Outline
Role of aggregate planning in a supply chain The aggregate planning problem Aggregate planning strategies Implementing aggregate planning in practice
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All supply chain stages should work together on an aggregate plan that will optimize supply chain performance
2007 Pearson Education 8-4
Labor/machine hours required per unit Inventory holding cost ($/unit/period) Stockout or backlog cost ($/unit/period) Constraints: limits on overtime, layoffs, capital available, stockouts and backlogs
2007 Pearson Education 8-6
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Chase Strategy
Production rate is synchronized with demand by varying machine capacity or hiring and laying off workers as the demand rate varies However, in practice, it is often difficult to vary capacity and workforce on short notice Expensive if cost of varying capacity is high Negative effect on workforce morale Results in low levels of inventory Should be used when inventory holding costs are high and costs of changing capacity are low
2007 Pearson Education 8-9
Level Strategy
Maintain stable machine capacity and workforce levels with a constant output rate Shortages and surpluses result in fluctuations in inventory levels over time Inventories that are built up in anticipation of future demand or backlogs are carried over from high to low demand periods Better for worker morale Large inventories and backlogs may accumulate Should be used when inventory holding and backlog costs are relatively low
2007 Pearson Education 8-11
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Basic Strategies
Chase strategy
Aggregate Planning
Item Materials Inventory holding cost Marginal cost of a stockout Hiring and training costs Layoff cost Labor hours required Regular time cost Over time cost Cost of subcontracting Cost $10/unit $2/unit/month $5/unit/month $300/worker $500/worker 4/unit $4/hour $6/hour $30/unit
8-14
500 Lt 6 Ot 2 I t
t 1 6 t 1 t 1
5 S t 10 Pt 30 C t
t 1 t 1 t 1
2007 Pearson Education 8-16
P t 40 W t Ot 4 , 40 W t Ot 4 P t 0, for t 1,..., 6.
2007 Pearson Education 8-18
Scenarios
Increase in holding cost (from $2 to $6) Overtime cost drops to $4.1 per hour Increased demand fluctuation
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