are allowed to send e-mails to your loved ones. I've just arrived and have been checked in. I see that everything has been prepared for and have been checked in. I see that everything has been prepared for your arrival tomorrow. Looking forward to see you then!your arrival tomorrow. Looking forward to see you then!

13-13-88

Aggregate Versus Aggregate Versus DetailedDetailed ForecastsForecasts Sales forecasts can be aggregated with respect to Sales forecasts can be aggregated with respect to

time:time:

January February March AggregateProduct A 100 150 200

Sales forecasts can be aggregated with respect to Sales forecasts can be aggregated with respect to time:time:

January February March AggregateProduct A 100 150 200 450

Aggregate Versus Aggregate Versus DetailedDetailed ForecastsForecasts

Sales forecasts can be aggregated with respect to Sales forecasts can be aggregated with respect to product:product:

JanuaryProduct A 100Product B 200Aggregate


Sales forecasts can be aggregated with respect to Sales forecasts can be aggregated with respect to product:product:

JanuaryProduct A 100Product B 200Aggregate 300


Why? Aggregate forecasts are more accurate Why? Aggregate forecasts are more accurate than individual detailed forecaststhan individual detailed forecasts

January Forecast

January Actual

Forecast Error % Error

Product A 100 120Product B 200 180Aggregate 300


Why? Aggregate forecasts are more accurate Why? Aggregate forecasts are more accurate than individual detailed forecaststhan individual detailed forecasts

January Forecast

January Actual

Forecast Error % Error

Product A 100 120 -20 -17%Product B 200 180 20 11%Aggregate 300 300 0 0


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