AGGREGATE PRODUCTION PLANNING

Concerned with planning of overall production of all products combined (in tonnes of steel, litres of paint etc.) Over a
planning horizon (generally next 3 to 6 months) for a given (forecast) demand schedule

Production planning specifies activities for the future. Usually these activities are described in terms
of what to do (e.g., how many units of certain products to be produced) in different “time periods”
in the future. These time periods are called time buckets.

MANAGEMENT OPTIONS TO MEET FLUCTUATING DEMAND

 Build inventories in slack periods in anticipation of higher demands later in

planning horizon.
 Carry backorders or tolerate lost sales during peak periods.
 Use over time in peak periods, under time in slack periods to vary output, while
holding work force and facilities constant.
 Vary capacity by changing size of work force through hiring and firing.
 Vary capacity through changes in plant and equipment (generally long term
option)

Each option involves cost (tangible or intangible). Aim in aggregate production

planning is to choose best option.

KINDS OF COSTS INVOLVED

 Procurement Costs
 Production Costs
 Inventory holding Costs
 Shortage losses associated with backorders and lost sales
 Costs of increasing / decreasing work force
 Cost of overtime / under time
 Cost of changing production rates (Set ups, opportunity losses etc)

1. What is aggregate planning? In production planning, it is the

intermediate-range capacity planning that typically covers a time horizon of 2
to 12 months.

2. What is the purpose of aggregate planning? The purpose of aggregate planning is

planning ahead because it takes time to implement plans. The second reason is
 strategic of the company and third aggregate planning help synchronize flow
throughout the supply chain; it affects costs, equipment utilization, employment levels
and customer satisfaction.

3. List the demand options in aggregate planning?

1. Price
2. Promotion
3. Back orders
4. New demand
4. List the capacity options in aggregate planning
1. Hire and lay off workers
2. Overtime/slack time
3 part-time workers
4. Inventories
5. Subcontracting
5. List the main strategies for meeting uneven demand.
1. Maintain a level of workforce
2. Maintain a steady output rate
3. Match demand period by period
4. Use a combination of decision variables
6. Name two important factors that influence choice of strategy.
They are company policy, which may set constraints on the available
options the extent to which they can be used and cost also influence choice
strategy.
7. Briefly describe the informal, trial and error approach to aggregate planning.
Trial-and-error approach of planning consist of developing simple tables or graphs
that enable planners to visually compare projected demand requirements with existing
capacity.
8. What difficulties do services pose for aggregate planning?
1. Services occur when they are rendered-most services can’t be inventories and
services capacity that goes unused is wasted.
2. Demand for services can be difficult to predict. There is a greater burden for
service providers to anticipate demand; therefore they have to pay careful attention to
planned capacity levels.
3. Capacity availability can be difficult to predict. In services, the types of variety of
task are more pervasive than compare with manufacturer and this makes it difficult to
establish measures of capacity.

9. Explain these terms:

Disaggregating the aggregate plan- this means breaking down the aggregate plan
into specific product requirements in order to determine labor requirement (skills,
size, or workforce), materials, and inventory requirements.

Master schedule- the result of disaggregating the aggregate plan is master schedule
showing the quantity and timing of specific end items for a scheduled horizon that
covers about six to eight weeks ahead.
 Rough-cut capacity planning-this involves testing the feasibility of a proposed
master schedule relative to available capacities, to assure that no obvious capacity
constraints exist. It means checking capacities of production and warehouse facilities,
labor, and vendors to ensure that no gross deficiencies exist that will render the master
schedule unworkable.

ATP or Available to Promise inventory- the master schedule process uses this
information on a period-by-period basis to determine the projected inventory,
production requirements and the resulting uncommitted inventory.

10. Why is it important to stabilize the master schedule?

Master schedule enables marketing to make valid delivery, enables production to
evaluate capacity requirements, and provides necessary information for production,
marketing and senior management with opportunity to determine whether the business
plan and its strategic objectives will be achieved.

11. How are master schedules stabilized?

By the master scheduling process which involves the input and outputs.

12. The duties of the master scheduler generally include:

1. evaluating the impact of new orders.
2. Providing delivery dates for orders.
3. Dealing with problems:
a. evaluating the impact of production delays or late deliveries of purchased
goods.
b. Revising the master schedule when necessary because of insufficient
supplies of capacity.
c. Bringing instances of insufficient capacity to the attention of production and
marketing personnel so that they can participate in resolving conflicts.

13. List the inputs and outputs of master scheduling:

Inputs- the beginning inventories, which is actual quantity on hand from the preceding
period; the forecasts for each period of the schedule; and the customer orders, which
are quantities already committed to customers.

Outputs- Projected inventory, master production schedule and uncommitted

inventory.

14. What are time fences?

Are use to facilitate order promising and the entry of orders into the system? It divides
a scheduling time horizon into three phases, frozen, slushy and liquid.