Operations Planning and Control: Chapter Four

OPERATIONS PLANNING AND CONTROL
CHAPTER FOUR
4.1. AGGREGATE PLANNING
Also known as the production plan is intermediate range capacity
planning that typically covers an average time horizon of 2 to 12
months, which is particularly useful for organizations that
experience seasonal or other fluctuations in demand or capacity.
The goal of aggregate planning is to achieve a production plan that

will effectively utilize the organization’s resources to satisfy
2
expected demand
THE ROLE OF AGGREGATE PLANNING
 Integral to part of the business planning process
 Supports the strategic plan
 Identifies resources required for operations (i.e. for the next 2 - 12 months)
 Details the aggregate production rate and size of work force required
TYPES OF AGGREGATE PLANS
 Level Aggregate Plans
 Maintains a constant workforce
 Sets capacity to accommodate average demand
 Often used for make-to-stock products like appliances
 Disadvantage- builds inventory and/or uses back orders
 Chase Aggregate Plans

 Produces exactly what is needed each period
 Sets labor/equipment capacity to satisfy periodic demands
 Hybrid Aggregate Plans

 Uses a combination of options
 May use a level workforce with overtime & temps
 May allow inventory buildup and some backordering
AGGREGATE PLANNING OPTIONS
Demand based options

 Reactive: uses finished goods inventories and backorders for fluctuations
 Proactive: shifts the demand patterns to minimize fluctuations e.g. early
bird dinner prices at a restaurant
Capacity based options

 Changes output capacity to meet demand
 Uses overtime, subcontracting, hiring, firing, and part-timers – cost and
operational implications
DEVELOPING THE AGGREGATE PLAN
Step 1- Choose strategy: level, chase, or Hybrid

Step 2- Determine the aggregate production rate
Step 3- Calculate the size of the workforce
Step 4- Test the plan as follows:
Calculate Inventory, expected hiring/firing, overtime needs
Calculate total cost of plan
Step 5- Evaluate performance: cost, service, human resources, and
operations
The Aggregate plan must balance several perspectives
 Costs are important but so are:
 Customer service
 Operational effectiveness
 Workforce morale
AGGREGATE PLANNING BOTTOM
LINE
A successful AP considers each of the above factors
MASTER PRODUCTION SCHEDULING
 Master production schedule (MPS) is the anticipated build schedule that

specifies how much to produce and when to produce
 MPS is often stated in product or service specifications rather than dollars
 MPS is often built, managed, reviewed and maintained by the master

scheduler
EVALUATING THE MPS
 Rough-cut capacity planning:
 An estimate of the plan’s feasibility
 Given the demonstrated capacity of critical resources (e.g.: direct labor & machine
time), have we overloaded the system?
 Customer service issues:
 Does “available-to-promise” inventory satisfy customer orders? If not, can future MPS
quantities be pulled in to satisfy new orders?
ROUGH CUT CAPACITY PROBLEM: a shoe company produces two
models of dance shoes. Over the past 3 years, 72,000 pairs of model m have
been produced using 21,600 direct labor hours and 5,760 machine hours, and
108,000 pairs of model w using 43,200 hours of labor and 12,960 hours of
machine time. 10
Determine the planning factors (using both resources)
Determine the Planning factors:
Total DL hours building model
 Labor
Direct Lab orFactors
Plannin g Factor 
number of units built
21,6000 hours 43,200 hours
DL PFM   0.30 hour ; DL PFW   0.40 hour
72,000 pairs 108,000 pairs
Machine Factors Total machine hours building model

Machine Planning Factor 
number of units built
5760 hours 12,960
Machine PFM   0.08hour ; MachinePF W   0.12hour
72,000 pairs 108,000
SCHEDULING DEFINITIONS
Routing:
 Theoperations to be performed, their sequence, the work centers, & the time
standards
Bottleneck:
 A resource whose capacity is less than the demand placed on it
Due date:
 When the job is supposed to be finished
Slack:
 The time that a job can be delayed & still be finished by its due date
Queue:
 A waiting line
HIGH-VOLUME OPERATIONS
 High-volume, also called flow operations, like automobiles, bread, gasoline can
be repetitive or continuous
 High-volume standard items; discrete or continuous with smaller profit margins
 Designed for high efficiency and high utilization
 High volume flow operations with fixed routings
 Bottlenecks are easily identified
LOW-VOLUME OPERATIONS
 Low-volume, like job shop operations, are designed for flexibility.
 Use more general purpose equipment
 Customized products with higher margins
 Each product or service may have its own routing (scheduling is much more difficult)
 Bottlenecks move around depending upon the products being produced at any given time
LOW-VOLUME TOOL – GANTT CHARTS
 Developed in the early 1900’s by Henry Gantt
 Load charts (see below Figure)
 Illustrates the workload relative to the capacity of a resource
 Shows today’s job schedule by employee
 Progress charts:
Illustrates the planned schedule compared to actual performance
15
HOW TO SEQUENCE JOBS
 Deals with which of the several jobs should be scheduled first?
 Techniques are available to do short-term planning of jobs based on available capacity &
priorities
Commonly Used Priorities Rules
I. First come, first served (FCFS)
II. Last come, first served (LCFS)
III. Earliest due date (EDD)
IV. Shortest processing time (SPT)
V. Longest processing time (LPT)
VI. Critical ratio (CR):
 (Time until due date)/(processing time)
VII. Slack per Remaining Operations (S/RO)

 Slack /(number of remaining operations)
 Lateness and Tardiness are both measures related to customer service
 Average tardiness is a more relevant Customer Service measurement as
illustrated below
Example 15-5 Calculating job lateness and job tardiness
Completion
Job Date Due Date Lateness Tardiness
A 10 15 -5 0
B 13 15 -2 0
C 17 10 7 7
D 20 20 0 0
Average 0 1.75

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OPERATIONS PLANNING AND CONTROL

The goal of aggregate planning is to achieve a production plan that

 Integral to part of the business planning process

 Supports the strategic plan

 Chase Aggregate Plans

 Hybrid Aggregate Plans

Demand based options

Capacity based options

Step 1- Choose strategy: level, chase, or Hybrid

 Master production schedule (MPS) is the anticipated build schedule that

 MPS is often stated in product or service specifications rather than dollars

 MPS is often built, managed, reviewed and maintained by the master

Machine Factors Total machine hours building model

VII. Slack per Remaining Operations (S/RO)

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