Dr.

Rameez Khalid, PMP, CQSSBB

Faculty, Department of Management
Institute of Business Administration, Karachi
Planning Horizon
Aggregate planning: Intermediate-range
capacity planning, usually covering 2 to 12
months.
Short
range
Intermediate
range
Long range
Now 2 months 1 Year
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Short-range plans (Detailed plans)
Machine loading
Job assignments
Intermediate plans (General levels)
Employment
Output
Long-range plans
Long term capacity
Location / layout
Overview of Planning Levels
3
Planning Sequence
Business Plan
Establishes operations
and capacity strategies
Aggregate pl an
Establishes
operations capacity
Master schedule
Establishes schedules
for specific products
Corporate
strategies
and policies
Economic,
competitive,
and political
conditions
Aggregate
demand
forecasts
4
Aggregate Planning
Begin with forecast of aggregate demand
Forecast intermediate range
General plan to meet demand by setting
Output levels
Employment
Finished goods inventory level
Production plan is the output of aggregate planning
Update plan periodically rolling planning horizon
always covers the next 12 18 months
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Resources
Workforce
Facilities
Demand forecast
Policies
Subcontracting
Overtime
Inventory levels
Back orders
Costs
Inventory carrying
Back orders
Hiring/firing
Overtime
Inventory changes
Subcontracting
Aggregate Planning Inputs
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Total cost of a plan
Projected levels of inventory
Inventory
Output
Employment
Subcontracting
Backordering
Aggregate Planning Outputs
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Aggregate Planning Strategies
Proactive
Alter demand to match capacity
Reactive
Alter capacity to match demand
Mixed
Some of each
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Pricing

Promotion

Back orders

New demand
Demand Options
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Hire and layoff workers
Overtime/slack time
Part-time workers
Inventories
Subcontracting
Capacity Options
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Aggregate Planning Strategies
1. Maintain a level workforce
2. Maintain a steady output rate
3. Match demand period by period
4. Use a combination of decision
variables
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Basic Strategies
Level capacity strategy:
Maintaining a steady rate of regular-time
output while meeting variations in demand
by a combination of options.
Chase demand strategy:
Matching capacity to demand; the planned
output for a period is set at the expected
demand for that period.

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Chase Approach
Advantages
Investment in inventory is low
Labor utilization is high
Disadvantages
The cost of adjusting output rates and/or
workforce levels
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Level Approach
Advantages
Stable output rates and workforce
Disadvantages
Greater inventory costs
Increased overtime and idle time
Resource utilizations vary over time
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1. Determine demand for each period
2. Determine capacities for each period
3. Identify policies that are pertinent
4. Determine units costs
5. Develop alternative plans and costs
6. Select the best plan that satisfies objectives.
Otherwise return to step 5.

Techniques for Aggregate Planning
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Summary of Planning Techniques
Technique Solution Characteristics
Graphical/charting Heuristic (trial
and error)
Intuitively appealing, easy to
understand; solution not
necessarily optimal.
Linear
programming
Optimizing Computerized; linear assumptions
not always valid.
Simulation Heuristic (trial
and error)
Computerized models can be
examined under a variety of
conditions.

13-16
Cumulative Graph
1 1 2 2 3 3 4 4 5 5
6 6 7 7
8 8 9 9 10 10
Cumulative
production
Cumulative
production
Cumulative
demand
Cumulative
demand
C
u
m
u
l
a
t
i
v
e

o
u
t
p
u
t
/
d
e
m
a
n
d

C
u
m
u
l
a
t
i
v
e

o
u
t
p
u
t
/
d
e
m
a
n
d

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Aggregate Plan to Master Schedule
Aggregate
Planning
Aggregate
Planning
Disaggregation
Master
Schedule
Master
Schedule
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Master schedule: The result of disaggregating an
aggregate plan; shows quantity and timing of
specific end items for a scheduled horizon.
Rough-cut capacity planning: Approximate
balancing of capacity and demand to test the
feasibility of a master schedule.
Disaggregating the Aggregate Plan
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Master Scheduling
Master schedule
Determines quantities needed to meet demand
Interfaces with
Marketing
Capacity planning
Production planning
Distribution planning
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Master Scheduling Process
Master
Scheduling
Beginning inventory
Forecast
Customer orders
Inputs
Outputs
Projected inventory
Master production schedule
Uncommitted inventory ATP
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Projected On-hand Inventory
Projected on-hand
inventory
Inventory from
previous week
Current weeks
requirements
-
=
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Projected On-hand Inventory
64 1 2 3 4 5 6 7 8
Forecast 30 30 30 30 40 40 40 40
Customer Orders
(committed) 33 20 10 4 2
Projected on-hand
inventory 31 1 -29
Beginning
Inventory
Customer orders are larger than
forecast in week 1
Forecast is larger than Customer orders
in week 2
Forecast is larger than Customer orders
in week 3
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Time Fences
Time Fences points in time
that separate phases of a
master schedule planning
horizon.
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Time Fences in MPS
Period
frozen
(firm or
fixed)
slushy
somewhat
firm
liquid
(open)
1 2 3 4 5 6 7 8 9
13-25
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REFERENCES


Operations Management
William J . Stevenson

Operations Management
Barry Render & J ay Heizer
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