OM LAB MIDTERMS

Aggregate Planning

• It is an intermediate-range capacity planning that typically covers a time horizon of 2 to 12 months but some companies it may extends to as much as 18 months.

• It deals with groups or families of products, not specific items.

Planners

must make decisions on output rates, employment levels and changes, inventory levels and changes, back orders, and subcontracting in or out.

Business Planning

coordinate the intermediate plans of various organization functions, such as marketing, operations, and finance.

Business plan

Establishes operations and capacities strategies

Aggregate plan

Establishes operation capacity

Master schedule

Establishes schedules for specific products

Aggregate planning

It is the starting point for scheduling and production control systems.

It provides input for financial plans, forecasting input and demand management, and require changes in employment levels.

Chase demand Strategy

Matching capacity to demand. The planned output for a period is set at the expected demand for that period.

Level output strategy

Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.

Chase approach

Capacities (workforce levels, output rates, etc.) are adjusted to match demand requirements over the planning horizon. A chase strategy works best when inventory carrying costs are high and costs of changing capacity are low.

Advantages: Investment in inventory is low. Labor utilization is kept high.

Disadvantage: The cost of adjusting output rates and/or workforce levels.

Level approach

Capacities (workforce levels, output rates, etc.) are kept constant over the planning horizon. A level strategy works best when inventory carrying costs and backlog costs are relatively low.

Advantage: Stable output rates and workforce levels.

Disadvantages: Greater inventory costs. Increased overtime and idle time. Resource utilizations that vary over time.

Aggregate planners

seek to match supply and demand within the constraints imposed on them by policies or agreements and at minimum cost.

Disaggregation

It means breaking down the aggregate plan into specific product requirements in order to determine labor requirements (skills, size of workforce), materials, and inventory requirements.

Forecast Disaggregation

The demand forecast for product families (from aggregate planning) is broken down into forecasts for individual products.