Lesson 7 - Aggregate Planning

Question 1

Aggregate Planning

Answer 1

intermediate range capacity planning, usually covering 2 to 12 months, effectively utilize resources to match expected demand, prepared with inputs from sales (demand forecasts), finance (financial constraints) and
operations (capacity constraints)

Question 2

Long term capacity decisions

Answer 2

product selection, facility
size & location, which establish constraints for other decisions

Question 3

Intermediate

Answer 3

levels of employment, output & inventories

Question 4

Short-term decisions

Answer 4

scheduling jobs, workers
& equipment

Question 5

Aggregate measures

Answer 5

abor/machine hours, output rate

Question 6

Demand strategies

Answer 6

alter demand so it matches capacity
Demand options: pricing (for ex offer lower process at off-peak times, the higher the price elasticity, the more effective), promotions & ads, create new demand with complementary products for ex, back orders (delayed deliveries)
Supply options: hiring/firing workers (restrictions like regulation & skill), overtime
(attractive with seasonal demand), temporary workers, inventories (produce in one and
sell in another period, but costs to it), subcontractors (make or buy)

Question 7

Capacity strategies

Answer 7

alter capacity so it matches demand, influence factors: costs, flexibility and company policy/strategy & agreements
Level Capacity Strategy: demand variations are met by previous options and
maintaining a steady output rate
Chase Demand Strategy: planned output for period is set at the expected demand for that period, inventory can be kept low, but lack of stability in operations & possibility of wrong forecast

Question 8

Aggregate Planning techniques

Answer 8

Informal trial-and-error (more frequent, but are not necessarily optimal) /Spreadsheet. Develop simple tables /graphs and visually compare projected demand/existing capacity
Costs: Output costs (regular, overtime, subcontract) +Inventory costs+Hire
costs+Backorder costs
Avg Inventory: Beg.+Ending Inventory/2
Mathematical techniques
- Linear Programming: obtain optimal solution involving allocation of scarce
resources in terms of profit maximization, cost minimization, assumptions not always valid
- Simulation models: computerized models that can be tested under different scenarios to identify acceptable solutions to problems