Submitted by: Submitted by amalkassem
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Category: Other Topics
Date Submitted: 09/12/2016 11:31 AM
Aggregate Planning
Definition
• Aggregate planning, or macro production
planning, details the production rate
decisions, work force decisions, and inventory
scheduling decisions over an intermediate
planning horizon to achieve a production plan
that will effectively utilize the organization’s
resources to satisfy the expected demand.
Reasons for Aggregation
• A planner can devise a course of action,
consistent with strategic goals without having
to deal with a lot of details.
Overview of the Aggregation Problem
• Suppose that D1, D2, . . . , DT are the forecasts
of demand for aggregate units over the
planning horizon (T periods.)
• The problem is to determine both work force
levels (Wt) and production levels (Pt ) to
minimize total costs over the T period
planning horizon.
Important Issues
• Smoothing. Refers to the costs and disruptions that
result from making changes from one period to the
next
• Bottleneck Planning. Problem of meeting peak demand
in the face of capacity restrictions
• Planning Horizon. Assumed given (T), but what is
“right” value? Rolling horizons and end of horizon
effect are both important issues
• Treatment of Demand. Assume demand is known.
Ignores uncertainty to focus on the predictable or
systematic variations in demand, such as seasonality
Relevant Costs
• Smoothing Costs
– changing size of the work force
– changing number of units produced
• Holding Costs
• Shortage Costs
• Other Costs: payroll, overtime, subcontracting
Aggregate units of production
• At this level of planning, there is not a lot of
detail. Individual and product identity is
typically not present. Instead, planning is
performed for a composite, or average unit of
product in a particular family of similar
products.
• Example: Labor hours , Dollars (Value of
sales),Fictitious aggregated units
Example
• One plant produced 6 models of washing machines:
Model
# hrs.
Price
% sales
A 5532
4.2
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