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PPC3

This document discusses aggregate planning, which involves determining production quantities and timing for the immediate future to minimize costs. It defines aggregate planning and lists its objective to adjust production rates, labor levels, inventory levels, overtime, and subcontracting. The document outlines various strategies for aggregate planning, including using inventories to absorb demand changes; varying workforce size; and using overtime, part-timers, or idle time. It also compares the costs and benefits of different capacity options and demand strategies. The document recommends that a mixed strategy combining options is often the best approach to achieve minimum costs.

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Cici Reemay Nababan
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27 views

PPC3

This document discusses aggregate planning, which involves determining production quantities and timing for the immediate future to minimize costs. It defines aggregate planning and lists its objective to adjust production rates, labor levels, inventory levels, overtime, and subcontracting. The document outlines various strategies for aggregate planning, including using inventories to absorb demand changes; varying workforce size; and using overtime, part-timers, or idle time. It also compares the costs and benefits of different capacity options and demand strategies. The document recommends that a mixed strategy combining options is often the best approach to achieve minimum costs.

Uploaded by

Cici Reemay Nababan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PRODUCTION

PLANNING
CONTROL
LECTURE#3
AGGREGATE
PLANNING
Benedikta Siboro, M.Sc
LEARNING
OBJECTIVES
 Define aggregate planning
 Identify optional strategies for developing an aggregate plan
 Prepare a graphical aggregate plan
 Solve an aggregate plan via the transportation method of linear
programming
 Understand and solve a yield management problem
DEFINITION &
OBJECTIVE
AGGREGATE
PLANNING
 Definition : a planning to determine the quantity and timing of
production for the immediate future.
 Objective : to minimize cost over the planning period by adjusting:
 Production rates
 Labor levels
 Inventory levels
 Overtime work
 Subcontracting rates
 Other controllable variables
DEFINITION &
OBJECTIVE
AGGREGATE
PLANNING (2)
STRATEGIES
 Use inventories to absorb changes in demand
 Accommodate changes by varying workforce size
 Use part-timers, overtime, or idle time to absorb changes
 Use subcontractors and maintain a stable workforce
 Change prices or other factors to influence demand
CAPACITY OPTIONS
(1)
Changing inventory levels
 Increase inventory in low demand periods to meet high demand in the
future
 Increases costs associated with storage, insurance, handling,
obsolescence, and capital investment 15% to 40%
 Shortages can mean lost sales due to long lead times and poor
customer service
CAPACITY OPTIONS
(2)
Varying workforce size by hiring or Layoffs
 Match production rate to demand
 Training and separation costs for hiring and laying off workers
 New workers may have lower productivity
 Laying off workers may lower morale and productivity
CAPACITY OPTIONS
(3)
Varying production rate through overtime or idle time
 Allows constant workforce
 May be difficult to meet large increases in demand
 Overtime can be costly and may drive down productivity
 Absorbing idle time may be difficult
CAPACITY OPTIONS
(4)
Subcontracting
 Temporary measure during periods of peak demand
 May be costly
 Assuring quality and timely delivery may be difficult
 Exposes your customers to a possible competitor

Using part-time workers


 Useful for filling unskilled or low skilled positions, especially in
services
DEMAND OPTIONS (1)
Influencing demand
 Use advertising or promotion to increase demand in low periods
 Attempt to shift demand to slow periods
 May not be sufficient to balance demand and capacity

Back ordering during high- demand periods


 Requires customers to wait for an order without loss of goodwill or the
order
 Most effective when there are few if any substitutes for the product or
service
 Often results in lost sales
DEMAND OPTIONS (2)
Counter seasonal product and service mixing
 Develop a product mix of counter seasonal items
 May lead to products or services outside the company’s areas of
expertise
STRATEGY
COMPARISON (1)
STRATEGY
COMPARISON (2)
STRATEGY
COMPARISON (3)
STRATEGY
COMPARISON (4)
WISE WORDS (1)
A mixed strategy may be the best way to achieve minimum costs
There are many possible mixed strategies
Finding the optimal plan is not always possible
Chase strategy:
 Match output rates to demand forecast for each period
 Vary workforce levels or vary production rate
 Favored by many service organizations
MIXING STRATEGIES
 Level strategy:
 Daily production is uniform
 Use inventory or idle time as buffer
 Stable production leads to better quality and productivity

 Some combination of capacity options, a mixed


strategy, might be the best solution

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