Production and Operation Managements Chapter 3 Aggregate Planning Professor JIANG Zhibin Department of Industrial Engineering Management Shanghai Jiao Tong University
Production and Operation Managements Professor JIANG Zhibin Department of Industrial Engineering & Management Shanghai Jiao Tong University Chapter 3 Aggregate Planning
⑧ Chapter 3 Aggregate Planning Contents .Introduction Aggregate Units of Production; .Costs in aggregate Planning; •A Prototype Problem; .Solution of Aggregate Planning Problem by LP;
Chapter 3 Aggregate Planning Contents •Introduction •Aggregate Units of Production; •Costs in Aggregate Planning; •A Prototype Problem; •Solution of Aggregate Planning Problem by LP;
Introduction(1) Aggregate planning,also called macro planning, decides how many employees the firm should retain and,for a manufacturing firm,the quantity and the mix of products to be produced. Assumption:demand is deterministic,or known in advance
Introduction(1) • Aggregate planning, also called macro planning, decides how many employees the firm should retain and, for a manufacturing firm, the quantity and the mix of products to be produced. • Assumption: demand is deterministic, or known in advance
Introduction(1) New one in dynamic environment:manufacturing is outsourced (Supply Chain) -Sun Microsystems is a successful example; -Focus on product innovation and design rather than manufacturing;
Introduction(1) • New one in dynamic environment: manufacturing is outsourced (Supply Chain) Sun Microsystems is a successful example; Focus on product innovation and design rather than manufacturing;
Introduction(2) Aggregate planning involves several basic competing objectives. Make frequent and large changes in size of labor force:a chase strategy to react quickly to anticipated changes in demand,cost effective,but a poor long-term strategy; Retain a stable workforce:results in larger buildups of inventory during period of low demand; Develop a production plan for a firm to maximize profit over the planning horizon subject to constraints on capacity. AP methodology is designed to translate demand forecast into blueprint for planning staffing and production level for a firm over a predetermined planning horizon;
Introduction(2) • Aggregate planning involves several basic competing objectives. Make frequent and large changes in size of labor force: a chase strategy to react quickly to anticipated changes in demand, cost effective, but a poor long-term strategy; Retain a stable workforce: results in larger buildups of inventory during period of low demand ; • Develop a production plan for a firm to maximize profit over the planning horizon subject to constraints on capacity. • AP methodology is designed to translate demand forecast into blueprint for planning staffing and production level for a firm over a predetermined planning horizon;
Aggregate Units of Production Describe aggregate units in the following situations: In terms of"average'item-when the items produced are similar,e.g.cars,computers; In terms of weights (tons of steel),volume (gallons of gasoline),amount of work required (worker- years of programming time),and dollar value (value of inventory in dollars)-when many kinds of items are produced; Appropriate aggregating schema are determined by context of the particular planning problem and the level of the aggregation to be required
Aggregate Units of Production • Describe aggregate units in the following situations: In terms of “average’ item-when the items produced are similar, e.g. cars, computers; In terms of weights (tons of steel), volume (gallons of gasoline), amount of work required (workeryears of programming time), and dollar value (value of inventory in dollars)-when many kinds of items are produced; • Appropriate aggregating schema are determined by context of the particular planning problem and the level of the aggregation to be required
Aggregate Units of Production Example 3.1:Decide on aggregating schema for the manager of a plant that produces six models of washing machines to determine the workforce and production levels. Number of Worker- Sales Model Number Hours Required to Selling Price Rate(%) Produce A5532 4.2 285 32 K4242 4.9 345 21 L9898 5.1 395 17 L3800 5.2 425 14 M2624 5.4 525 10 M3880 5.8 725 6
Aggregate Units of Production Example 3.1: Decide on aggregating schema for the manager of a plant that produces six models of washing machines to determine the workforce and production levels. Model Number Number of WorkerHours Required to Produce Selling Price Sales Rate(%) A5532 4.2 285 32 K4242 4.9 345 21 L9898 5.1 395 17 L3800 5.2 425 14 M2624 5.4 525 10 M3880 5.8 725 6
Aggregate Units of Production One possibility is to define aggregate unit as one dollar of output Unfortunately,it is impossible since the selling prices of the various models are not consistent with the number of worker- hours required to produce them. Given amount of dollars of output,we could not know the total WH required. Number of Worker- 4.2/285=0.0147WH/S Model Number Hours Required to Selling Priceales Rate(% Produce T A5532 4.2 285 32 K4242 4.9 345 21 5.4/525=0.008WH/S L9898 5.1 395 17 L3800 52 425 14 M2624 5.4 525 10 M3880 5.8 725 6
Aggregate Units of Production • One possibility is to define aggregate unit as one dollar of output • Unfortunately, it is impossible since the selling prices of the various models are not consistent with the number of workerhours required to produce them. • Given amount of dollars of output, we could not know the total WH required. Model Number Number of WorkerHours Required to Produce Selling PriceSales Rate(%) A5532 4.2 285 32 K4242 4.9 345 21 L9898 5.1 395 17 L3800 5.2 425 14 M2624 5.4 525 10 M3880 5.8 725 6 4.2/285=0.0147WH/$ 5.4/525=0.008WH/$
Aggregate Units of Production Fact:the percentages of the total number of sales for these six models have been fairly constant (32%,21%,17%,14%,10% and 6%for six models respectively) Define the aggregate unit of production as a fictitious washing machine requiring.32×4.2+.21×4.9+.17×5.1+.14×5.2+.10 ×5.4+.06×5.8=4.856 hrs of labor time. Problem:Given number of washing machines to be produced, say 10,000,could we know the total WH required? Number of Worker- Model Number Hours Required to Selling Price Sales Rate(%) Produce A5532 4.2 285 32 K4242 4.9 345 21 L9898 5.1 395 17 L3800 5.2 425 14 M2624 5.4 525 10 M3880 5.8 725 6
Aggregate Units of Production • Fact: the percentages of the total number of sales for these six models have been fairly constant (32% ,21%, 17%, 14%, 10% and 6% for six models respectively) • Define the aggregate unit of production as a fictitious washing machine requiring .324.2+.21 4.9+.17 5.1+.14 5.2+.10 5.4+.06 5.8=4.856 hrs of labor time. • Problem: Given number of washing machines to be produced, say 10,000, could we know the total WH required? Model Number Number of WorkerHours Required to Produce Selling Price Sales Rate(%) A5532 4.2 285 32 K4242 4.9 345 21 L9898 5.1 395 17 L3800 5.2 425 14 M2624 5.4 525 10 M3880 5.8 725 6
Aggregate Units of Production Defining an aggregate unit of production at higher level of the firm is more difficult: When the firm produces a large of products,a natural aggregate unit is sales dollars; Aggregate planning is closely related to hierarchical production planning (HPP).HPP considers workforce sizes and production rates at different levels of the firm.The recommended hierarchy is as follows: vItems-correspond to individual models of washing machines; Families-a group of items,e.g.all washing machines; Types-groups of families,e.g.large house appliances;
Aggregate Units of Production • Defining an aggregate unit of production at higher level of the firm is more difficult; • When the firm produces a large of products, a natural aggregate unit is sales dollars; • Aggregate planning is closely related to hierarchical production planning (HPP). HPP considers workforce sizes and production rates at different levels of the firm. The recommended hierarchy is as follows: Items-correspond to individual models of washing machines; Families-a group of items, e.g. all washing machines; Types-groups of families, e.g. large house appliances;