2. Attempts to match the supply of and
demand for a product or service by
determining the appropriate quantities and
timing of inputs, transformation, and
outputs. Decisions made on production,
staffing, inventory and backorder levels.
3. Considers a "planning horizon" from about 3
to 18 months, with periodic updating
Looks at aggregate product demand, stated
in common terms
Looks at aggregate resource quantities,
stated in common terms
Possible to influence both supply and
demand by adjusting production rates,
workforce levels, inventory levels, etc., but
facilities cannot be expanded.
4. Maximize customer service
Minimize inventory investment
Minimize changes in workforce levels
Minimize changes in production rates
Maximize utilization of plant and equipment
5. A managerial statement of the period-by-
period staff sizes and labor-related
capacities, given customer requirements and
capacity limitations.
6. Attempts to handle fluctuations in demand by
focusing on demand management
Use pricing strategies and/or advertising and
promotion
Develop counter-cyclical products
Request customers to backorder or advance-
order
Do not meet demand
7. Attempts to handle fluctuations in demand by
focusing on supply and capacity management
Vary size work force size by hiring or layoffs
Vary utilization of labour and equipment
through overtime or idle time
Build or draw from inventory
Subcontract production
Negotiate cooperative arrangements with
other firms
Allow backlogs, back orders, and/or
stockouts
8. Combines elements of both an active strategy
and a passive (reactive) strategy
Firms will usually use some combination of
the two
9. Capacities (workforce levels, production
schedules, output rates, etc.) are adjusted to
match demand requirements over the
planning horizon.
10. Advantages:
Anticipation inventory is not required, and
investment in inventory is low
Labor utilization is kept high
Disadvantages:
Expense of adjusting output rates and/or
workforce levels
Alienation of workforce
11. Capacities (workforce levels, production
schedules, output rates, etc.) are kept
constant over the planning horizon.
12. Stable output rates and workforce
levels
Unlike the rest of Psychology it
focuses on how we are different
from each other rather than
generalizing findings to
everybody.
13. Greater inventory investment is required
Increased overtime and idle time
Resource utilizations vary over time
14. Intuitive methods use management intuition,
experience, and rules-of-thumb, frequently
accompanied by graphical and/or spreadsheet
analysis.
15. Easy to use and explain
Many solutions are possible, most of which
are not optimal
16. Suppose you have the following forecasts for
demand to meet:
Month 1 2 3 4 5 6
Demand 1000 1200 1500 1900 1800 1600
17. Regular production cost $35/unit
Lost sales $100/unit
Inventory carrying costs $10/unit/month
Subcontracting costs $60/unit
Hiring costs $1500/worker
Firing costs $3000/worker
Beginning workforce level 20 workers
Capacity per worker 50 units/month
Initial inventory level 700 units
Closing inventory level 100 units
18. Find the requirements for the period of the
plan and produce the average amount needed
per month to meet the plan.
20. (9000 - 700 + 100)/6 = 1400 units/period
Steps:
Enter the production data
Determine hire/fire to get to production level
desired
Update inventory levels
Does the inventory run out - If it does recalculate
average production needed and go to step 1
Calculate totals for each category
Calculate costs
21. Trial and Error to find a good solution
Use Excel to model the problem and test the
impact of different solutions
Build the model using proper structure with
key variables at the top and a summary of key
results immediately below.
22. Aggregate planning problems can be solved
optimally using linear programming (LP).
Given the constraints on requirements,
production capabilities, allowed workforce
changes, overtime and subcontracting limits
plus all relevant costs LP will find an optimal
solution to the problem which minimizes
total costs.
Excel's Solver add-in will perform LP
23. An aggregate plan takes into consideration
the overall level of output and the capacity
that is required to produce it. There are two
basic approaches to estimating the capacity
that will be required to produce an
aggregation or grouping of a company’s
products.
24. With this approach, the desirable overall plan is
developed for the periods in the planning
horizon, with the plan for the first few periods
being fairly firm. This approach rests on the
assumption that if the proper amount of total
capacity is available, the right amount of capacity
for all of the parts will be available. With this
approach, the desirable overall plan is developed
for the periods in the planning horizon, with the
plan for the first few periods being fairly firm.
This approach rests on the assumption that if the
proper amount of total capacity is available, the
right amount of capacity for all of the parts will
be available.
25. This is also called as resource requirement
planning (sometimes called rough-cut
capacity planning) which is usually used in
conjunction with material requirement
planning (MRP-1) both capacity and materials
must be available for products to be made
and hence material plans need to be
coordinated with a more detailed production
plan.
26. This is done in conjunction with the tentative
mater production schedule to test its feasibility
in terms of capacity before the Master Production
Schedule (MPS) is finalized.
This ensures that a proposed MPS does not
inadvertently overload any key department, work
centre or machine, making the MPS unworkable.
Although the check can be applied to all work
centers, it is typically applied only to the critical
work centers that are most likely to be
bottlenecks. It is a quick and inexpensive way to
find and correct gross discrepancies between the
capacity requirements of the MPS and the
available capacity.
27. For manufacturing firms the luxury of building
up inventories during periods of slack demand
allows coverage of an anticipated time when
demand will exceed capacity. Services cannot be
stockpiled or inventoried so they do not have this
option. Also, since services are considered
"perishable," any capacity that goes unused is
essentially wasted. An empty hotel room or an
empty seat on a flight cannot be held and sold
later, as can a manufactured item held in
inventory.
28. Service capacity can also be very difficult to measure.
When capacity is dictated somewhat by machine
capability, reasonably accurate measures of capacity
are not extremely difficult to develop. However,
services generally have variable processing
requirements that make it difficult to establish a
suitable measure of capacity.
Historically, services are much more labor intensive
than manufacturing, where labor averages 10 percent
(or less) of total cost. This labor intensity can actually
be an advantage because of the variety of service
requirements an individual can handle. This can
provide quite a degree of flexibility that can make
aggregate planning easier for services than
manufacturing.
29. Operations management, also called "operations
planning" or "operations scheduling," is a term
assigned to the planning of production in all
aspects, from workforce activities to product
delivery. While this type of planning is almost
exclusively seen in manufacturing environments,
many of the techniques are used by service-
oriented businesses. Simple to implement,
operations management can be applied using
nothing more than a spreadsheet program.
30. Operations management is primarily
concerned with the efficient use of resources.
While it is sometimes referred to as
production planning and employs many of
the same techniques, the primary
distinguishing characteristic is that
production planning is narrowly focused on
the actual production whereas operations
management looks at the operation as a
whole.
31. Operations planning is an important part of
any business. Effective and efficient
management of operations is the hallmark of
a successful company. Operations
management is an old concept, but as many
of the techniques of operations management
have gained attention in the business media,
the definition has become somewhat unclear,
making effective management of operations
seem more complicated than it really is.
32. Operations management has a broad
focus: inventory levels must be managed,
materials ordered/stored, capacity
maximized, relationships with suppliers
maintained, and the interactions within
the system monitored.
33. Capacity planning is focused on maximizing
the capacity of a company to make it more
efficient and more profitable. Capacity
planning at its most basic attempts to match
the volume the company is able to produce to
the demand to avoid downtime by preventing
bottlenecks.
34. Aggregate planning is a static form of production
planning. It focuses on satisfying expected
demand. This may be in relation to production, the
workforce itself or inventory management.
Aggregate planning basically ties facility planning
in with scheduling decisions and it does so
quantitatively, meaning it produces numbers to
back up an operations plan.
