Aggregate Planning Planning Process Scheduling Decisions Operations Management Chapter 13 Short range Medium range Long range Chris Schrage OPS 13 2 Aggregate Combining appropriate resources into general or overall terms Disaggregation Breaking up components of aggregate plan into detailed aspects Five questions of aggregate planning Should inventories be used to absorb changes in demand during the planning period? Should changes be accommodated by varying the size of the workforce? Should part-timers be used, or should overtime and idle time absorb fluctuations? Should subcontractors be used on fluctuating orders so a stable workforce can be maintained? Should prices or other factors be changed to influence demand? Chris Schrage OPS 13 3 Chris Schrage OPS 13 4 Capacity options Changing inventory levels Varying workforce size by hiring/layoffs Varying production rates through overtime or idle time Subcontracting Using part-time workers options Influencing demand Back ordering during high-demand periods Counter-seasonal product and service mixing Chris Schrage OPS 13 Chris Schrage OPS 13 6 1
Mixing Options Chase strategy Hire & fire employees to meet demand levels Level strategy Maintain constant level of company employees Aggregate Planning Methods Graphical and Charting Method Transportation Method of Linear Programming Look for OPTIMAL solution Management Coefficients Use of heuristics Others LDR- optimum production rate and workforce size for specific period Simulation----OPSIM Chris Schrage OPS 13 7 Chris Schrage OPS 13 8 Graphical and Charting Method Easiest to Use Many solutions not choose optimal solution Chris Schrage OPS 13 9 Power s Ladder Manufacturing Expected 8 9 9 8 Days Chris Schrage OPS 13 1 84 246 per day Daily Expected 8 9 9 8 Days Chris Schrage OPS 13 11 per day Average requirement= 84/246 = 34 per day 23 34 29 34 32 4 43 43 4 32 3 34 4 4 3 3 2 1 1 Chris Schrage OPS 13 12 Average requirement= 84/246 = 34 per day 2
Cost Information Backorder (shortage) per ladder $1 per month carrying $3 per month Present work force- ladders/ month Cost is $ 7 per ladder at /mo. Cost is $7 for each ladder OVER /mo. If less than ladders/mo. Cost is $82 per ladder Constant workforce level 34 units/day forecast Change Chris Schrage OPS 13 13 Chris Schrage OPS 13 14 Calculations Additional Costs 34 units/day 748 612 748 68 68 748 68 612 $3832 forecast 8 9 9 8 units over per month @$ = $ Change +248 +12 +114 +14 +48-1 -6-6 -1 +48 +8 +12 248 26 374 388 436 316 13-6 -176-128 -48-36 $1,896 444 units shortage @ $1/unit = $4,44 2 units carried @ $3 per unit = $646 Lenova Computer, Ltd Beginning inventory 1 units Stockout $ per unit Cost $1 per unit based on count at month s end Sub-contracting $4 extra per unit Maximum of 1 extra units per month Maximum of units per month $1 extra per unit 236 units Chris Schrage under OPS 13 per month @$12 = $2832 Chris Schrage OPS 13 16 1 14 1 Plan 1- Produce at /month and subcontract to meet demand Plan 2- produce at / month and use overtime to meet demand Plan 1 Beginning = 1 Plan 2a Beginning = 1 production +3 3 Subcontrator Total 3 + Total +3 3 +1 3 14 1 +1 +1 8 4 8 1 14 1-1 -1 14 2 Chris Schrage OPS 13 17 $ per unit stockout Chris Schrage OPS 13 3
Plan 2b Beginning = 1 Plan 3 Beginning = 1 14 1 production + +1 Overti me Total 4 8 14 1 +4 + +4 +3 +1 +1 4 4 3 Total 4 9 1 1 Chris Schrage OPS 13 19 Chris Schrage OPS 13 Plan comparison Transportation Model Plan Plan 1 Plan 2a Plan 2b Plan 3 Cost $, $, $12, $, Method of linear programming Attempts to find the optimal solution The Schedule-Sequencing Problem Edward H. Bowman Operations Research, Vol. 7, No. (Sep. - Oct., 199), pp. 6-624 Assembly-Line Balancing by Linear Programming E. H. Bowman Operations Research, Vol. 8, No. 3 ( - Jun., 196), pp. 38-389 Chris Schrage OPS 13 Chris Schrage OPS 13 Transportation Table Transportation Table Allocate production capacity to meet demand at a minimum. Assume the initial inventory has no holding in the initial period To From 1 2 3 Excess Supply Initial 1 1 1 2 2 2 3 3 3 Chris Schrage OPS 13 23 Period 1 2 3 3 3 3 Initial 1 12 1 Regular-time /unit /unit Subcontract /unit Carrying /unit-month Subcontract 4 Chris Schrage OPS 13 24 $1 $1 $ $4 Forecast 4 units 4
Results To From 1 2 3 Excess Time Supply Initial 4 8 1 14 1 1 3 1 14 1 1 1 4 8 1 1 14 2 3 3 1 14 2 7 12 4 2 1 3 3 3 1 3 1 1 3 DEMAND 4 4 32 29 4 Total Cost $11,79 Chris Schrage OPS 13 2 Transportation Table Allocate production capacity to meet demand at a minimum. No initial or ending inventory. Period 1 2 3 4 Regular Time 23 2 29 3 24 26 24 Initial Regular-time /unit /unit Subcontract /unit Carrying /unit-month Subcontract 12 1 1 17 units $98 $131 $1 $1 Forecast 2 294 3 31 Chris Schrage OPS 13 26 To To 1 2 3 4 From Excess Time Supply 1 1 1 2 2 2 3 3 3 4 4 4 DEMAND From 1 2 3 4 Excess Time Supply Regular 1 128 Time 98 1 23 23 131 141 11 161 1 1 1 1 1 12 12 98 1 2 2 2 131 141 11 2 24 24 1 1 1 2 1 1 98 3 29 29 131 141 3 26 26 1 1 3 1 1 98 4 3 3 131 4 1 23 24 1 4 17 17 DEMAND 2 294 3 31 62 27,67 3,11 327, 296,81 TOTAL 1,6,81 TOTAL Chris Schrage OPS 13 27 Chris Schrage OPS 13 28 Services Cost of labor is Critical Assure response to customer needs Allow for on-call resources Flexibility in skill base Personal flexibility for work scheduling Restaurants Smoothing production rate Appropriate workforce size Chris Schrage OPS 13 29 Chris Schrage OPS 13 3
Small service industries Copyworks H&R Block Airline Industry Flights in and out Number of flights Number of passengers serviced Air and ground personnel Fare allocation Chris Schrage OPS 13 31 Chris Schrage OPS 13 32 Yield Management Revenue management Attempt to maximize profit (or yield) In response to perish-ability of service offerings Characteristics Can be sold in advance of consumption fluctuates Capacity if relatively fixed can be segmented Variable s low-fixed s high Yield management issues Multiple pricing structures Forecasts of use and duration of the use Changes in demand Chris Schrage OPS 13 33 Chris Schrage OPS 13 34 Yield Management Matrix Price Tend to be fixed Tend to be variable Duration of Use Predictable Unpredictable Quadrant 1 Movies Convention centers Quadrant 3 Restaurants Golf courses Quadrant 2 Hotels Airlines Quadrant 4 Nursing homes Rehabilitation centers Chris Schrage OPS 13 3 6