© 1997 Prentice-Hall, Inc. 12 - 1 Principles of Operations Management Aggregate Scheduling Chapter 12.

© 1997 Prentice-Hall, Inc.© 1997 Prentice-Hall, Inc.

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Principles of Principles of Operations ManagementOperations Management

Principles of Principles of Operations ManagementOperations Management

Aggregate SchedulingAggregate SchedulingChapter 12Chapter 12


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Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

Describe planningDescribe planning Distinguish the types of plansDistinguish the types of plans Define aggregate schedulingDefine aggregate scheduling Relate aggregate scheduling to the Relate aggregate scheduling to the

overall planning processoverall planning process Explain aggregate scheduling optionsExplain aggregate scheduling options Develop aggregate schedulesDevelop aggregate schedules


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Thinking ChallengeThinking ChallengeThinking ChallengeThinking Challenge

You’ve started a You’ve started a newnew company. You’ve company. You’ve developed 2 production plans:developed 2 production plans:

MonthMonth ForecastForecast Plan 1Plan 1 Plan 2Plan 2JanJan 900 900 900900 800800FebFeb 700 700 700700 800800MarMar 800800 800800 800800

You estimate You estimate 1 worker 1 worker can make can make 100 units100 units per monthper month. Which plan do you use? How . Which plan do you use? How many workers do you hire? How do you many workers do you hire? How do you meet demand? meet demand?

AloneAlone GroupGroup Class Class


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PlanningPlanningPlanningPlanning

Setting goals & objectivesSetting goals & objectives Example: Meet demand within the limits Example: Meet demand within the limits

of available resources at the least costof available resources at the least cost

Determining steps to achieve goalsDetermining steps to achieve goals Example: Hire more workersExample: Hire more workers

Setting start & completion datesSetting start & completion dates Example: Begin hiring in Jan.; finish, Mar.Example: Begin hiring in Jan.; finish, Mar.

Assigning responsibility Assigning responsibility


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Types of PlansTypes of PlansTypes of PlansTypes of Plans

TodayToday 3 months3 months 1 year1 year 5 years5 years

Long-Range Facility location

Long-Range Facility location

Intermediate-Range Aggregate plans

Intermediate-Range Aggregate plans

Short-Range Dispatching

Short-Range Dispatching

Mgt LevelMgt Level

HighHigh

LowLow

Top Top ExecutivesExecutives

SupervisorsSupervisors

Operations Operations ManagersManagers

18 months18 months


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Aggregate Scheduling Aggregate Scheduling Aggregate Scheduling Aggregate Scheduling

Provides the quantity & timing of Provides the quantity & timing of production for intermediate futureproduction for intermediate future Usually 3 to 18 months into futureUsually 3 to 18 months into future

Combines (‘aggregates’) productionCombines (‘aggregates’) production Often expressed in common unitsOften expressed in common units

Example: Hours, dollars, equivalents Example: Hours, dollars, equivalents (e.g., FTE students)(e.g., FTE students)

Involves capacity & demand variablesInvolves capacity & demand variables


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Relationships of Relationships of Aggregate ScheduleAggregate Schedule

Relationships of Relationships of Aggregate ScheduleAggregate Schedule

Forecast &Firm Orders

MaterialRequirements

Planning

AggregateProduction

Planning

ResourceAvailability

MasterProductionScheduling

ShopFloor

Schedules

CapacityRequirements

PlanningRealistic?

Yes

No, modify CRP, MRP, or MPS

Work forceInventorySubcontractors

Forecast &Firm Orders

MaterialRequirements

Planning

AggregateProduction

Planning

ResourceAvailability

MasterProductionScheduling

ShopFloor

Schedules

CapacityRequirements

PlanningRealistic?

Yes

No, modify CRP, MRP, or MPS

Work forceInventorySubcontractors


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Aggregate Schedule Aggregate Schedule ExampleExample

Aggregate Schedule Aggregate Schedule ExampleExample

Aggregate Schedule:Aggregate Schedule:MonthMonth JanJan FebFeb MarMar AprApr MayMayNo. of ChipsNo. of Chips 600600 650650 620620 630630 640640

Master Production Schedule:Master Production Schedule:MonthMonth JanJan FebFeb MarMar AprApr MayMayPentiumPentium 300300 200200 310310 300300 340340486DX2486DX2 300300 450450 310310 330330 300300


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Aggregate Scheduling Aggregate Scheduling GoalsGoals

Aggregate Scheduling Aggregate Scheduling GoalsGoals

Meet demandMeet demand Use capacity efficientlyUse capacity efficiently Meet inventory policyMeet inventory policy Minimize costMinimize cost

LaborLabor InventoryInventory Plant & equipmentPlant & equipment SubcontractSubcontract


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Promotion & pricePromotion & price Back orderingBack ordering Counterseasonal Counterseasonal

product mixingproduct mixing

Aggregate Scheduling Aggregate Scheduling OptionsOptions

Aggregate Scheduling Aggregate Scheduling OptionsOptions

CapacityCapacity DemandDemand InventoryInventory Hire or layoffHire or layoff Overtime or idle Overtime or idle

timetime SubcontractSubcontract Part-time workersPart-time workers


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Aggregate Scheduling Aggregate Scheduling StrategiesStrategies


Mixed strategyMixed strategy Combines 2 or more aggregate scheduling Combines 2 or more aggregate scheduling

optionsoptions

OvertimeOvertime

Sub-Sub-contractcontract

InventoryInventory

PricePrice

Mixed Strategy


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Mixed strategyMixed strategy Combines 2 or more aggregate scheduling Combines 2 or more aggregate scheduling

optionsoptions

Level scheduling strategyLevel scheduling strategy Produce same amount every Produce same amount every dayday Keep work force level constant Keep work force level constant Vary non-work force capacity or demand Vary non-work force capacity or demand

optionsoptions Often results in lowest production costsOften results in lowest production costs


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Aggregate Scheduling Example Aggregate Scheduling Example 1 (Level with Overtime)1 (Level with Overtime)

Aggregate Scheduling Example Aggregate Scheduling Example 1 (Level with Overtime)1 (Level with Overtime)

You’re an aggregate planner You’re an aggregate planner for GE. You want to develop for GE. You want to develop a plan that meets a plan that meets average average daily demand daily demand with a with a constant constant work forcework force. Each worker . Each worker produces produces 5 units per day5 units per day. . There is There is no beginning no beginning inventoryinventory. Besides regular . Besides regular production, you decide to use production, you decide to use inventoryinventory & & overtimeovertime..


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Plan 1 SolutionPlan 1 SolutionPlan 1 SolutionPlan 1 Solution

Production/day: Production/day: No. workers: No. workers:

Month Days Units Produced InventoryReg OT Subcn Held Chg

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

TotalTotal

$/Unit$/Unit $8.00$8.00 $11.20$11.20 $5.00$5.00

Tot $Tot $

Forc

$10.00$10.00

Given informationGiven information


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Month Days Forc Units Produced InventoryReg OT Subcn Held Chg

Jan 22 900 880 20 0

Feb 18 700 720 20 20

Mar 20 800 800 20

Total 60 2400 2400 20 40

$/Unit $8.00 $11.20 $10.00 $5.00

Tot $ 19200 $224 $200


Jan 22 900 880 20 0

Feb 18 700 720 20 20

Mar 20 800 800 20

Total 60 2400 2400 20 40

$/Unit $8.00 $11.20 $10.00 $5.00

Tot $ 19200 $224 $200

Production/day: 40Production/day: 40 No. workers: 8.0No. workers: 8.0

Total cost = 19200 + 224 + 200 = $19,624Total cost = 19200 + 224 + 200 = $19,624

00

00


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Aggregate Scheduling Thinking Aggregate Scheduling Thinking Challenge 2 (Level with Challenge 2 (Level with

Subcontracting)Subcontracting)

Aggregate Scheduling Thinking Aggregate Scheduling Thinking Challenge 2 (Level with Challenge 2 (Level with

Subcontracting)Subcontracting)

You’re an aggregate planner You’re an aggregate planner for GE. You want to develop for GE. You want to develop a plan that meets lowest daily a plan that meets lowest daily demand (March), about demand (March), about 38/day38/day, with a , with a constant work constant work forceforce. All other demand will . All other demand will be met by be met by subcontractingsubcontracting. . Each worker produces Each worker produces 5 units 5 units per dayper day. There is . There is no no beginning inventorybeginning inventory. .



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Plan 2 Solution*Plan 2 Solution*Plan 2 Solution*Plan 2 Solution*

Production/day: 38 Production/day: 38 No. workers: No. workers:

Month Days Units Produced InventoryReg OT Subcn Held Chg

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

TotalTotal

$/Unit$/Unit $8.00$8.00 $11.20$11.20 $5.00$5.00

Tot $Tot $

Forc

$10.00$10.00



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Plan 2 Solution*Plan 2 Solution*Plan 2 Solution*Plan 2 Solution*


Jan 22 900 836 64

Feb 18 700 684 16

Mar 20 800 760 40

Total 60 2400 2280 120

$/Unit $8.00 $11.20 $10.00 $5.00

Tot $ 18240 $1200


Jan 22 900 836 64

Feb 18 700 684 16

Mar 20 800 760 40

Total 60 2400 2280 120

$/Unit $8.00 $11.20 $10.00 $5.00

Tot $ 18240 $1200

Production/day: 38Production/day: 38 No. workers: 7.6No. workers: 7.6

Total cost = 18240 + 1200 = $19,440Total cost = 18240 + 1200 = $19,440

00

00

00

00

00

00


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Aggregate Scheduling Example Aggregate Scheduling Example 3 (Chase with Hiring and 3 (Chase with Hiring and

Layoffs)Layoffs)

Aggregate Scheduling Example Aggregate Scheduling Example 3 (Chase with Hiring and 3 (Chase with Hiring and

Layoffs)Layoffs)

You’re an aggregate planner You’re an aggregate planner for GE. You want to develop a for GE. You want to develop a plan that meets exactly plan that meets exactly monthly demandmonthly demand. To do this, . To do this, you decide to you decide to hirehire & & layofflayoff workers. The number of workers. The number of workers will vary each month. workers will vary each month. Each worker produces Each worker produces 5 5 units per dayunits per day. There is . There is no no beginning inventorybeginning inventory. .


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Production/day: Production/day: No. workers: No. workers:

Month Days Forc Units Produced InventoryReg Inc Dec Held Chg

TotalTotal

$/Unit$/Unit

Tot $Tot $

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

$8.00$8.00 $10.00$10.00 $15.00$15.00 $5.00$5.00



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Production/day: Production/day: No. workers:No. workers:


TotalTotal

$/Unit$/Unit

Tot $Tot $

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

$8.00$8.00 $10.00$10.00 $15.00$15.00 $5.00$5.00

6060 24002400

909000 0000

707000

Production matchesforecast demand

Production matchesforecast demand


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Production/day: Varies Production/day: Varies No. workers: No. workers:


TotalTotal

$/Unit$/Unit

Tot $Tot $

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

$8.00$8.00 $10.00$10.00 $15.00$15.00 $5.00$5.00

6060 24002400

909000 0000

707000

Production per day varies.Jan: 900/22 = 40.9 units/dayFeb: 700/18 = 38.9 units/day

Production per day varies.Jan: 900/22 = 40.9 units/dayFeb: 700/18 = 38.9 units/day


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Production/day: VariesProduction/day: Varies No. workers: VariesNo. workers: Varies


TotalTotal

$/Unit$/Unit

Tot $Tot $

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

$8.00$8.00 $10.00$10.00 $15.00$15.00 $5.00$5.00

6060 24002400

909000 0000

707000

Workers per day varies.Jan: (40.9 units/day)/(5 units/worker/day) = 8.2 Feb: (38.9 units/day)/(5 units/worker/day) = 7.8

Workers per day varies.Jan: (40.9 units/day)/(5 units/worker/day) = 8.2 Feb: (38.9 units/day)/(5 units/worker/day) = 7.8


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TotalTotal

$/Unit$/Unit

Tot $Tot $

JanJan 2222 900900

FebFeb 1818 700700

MarMar 2020 800800

$8.00$8.00 $10.00$10.00 $15.00$15.00 $5.00$5.00

6060 24002400

909000 0000

707000 200200

200 = 900 - 700: decrease in production due to layoffs

200 = 900 - 700: decrease in production due to layoffs


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Jan 22 900 900 0 0

Feb 18 700 700 200 0 0

Mar 20 800 800 100 0 0

Total 60 2400 2400 100 200

$/Unit $8.00 $10.00 $15.00 $5.00

Tot $ 19200 $1000 $3000


Jan 22 900 900 0 0

Feb 18 700 700 200 0 0

Mar 20 800 800 100 0 0

Total 60 2400 2400 100 200

$/Unit $8.00 $10.00 $15.00 $5.00

Tot $ 19200 $1000 $3000


Total cost = 19200 + 1000 + 3000 = $23,200Total cost = 19200 + 1000 + 3000 = $23,200


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Thinking Challenge:Thinking Challenge:Compare & ContrastCompare & ContrastThinking Challenge:Thinking Challenge:Compare & ContrastCompare & Contrast

Basis of PlanComparison Inv/OT Subcontract Hire/Layoff

Basis of PlanComparison Inv/OT Subcontract Hire/Layoff



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ConclusionConclusionConclusionConclusion

Described planningDescribed planning Distinguished the types of plansDistinguished the types of plans Defined aggregate schedulingDefined aggregate scheduling Related aggregate scheduling to the Related aggregate scheduling to the

overall planning processoverall planning process Explained aggregate scheduling optionsExplained aggregate scheduling options Developed aggregate schedulesDeveloped aggregate schedules

© 1997 Prentice-Hall, Inc. 12 - 1 Principles of Operations Management Aggregate Scheduling Chapter 12.

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