Aggregate Planning and Scheduling

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AGGREGATE PLANNING

AND SCHEDULING


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Aggregate planning involves planning the best quality toproduce in the intermediate-range horizon (3 months to oneyear)

Objectives of Aggregate Planning

i. The overall objective is to balance conflictingobjectives involving customer service, work forcestability, cost and profit.

ii. To establish company-wide strategic plan for allocatingresources.

iii. To develop an economic strategy to meet customer

demand.


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Inputs to and Outputs from AggregateProduction Planning


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Importance of Aggregate

Plans The various inputs to aggregate plans that affect the

performance of production and operations managersare:i. Engineeringii. Materialsiii. Operationsiv. Marketing and distributionv. Accounting and financevi. Human resources


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Aggregate Planning or

Aggregate CapacityPlanning

Need for Aggregate Capacity Planning

1. It facilitates fully loaded facilities and minimizesoverloading and underloading and keeps productioncosts low.

2. Adequate production capacity is provided to meetexpected aggregate demand.

3. Orderly and systematic transition of productioncapacity to meet the peaks and valleys of expectedcustomer demand is facilitated.


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Steps in Aggregate Capacity Planning

i. Determine the demand (i.e., sales forecast) for eachproduct for each time period (i.e., weeks or months orquarters) over the planning horizon (6 to 12 months).

ii. Determine the aggregate demand by summing up thedemand for individual products.

iii. Transform the aggregate demand for each time periodinto workers, materials, machines required to satisfyaggregate demand.

iv. Identify company policies that are pertinent (e.g., policyregarding safety stock maintenance, maintaining stableworkforce etc.).


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i. Determine unit costs for regular time, overtime,

subcontracting, holding inventories, back orders, layoffs etc.ii. Develop alternative resource plans for providing necessary

production capacity to support the cumulative aggregatedemand and compute the cost of each alternative plan.

iii. Select the resource plan from among the alternativesconsidered that satisfies aggregate demand and best meetsthe objectives of the firm.


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Approaches to Aggregate Planning

1. Top down approach2. A bottom-up approach or subplan consolidation

approach. Rough-cut Capacity Planning

This is done in conjunction with the tentativemaster production schedule to test its feasibility

in terms of capacity before the master productionschedule (MPS) is finalised.


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Flow Chart for Rough-cut Capacity Planning


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Capacity Planning andCapacity Requirement Planning (CRP)

Production capacity is defined as the maximum production rateof a facility or a plant.Types of Capacity

1. Fixed capacity2. Adjustable capacity3. Design capacity4. System capacity5. Potential capacity

6. Immediate capacity7. Effective capacity8. Normal capacity or rated capacity9. Actual or utilised capacity


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Actual Output

System efficiency is the ratio of the actual measuredoutput of goods/services to the system capacity

System efficiency =

System capacity


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Capacity DecisionsMajor considerations in capacity decisions are

a. What size of plant? How much capacity to install?b. When capacity is needed? When to phase-in capacity or

phase-out capacity?c. At what cost? How to budget for the cost?

Factors Affecting Determination of Plant Capacity1. Market demand for a product/service.2. The amount of capital that can be invested.3. Degree of automation desired.4. Level of integration (i.e., vertical integration).

5. Type of technology selected.6. Flexibility for capacity additions.


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Capacity Planning

Capacity planning involves activities such as:a. Assessing existing capacityb. Forecasting future capacity needsc. Identifying alternative ways to modify capacityd. Evaluating financial, economical and technological

capacity alternativese. Selecting a capacity alternative most suited to achieve

the strategic mission of the firm. Capacity planninginvolves capacity decisions that must merge consumer

demands with human, material and financial resourcesof the organization.


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4 Types of Capacity Planning are: Long term Capacity Planning Short-term Capacity Planing Finite Capacity Planning Infinite Capacity Planning.

Two catagories of factors affecting capacity planning are: Controllable Factors Less Controllable Factors.

Capacity Requirement Planning (CRP): A technique todetermine the labour and equipment capacities needed to

meet the objectives.


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Capacity Requirement Planning (CRP) ProcessCapacity Requirement Planning Process (Flow Chart)


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Master Production Scheduling

Objectives of Master Production Scheduling1. To schedule end items to be completed promptly and

when promised to customers.2. To avoid overloading or underloading the production

facility so that production capacity is efficiently

utilized and low production costs result.Functions of MPS:

. Translating aggregate plans. Evaluating alternative master schedules. Generating material and capacity requirements

. Facilitating information processing. Maintaining priorities. Utilizing the capacity effectively.


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Master Production Schedule - Flow Chart


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Guidelines for Master Scheduling

1. Work from an aggregate production plan2. Schedule common modules when possible

3. Load facilities realistically4. Release orders on a timely basis5. Monitor inventory levels closely6. Reschedule as required


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MPS in Produce-to-stock andProduce-to-order Firms

The elements of the MPS that are affected by the

type of production system are:a. Demand management

b. Lot-sizing

c. Number of products to be scheduled (product-mix).

Documents

Aggregate Planning and Scheduling