To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.

Chapter 11

Aggregate
Planning
and
Scheduling
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Managerial Inputs
Figure 11.1
Supplier capabilities
Storage capacity
Materials availability
Materials
Current machine capacities
Plans for future capacities
Workforce capacities
Current staffing level
Operations
New products
Product design changes
Machine standards
Engineering
Labor-market conditions
Training capacity
Human resources
Cost data
Financial condition
of firm
Accounting and finance
Aggregate
plan
Customer needs
Demand forecasts
Competition behavior
Distribution and marketing
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Aggregate
Planning
Objectives
Minimize Costs/Maximize Profits
Maximize Customer Service
Minimize Inventory Investment
Minimize Changes in Production Rates
Minimize Changes in Workforce
Levels
Maximize Utilization of Plant and
Equipment
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Aggregate Planning Strategies
Possible Alternatives Possible Alternatives
Strategy during Slack Season during Peak Season

1. Chase #1: vary workforce Layoffs Hiring
level to match demand
2. Chase #2: vary output Layoffs, undertime, Hiring, overtime,
rate to match demand vacations subcontracting
3. Level #1: constant No layoffs, building No hiring, depleting
workforce level anticipation inventory, anticipation inventory,
undertime, vacations overtime, subcontracting,
backorders, stockouts
4. Level #2: constant Layoffs, building antici- Hiring, depleting antici-
output rate pation inventory, pation inventory, over-
undertime, vacations time, subcontracting,
backorders, stockouts
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Aggregate Planning Process
Figure 11.2
Determine
requirements for
planning horizon
Identify alternatives,
constraints, and costs
Prepare prospective
plan for
planning horizon
Move ahead
to next
planning session
Implement and
update the plan
Is the plan
acceptable?
No
Yes
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Aggregate Planning
Costs
Regular-time Costs
Overtime Costs
Hiring and
Layoff Costs
Inventory
Holding Costs
Backorder and Stockout Costs
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Level Strategy
for Services
Dock Aisle
Example 11.1
TIME PERIOD

1 2 3 4 5 6 Total

Requirement* 6 12 18 15 13 14 78

Current employment = 10 part-time clerks
1. No more than 10 new hires in any period
2. No backorders are permitted
3. Overtime can not exceed 20% of regular-time capacity
4. The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
* Number of part-time employees
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Level Strategy
for Services
Dock Aisle
Example 11.1
TIME PERIOD

1 2 3 4 5 6 Total

Requirement* 6 12 18 15 13 14 78

Current employment = 10 part-time clerks
1. No more than 10 new hires in any period
2. No backorders are permitted
3. Overtime can not exceed 20% of regular-time capacity
4. The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
Peak Requirement
1.20w = 18 employees in peak period
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Level Strategy
for Services
Dock Aisle
Example 11.1
TIME PERIOD

1 2 3 4 5 6 Total

Requirement* 6 12 18 15 13 14 78

Current employment = 10 part-time clerks
1. No more than 10 new hires in any period
2. No backorders are permitted
3. Overtime can not exceed 20% of regular-time capacity
4. The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
Peak Requirement
1.20w = 18 employees in peak period
w = = 15 employees
18
1.20
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Level Strategy
for Services
Dock Aisle
Figure 11.3
TIME PERIOD

1 2 3 4 5 6 Total

Requirement* 6 12 18 15 13 14 78

Current employment = 10 part-time clerks
1. No more than 10 new hires in any period
2. No back orders are permitted
3. Overtime can not exceed 20% of regular-time capacity
4. The following costs can be assigned:
Regular-time wage $2,000/period at 20 hours/week
Overtime wages 150% of regular-time
Hiring $1,000/person
Layoffs $500/person
Peak Requirement
1.20w = 18 employees in peak period
w = = 15 employees
18
1.20
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Chase Strategy
for Services
Dock Aisle
TIME PERIOD

1 2 3 4 5 6 Total

Requirement* 6 12 18 15 13 14 78

Current employment = 10 part-time clerks
Figure 11.4
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Mixed
Strategies in
Manufacturing
Example 14.3
1. No beginning inventory or back orders in period 1
2. No stockouts or backlog extensions are permitted
3. Overtime cannot exceed 20% of regular-time capacity
4. The following costs can be assigned:
Regular-time production $4,000/employee-period
Overtime production 150% of regular-time
Hires $2,400/person
Layoffs $400/person
Inventory $40/employee-period/period
Back orders $1,000/employee-period/period
ACCOUNTING PERIOD

1 2 3 4 5 6 Total

Requirement* 24 142 220 180 136 168 870
Current employment = 120 workers
Figure 11.5
To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Example 11.3
1 450 90 20 560
2 450 90 200 740
3 750 150 200 1100
4 450 90 110 650
Totals 2100 420 530 3050

Regular-Time Overtime Subcon-
Quarter Production Production tracting Total
Anticipation Inventory
Quarter Quantity

To Accompany Ritzman & Krajewski, Foundations of Operations Management 2003 Prentice Hall, Inc. All rights reserved.
Example 11.3
1 450 90 20 560
2 450 90 200 740
3 750 150 200 1100
4 450 90 110 650
Totals 2100 420 530 3050

Regular-Time Overtime Subcon-
Quarter Production Production tracting Total
Anticipation Inventory
Quarter Quantity
1 250 + 560 300 = 510
2 510 + 740 850 = 400
3 400 + 1100 1500 = 0
4 0 + 650 350 = 300