1、8Aggregate Planning in a Supply ChainLearning ObjectivesIdentify the decisions that are best solved by aggregate planning.Understand the importance of aggregate planning as a supply chain activity.Describe the information needed to produce an aggregate plan.Explain the basic trade-offs to consider w

2、hen creating an aggregate plan.Formulate and solve basic aggregate planning problems using Microsoft Excel.Role of Aggregate Planning in a Supply ChainCapacity has a cost and lead times are often longAggregate planning: process by which a company determines levels of capacity, production, subcontrac

3、ting, inventory, stockouts, and pricing over a specified time horizongoal is to maximize profitdecisions made at a product family (not SKU) leveltime frame of 3 to 18 monthshow can a firm best use the facilities it has?Role of Aggregate Planning in a Supply ChainSpecify operational parameters over t

4、he time horizonProduction rateSubcontractingWorkforceBacklogOvertimeInventory on handMachine capacity levelAll supply chain stages should work together on an aggregate plan that will optimize supply chain performanceThe Aggregate Planning ProblemGiven the demand forecast for each period in the plann

5、ing horizon, determine the production level, inventory level, and the capacity level for each period that maximizes the firms (supply chains) profit over the planning horizonSpecify the planning horizon (typically 3-18 months)Specify the duration of each periodSpecify key information required to dev

6、elop an aggregate planInformation Needed foran Aggregate PlanAggregate demand forecast Ft for each Period t over T periodsProduction costsLabor costs, regular time ($/hr) and overtime ($/hr)Subcontracting costs ($/hr or $/unit)Cost of changing capacity hiring or layoff ($/worker), adding or reducing

7、 machine capacity ($/machine)Labor/machine hours required per unitInventory holding cost ($/unit/period)Stockout or backlog cost ($/unit/period)Constraints overtime, layoffs, capital available, stockouts, backlogs, from suppliersOutputs of Aggregate PlanProduction quantity from regular time, overtim

8、e, and subcontracted timeInventory heldBacklog/stockout quantityMachine capacity increase/decreaseA poor aggregate plan can result in lost sales, lost profits, excess inventory, or excess capacityIdentifying Aggregate Units of ProductionAggregate unit should be identified in a way that the resulting

9、 production schedule can be accomplished in practiceFocus on the bottlenecks when selecting the aggregate unit and identifying capacity and production timesAccount for activities such as setups and maintenanceRed Tomato ToolsFamilyMaterial Cost/ Unit ($)Revenue/ Unit ($)Setup Time/Batch (hour)Averag

10、e Batch SizeProduction Time/ Unit (hour)Net Production Time/Unit (hour)Percentage Share of Units SoldA15548505.605.7610B73061503.003.0425C93981003.803.8820D124910504.805.0010E93661003.603.6620F13485754.304.3715Table 8-1Red Tomato ToolsWeighted average approachMaterial cost per aggregate unit = 15 x

11、0.10 + 7 x 0.25 + 9 x 0.20 + 12 x 0.10 + 9 x 0.20 + 13 x 0.15 = $10SimilarlyRevenue per aggregate unit = $40Net production time per aggregate unit = 4.00 hoursAggregate Planning StrategiesTrade-off between capacity, inventory, backlog/lost salesChase strategy using capacity as the leverTime flexibil

12、ity from workforce or capacity strategy using utilization as the leverLevel strategy using inventory as the leverTailored or hybrid strategy a combination of strategiesChase StrategyVary machine capacity or hire and lay off workers as demand variesOften difficult to vary capacity and workforce on sh

13、ort noticeExpensive if cost of varying capacity is highNegative effect on workforce moraleResults in low levels of inventoryUsed when inventory holding costs are high and costs of changing capacity are lowTime Flexibility StrategyUse excess machine capacityWorkforce stable, number of hours worked va

14、riesUse overtime or a flexible work scheduleFlexible workforce, avoids morale problemsLow levels of inventory, lower utilizationUsed when inventory holding costs are high and capacity is relatively inexpensiveLevel StrategyStable machine capacity and workforce levels, constant output rateInventory l

15、evels fluctuate over timeInventories carried over from high to low demand periodsBetter for worker moraleLarge inventories and backlogs may accumulateUsed when inventory holding and backlog costs are relatively lowAggregate Planning Using Linear ProgrammingRed Tomato ToolsHighly seasonal demandDevel

16、op a forecastMonthDemand ForecastJanuary1,600February3,000March3,200April3,800May2,200June2,200Table 8-2Red Tomato ToolsItemCostMaterial cost$10/unitInventory holding cost$2/unit/monthMarginal cost of stockout/backlog$5/unit/monthHiring and training costs$300/workerLayoff cost$500/workerLabor hours

17、required4/unitRegular time cost$4/hourOvertime cost$6/hourCost of subcontracting$30/unitTable 8-3Red Tomato ToolsDecision VariablesFor t = 1, ., 6Wt=Workforce size for month tHt=Number of employees hired at the beginning of month tLt=Number of employees laid off at the beginning of month tPt=Product

18、ion in month tIt=Inventory at the end of month tSt=Number of units stocked out at the end of month tCt=Number of units subcontracted for month tOt=Number of overtime hours worked in month tRed Tomato ToolsObjective FunctionMinimize(Regular-time labor cost + Overtime labor cost + Cost of hiring and l

19、ayoffs + Cost of holding inventory + Cost of stocking out + Cost of subcontracting + Material cost)Red Tomato ToolsConstraintsWorkforce, hiring, and layoff constraintsAll for t = 1,., 6Capacity constraintsInventory balance constraintsOvertime limit constraintsRed Tomato ToolsAverage timein inventory

20、Red Tomato ToolsTotal cost over planning horizon = $422,275Revenue over planning horizon = 40 x 16,000 = $640,000Period, tNo. Hired, HtNo. Laid Off, LtWorkforce Size, WtOvertime, OtInventory, ItStockout, StSubcontract, CtTotal Production, Pt0008001,0000010156501,983002,5832006501,567002,583300650950

21、002,583400650026702,583500650117002,583600650500002,583Table 8-4Red Tomato ToolsAverage seasonal inventoryRed Tomato ToolsHigher demand variabilityMonthDemand ForecastJanuary1,000February3,000March3,800April4,800May2,000June1,400Table 8-5Average seasonal inventoryRed Tomato ToolsTotal cost over plan

22、ning horizon = $432,858Period, tNo. Hired, HtNo. Laid Off, LtWorkforce Size, WtOvertime, OtInventory, ItStockout, StSubcontract, CtTotal Production, Pt0008001,0000010156502,583002,5832006502,167002,583300650950002,58340065001,26702,583500650068302,583600650500002,583Table 8-6Red Tomato ToolsLower hi

23、ring and layoff costsAverage seasonal inventoryTotal cost over planning horizon = $412,688Red Tomato ToolsPeriod, tNo. Hired, HtNo. Laid Off, LtWorkforce Size, WtOvertime, OtInventory, ItStockout, StSubcontract, CtTotal Production, Pt0008001,0000010354501,200002,2672004500002,2673420870300002,267400

24、87001,26702,267502661025068302,267600610500002,267Table 8-7Forecast Error in Aggregate PlansForecast errors must be consideredSafety inventorySafety capacityUse overtime as a form of safety capacityCarry extra workforce permanently as a form of safety capacityUse subcontractors as a form of safety c

25、apacityBuild and carry extra inventories as a form of safety inventoryPurchase capacity or product from an open or spot market as a form of safety capacityAggregate Planning In ExcelFor t = 1, ., 6Wt=Workforce size for Month tHt=Number of employees hired at the beginning of Month tLt=Number of emplo

26、yees laid off at the beginning of Month tPt=Production in Month tIt=Inventory at the end of Month tSt=Number of units stocked out at the end of Month tCt=Number of units subcontracted for Month tOt=Number of overtime hours worked in Month tAggregate Planning In ExcelFigure 8-1Aggregate Planning In E

27、xcelFigure 8-2Aggregate Planning In ExcelFigure 8-3Aggregate Planning In ExcelFigure 8-4Building a Rough Master Production ScheduleDisaggregate an aggregate planFamilySetup Time/Batch (hour)Average Batch SizeProduction Time/Unit (hour)Production QuantityNumber of SetupsSetup Time (hours)Production T

28、ime (hours)A8505.602585401,445B61503.006464241,938C81003.805175401,965D10504.802585501,238E61003.605175301,861F5754.303875251,664Table 8-8The Role of IT in Aggregate PlanningThe ability to handle large problemsThe ability to handle complex problems (through either nonlinear optimization or linear approximations)The ability to interact with other core IT systems such as inventory manage