Aggregate Production

Planning
Dr. Nitin Joshi

Worry in Production ??

What
Where
When
How Much
To be carried out in future .
Future = Immediate (to) + long term
future
Plans can be Long term, Intermediate and
short term.

Long term

Intermediate

Short term

Technology appraisal
and selection

Physical arrangements
for M/c , plat layout, raw
material etc

Plans for using

remaining flexibilities in
time, machine, men and
materials.
(Production/ Operation s
scheduling.)

Location of facilities

Raw materials resources

Sequencing

Plant and Machinery

Environment Protection

Assigning people

Selection and training

Plans for using time

flexibilities

Determining appropriate
batch size.

Selection of RM

Plans for using interresources flexibilities or

convertibility

Analysis of impact on
the environment and
crucial decision
Decision of time spans
available at different
operations point

What is APP?
It is an attempt to match the supply
of and demand for a product or
service
by
determining
the
appropriate quantities and timing of
inputs, transformation, and outputs.
Decisions made on production,
staffing, inventory and backorder
levels.

APP

Why APP is important?

Aggregate planning is the key to
managing change in POM because
the changing patterns of customer
demand and the plans for providing
production resources that adopt to
those changes are fundamental to
aggregate planning.

The goal of aggregate planning is to achieve a

production plan that will effectively utilize the
organizations resources to satisfy expected
demand.

Characteristics of aggregate planning:

Considers a "planning horizon" from about 3
to 18 months, with periodic updating
Looks at aggregate product demand, stated
in common terms
Looks at aggregate resource quantities,
stated in common terms
Possible to influence both supply and
demand by adjusting production rates
Workforce levels, inventory levels, etc., but
facilities cannot be expanded.

Objectives of Aggregate Planning

Objective of aggregate planning
frequently is to minimize total cost
over the planning horizon.
maximize customer service
minimize inventory investment
minimize changes in workforce levels
minimize changes in production rates
maximize utilization of plant and
equipment

OPTIONS TO MEET FLUCTUATING

DEMAND
Build inventories in slack periods in anticipation of
higher demands later in planning horizon.
Carry backorders or tolerate lost sales during peak
periods.
Use over time in peak periods, under time in slack
periods to vary output, while holding work force and
facilities constant.
Vary capacity by changing size of work force through
hiring and firing.
Vary capacity through changes in plant and
equipment (generally long term option)
Subcontracting may be resolved.

Two important strategies

Level ( Uniform production )
Chase ( Non uniform production )

Aggregate planning situation

Suma enterprises produces
decorative bricks . The demand for
these bricks for the next 12 months
is as below:
The cost of holding the inventory is
3% of Rs 4.00 ( Cost of the brick)
Lost opportunity cost is Re.0.25 per
brick per month.

Months

Demand (Thousands)

Jan

27

Feb

36

Mar

36

Apr

25

May

25

Jun

14

Jul

10

Aug

15

Sep

20

Oct

30

Nov

35

Dec

27

Months

Demand
(Thousan
ds)

Jan

27

Feb

36

Mar

36

Apr

25

May

25

Jun

14

Jul

10

Aug

15

Sep

20

Oct

30

Nov

35

Dec

27

Producti
Inventory
on
Beginnin End
Average
g

Shortag
e

Mont
hs

Demand
(Thousa
nds)

Jan

27

Feb

36

Mar

36

Apr

25

May

25

Jun

14

Jul

10

Aug

15

Sep

20

Oct

30

Nov

35

Dec

27

Planne
d

Over &
under

Inventory
Beginni
ng

End

Averag
e

Shorta
ge