Aggregate Planning

1
Aggregate Planning
Chapter 14
2
Managerial Inputs
Figure 14.2
3
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

4
Aggregate Planning Costs

• Regular-Time Costs
• Overtime Costs
• Hiring and Layoff Costs
• Inventory Holding Costs
• Backorder and Stockout Costs

5
Labor

• Workforce can be aggregated in various ways,
  depending on workforce flexibility
• The workforce schedule details the specific work
  schedule for each category of employee.

6
Workforce Adjustment

• Hiring
• Laying off
• There may be limiting factors

7
Workforce Utilization

• Alternative to workforce adjustment
• Overtime
• Undertime employees do not work productively for
  the regular-time workday or workweek occurs
  when labor capacity exceeds a periods demand
• Paid v. unpaid undertime

8
Planning Strategies
Strategy Possible Alternatives Possible
Alternatives Slack Season Peak Season
Vary workforce level Layoffs Hiring to match
demand Vary output rate to Layoffs,
undertime Hiring, overtime, match
demand vacations subcontracting Constant
workforce No layoffs, building No hiring,
depleting level anticipation
inventory anticipation inventory, undertime,
vacations overtime, subcontracting, backorde
rs, stockouts Constant output rate Layoffs,
building Hiring, depleting anticipation
inventory, anticipation inventory, undertime,
vacations overtime, subcontracting, backorde
rs, stockouts
9
Workforce Utilization Formula

• Productive work time
• Workforce utilization ----------------------

Total work time available
10
Debate

• In groups, discuss the various approaches to
  scheduling the workforce. Identify the pros and
  cons of each approach. Why is it critical to
  identify a strategy that will minimize frequent
  adjustments to the workforce?