Transcript Aggregate Planning - Business Course Materials – Winter 2016

Operations
Management
Aggregate Planning
Chapter 13
13-1
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Aggregation
Clustering goods or services that have similar demand requirements
and common processing, labor, and materials requirements:
Individual 1040’s
Trust returns
Small business
returns
Tax planning
Estate planning
# returns –or–
# forms –or–
# hours
$
# clients –or–
# consultations –or–
# hours
13-2
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Aggregate Planning
Determining the quantity
and timing of production
for the intermediate
future (3 – 18 months)
Responsibility
Planning tasks and horizon
13-3
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Planning Horizons
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen
Today
Responsible:
Operations
managers
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
3 Months
1 year
Responsible:
Top executives
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
5 years
Planning Horizon
13-4
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Inputs to Aggregate Plan
Operations
Current machine capacities
Plans for future capacities
Workforce capacities
Current staffing level
Materials
Supplier capabilities
Storage capacity
Materials availability
Distribution and marketing
Customer needs
Demand forecasts
Competition behavior
Aggregate
plan
Engineering
New products
Product design changes
Machine standards
13-5
Accounting and finance
Cost data
Financial condition
of firm
Human resources
Labor-market conditions
Training capacity
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Inputs to Aggregate Plan
 Physical limitations / constraints
 Managerial policy constraints
13-6
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Relationships of the Aggregate Plan
Marketplace
and Demand
Demand
Forecasts,
orders
Product
Decisions
Process
Planning & Capacity
Decisions
Research and
Technology
Work Force
Aggregate
Plan for
Production
Raw Materials
Available
Inventory On
Hand
External
Capacity
Subcontractors
Master
Production
Schedule, and MRP systems
Detailed Work
Schedules
13-7
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Aggregate Planning Goals
 Meet demand
(maximize customer service)
 Use capacity efficiently
(minimize changes in workforce)
 Meet inventory policy
(minimize inventory)
 Minimize cost
(maximize profit)





Labor
Inventory
Plant & equipment
Subcontract
Backorder / stockout costs
13-8
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Aggregate Planning Options
Capacity Options
Demand Options
 Vary staffing (hire/fire,
overtime, idle time,
temporary workers)
 Subcontracting
 Change inventory levels
 Vary prices
 Vary promotion
 Change lead times
(e.g., backorders)
 Offer complementary
products
13-9
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Aggregate Planning Strategies
Chase
Strategy
Level
Strategy
Production rate
is constant
Mixed
Strategy
13-10
Production
equals
demand
Aggregate Plan Worksheet
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Graphical Approach
Production rate per working day
70
60
50
Level production using
average monthly
forecast demand
Forecast
Demand
40
30
20
10
0
Jan
22
Feb
18
Mar
21
13-11
Apr
May
Jun
21
22
20
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Controlling the Cost of Labor
in Service Firms
Seek:
Close control of labor hours to ensure quick response
to customer demand
 On-call labor resource that can be added or deleted to
meet unexpected demand
 Flexibility of individual worker skills to permit
reallocation of available labor
 Flexibility of individual worker in rate of output or hours
of work to meet demand

13-12
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Yield Management
 The aggregate planning process of allocating resources
to customers at prices that will maximize yield (revenue)
 Used where businesses have:






perishable inventory
service or product can be sold in advance
demand fluctuates
capacity is relatively fixed
demand can be segmented
variable costs are low and fixed costs are high
 Examples – airlines, hotels, cruise lines, etc.
13-13
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Hotel: Single Price Level
Sales
Demand Curve
Potential customers exist who are willing
to pay more than the $15 variable cost
$ Net Sales
= net price * 50 rm.
= ($150 - $15) * 50
= $6,750
Passed up
profit
contributions
Some customers who paid
$150 for the room were
actually willing to pay more
Money left
on the table
$15 variable
cost of room
$150 price
charged for room
13-14
Price
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Hotel: Two Price Levels
Sales
Demand
Net prices:
Price #1 = $85
Price #2 = $185
$ Net Sales
= $85 * 30 people +
$185 * 30 people
= $8100
$15 variable
cost of room
$100
Price #1
13-15
$200
Price #2
Price
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Making Yield Management Work
 Multiple pricing structures must be feasible and
appear logical
 Manage forecasts of use and duration of use
 Manage the changes in demand.
13-16
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Yield Management Matrix
D
u
r
a
t
i
o
n
o
f
u
s
e
Fixed Price
Variable Price
Predictable Quadrant 1
Quadrant 2
use
Movies,
Hotels,
Stadiums / arenas,
Airlines,
Convention centers, Rental cars,
Hotel meeting space Cruise lines
Quadrant 4
Unpredictable Quadrant 3
use
Continuing care
Restaurants,
hospitals
Golf courses,
ISP’s
13-17
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458
Summary
Aggregate planning reconciles conflicting needs and objectives
Aggregate plan specifies time-phased production rates,
workforce levels and inventory holdings
Aggregation:
 products / services are grouped into families
 labor may be grouped along family lines or by skills
 time may be aggregated (quarters, etc.)
Two basic planning options: changing capacity and
changing demand
Aggregate planning strategies:
 Level – constant workforce or production level
 Chase – vary production to equal demand
13-18
Air NZ video
© 2004 by Prentice Hall, Inc. Upper Saddle River, N.J. 07458