opsm301_s10_aggregateplanning

7/30/2019 OPSM301_S10_AggregatePlanning

1/4

18.05.2010

1

OPSM301 Spring 2010OPSM301 Spring 2010

Supply Chain Management:

Transportation

AnnouncementsAnnouncements

3 quizzes- 2 minimum will be droppedSupply chain and aggregate planning

Inventory management

Extra class on Monda Ma 24 6.30 m

CAS B07

Project 3 due on May 28

Final on June 3

The Aggregate Operations PlanThe Aggregate Operations Plan

y Specify the optimal combination of

Production rate (units completed per unit of time)

Workforce level (number of workers)

Inventory on hand (inventory carried from previous period)

y Product rou or broad cate or a re ation

y This planning is done over an intermediate-range

planning period of 3 to18 months

y Meet demand

y Use capacity efficiently

y Meet inventory policy

Aggregate Planning GoalsAggregate Planning Goals

y n m ze cost

Labor

Inventory

Plant & equipment

Subcontract

Production Planning StrategiesProduction Planning Strategies1. Chase strategy (Set Production rate=Demand rate

for each period)

Match the production rate by hiring and laying off

employees, i.e.

Must have a pool of easily trained applicants to draw on

2. Stable workforcevariable work hours

Vary the number of hours worked through flexible work

schedules or overtime

3. Level strategy (Constant production rate)

Demand changes are absorbed by fluctuating inventory

levels, order backlogs, and lost sales

Production Planning StrategiesProduction Planning StrategiesContinuedContinuedy Pure strategy: when just one of these approaches is

used to absorb demand fluctuations

y Mixed strategy: when two or more of the

approaches are used

y ,

choose to subcontract some portion of production

Similar to the chase strategy, but hiring and laying off are

translated into subcontracting


2/4

18.05.2010

2

Relevant CostsRelevant Costs

1. Basic production costs The fixed and variable costs incurred in

producing a given product type in a given

time period

2. Costs associated with changes in the

production rate

Hiring, training, and laying off personnel

3. Inventory holding costs

4. Backorder costs

Example 2: Formulating Aggregate PlanningExample 2: Formulating Aggregate Planning

problem as a Linear Programproblem as a Linear Program

y A company wants a high level, aggregate production plan for the next 6 months.Projected orders for the company's product are listed in the table. Over the 6-monthperiod, units may be produced in one month and stored in inventory to meet somelater month's demand. Because of seasonal fa ctors, the cost of production is notconstant, as shown in the table:

Demand Production

Month (units) cost

($/unit)

1 1300 100

2 1400 105

3 1000 110

4 800 115

5 1700 110

6 1900 110

y The cost of holding an item in inventory for 1 month is$4/unit/mo.

y Items produced and sold in the same month are not put ininventory.

y The maximum number of units that can be held ininventory is 250.

y The initial inventory level at the beginning of thelannin horizon is 200 units the final inventor level at

the end of the planning horizon is to be 100.

The problem is to determine the optimal amount to producein each month so that demand is met while minimizingthe total cost of production and inventory. Shortages arenot permitted.

Parameters (Given Variables)Parameters (Given Variables)

y Dt : demand in month t

Decision Variables (Variables we canDecision Variables (Variables we can

chan echan e

y Pt: Production in month t

y It : Inventory level at the end of month t

I0 : initial inventory level

I6 : final inventory level

ConstraintsConstraintsy Conservation of flow: A basic requirement in production

planning problems is that product or material must be

conserved.

It-1 + Pt -It = Dt, t = 1,...,6

y Maximum inventory: upper bound constraint on the

inventory levels.

It < 250, t = 1,...,6

y Initial and final conditions:

I0 = 200, I6 = 100

It > 0, Pt > 0 for all t

Objective functionObjective functiony Minimize Z = 100P1 + 105P2 + 110P3 +

115P4 + 110P5 + 110P6 + 4I1 + 4I2 + 4I3 +

4I4 + 4I5 + 4I6

y See the Excel file in the course share

folder for the solution


3/4

18.05.2010

3

DESIGNING THEDESIGNING THE

NETWORKNETWORK

Issues in Facility LocationIssues in Facility Location

y Proximity to customers: makes rapid delivery

easier

y Business climate: can include presence of similar-

sized businesses, businesses in the same industry, and

other forei n com anies

y Total costs : object is to minimize overall cost

y Infrastructure: adequate road, rail, air, and sea

transportation along with energy and

telecommunications

Issues in Facility LocationIssues in Facility Location ContinuedContinued

y Quality of labor: educational and skill levels must

match needs

y Suppliers: proximity of important suppliers supports

lean production

y Other facilities: location of other facilities can

influence a location decision

y Free trade zones: a closed facility into which

foreign goods can be brought without being subject

to the normal customers requirements

Issues in Facility LocationIssues in Facility Location ContinuedContinued

y Political risk: risks in both the

country of location and the host

country influence the decision

y Government barriers: barriers in

many countries are being removed

y Trading blocs: firms locate within ablock to take advantage of new

markets or lower total cost

Issues in Facility LocationIssues in Facility LocationContinuedContinued

y Environmental regulation: these

impact a certain industry in a given

location and must be included in the

decision

y Host community: host communitys

interest is part of the evaluation process

y Competitive advantage: the location

should provide the company with a

competitive advantage

Transportation Method of LinearTransportation Method of Linear

ProgrammingProgramming

y Transportation method is a special linear

programming method

y Seeks to minimize costs of shipping n

units to m destinations or it seeks to

maximize profit of shipping n units to m

destinations


4/4

18.05.2010

4

U.S. Pharmaceuticals ExampleU.S. Pharmaceuticals Example

From/To Columbus St. Louis Denver Los Angeles

FactorySupply

Indianapolis 25 35 36 60 15

Phoenix 55 30 25 25 6

New York 40 50 80 90 14

Atlanta 30 40 66 75 11

Requirements 10 12 15 9

Si

Define Xij: # units transported from location ito locationj

Cij: Unit cost of transportation between i and j

Objective: i j

ijijxc

Constraints: Supply constraints:

Demand Constraints

i

i

ijSx

Di

j

j

ij Dx =

See the Excel file in the

Course share folder

For the solution

Exercise:Exercise:

500500

2500250011

22

FactoriesFactories WarehouseWarehouse

What is the minimum costly distribution planWhat is the minimum costly distribution plan??

Formulate an LP and folve using Excel SolverFormulate an LP and folve using Excel Solver

F1F1W1W1

25002500

30003000

60006000

25002500

10001000

25002500

30003000

4455SupplySupply DemandDemand

F2F2

F3F3

F4F4

W2W2

W3W3

W4W4

W5W5

Unit Costs of TransportationUnit Costs of Transportation

W1W1 W2W2 W3W3 W4W4 W5W5

F1F1 11 22 33 44 55

F3F3 22 11 33 55 22

F4F4 88 33 44 33 99

opsm301_s10_aggregateplanning

Documents