PRODUCTION AND
OPERATIONS
MANAGEMENT
Ch. 14: Aggregate Scheduling
POM - J. Galván
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Learning Objectives

Describe planning

Distinguish the types of plans

Define aggregate scheduling

Relate aggregate scheduling to the
overall planning process

Explain aggregate scheduling options

Develop aggregate schedules
POM - J. Galván
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Aggregate Planning Requires




Logical overall unit for measuring
sales and outputs
Forecast for intermediate planning
period in these aggregate units
Method for determining costs
Model that combines forecasts and
costs so that scheduling decisions
can be made
POM - J. Galván
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Planning




Setting goals & objectives
• Example: Meet demand within the
limits
of available resources at the least cost
Determining steps to achieve goals
• Example: Hire more workers
Setting start & completion dates
• Example: Begin hiring in Jan.; finish,
Mar.
Assigning responsibility
POM - J. Galván
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Planning Horizons
Short-range plans
Job assignments
Ordering
Job scheduling
Dispatching
Responsible:
Operations
managers,
supervisors,
foremen
Today
3 Months
Responsible:
Operations
managers
Intermediate-range plans
Sales planning
Production planning and
budgeting
Setting employment, inventory,
subcontracting levels
Analyzing operating plans
1 year
Responsible:
Top executives
Long-range plans
R&D
New product plans
Capital expenses
Facility location, expansion
5 years
Planning Horizon
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Types of Plans
Management
Level
High
Long-Range
Facility location
Top Executives
Intermediate-Range
Aggregate plans
Operations
Managers
Short-Range
Low Dispatching
Today
3 months
Supervisors
1 year
POM - J. Galván
18 months
5 years
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Relationships of the Aggregate
Plan
Marketplace
and Demand
Research and
Technology
Product
Decisions
Demand
Forecasts,
orders
Work Force
Process
Planning &
Decisions
Raw Materials
Available
Aggregate
Plan for
Production
Inventory On
Hand
External
Capacity
Master
Production
Schedule
Detailed Work
Schedules
POM - J. Galván
Plant
Capacity
Priority
Planning &
Scheduling
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What’s Needed for Aggregate
Planning
A mathematically based aggregate planning model requires
considerable:
• time
 problem definition
 model development
 model verification
 model application
• expertise
 people who understand the problem
 people who understand both the modeling process, and
the specific model
• money
 money to pay for all of the above
 often requires funding for several people for several
months!
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Aggregate Scheduling

Provides the quantity and timing of
production for intermediate future
•

Usually 3 to 18 months into future
Combines (‘aggregates’) production
•
Often expressed in common units


Example: Hours, dollars, equivalents
(e.g., FTE students)
Involves capacity and demand
variables
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Aggregate Scheduling Goals




Meet demand
Use capacity
efficiently
Meet inventory
policy
Minimize cost
•
•
•
•
Labor
Inventory
Plant & equipment
Subcontract
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Aggregate Planning Strategies
Pure Strategies

Capacity Options — change
capacity:
•
•
•
•
•
changing inventory levels
varying work force size by hiring or
layoffs
varying production capacity through
overtime or idle time
subcontracting
using part-time workers
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Aggregate Planning Strategies
Pure Strategies

Demand Options — change
demand:
•
•
•
influencing demand
backordering during high demand
periods
counterseasonal product mixing
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Aggregate Planning Options Advantages and Disadvantages
Option
Advantage
Disadvantage
Some
Comments
Changing
INVENTORY
levels
Changes in
inventories are
gradual, not
abrupt production
changes
Inventory holding
costs; shortages
Applies mainly to
resulting in lost
production, not
sale may occur if
service settings
demand increases
Varying
WORKFORCE
SIZE by hiring or
layoffs
Avoids use of
other alternatives
Hiring, layoff, and
training costs
POM - J. Galván
Used where many
unskilled people
seek extra income
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Advantages/Disadvantages continued
Option
Varying
PRODUCTION
RATES through
overtime or idle time
Advantage
Disadvantage
Some
Comments
Overtime
Matches seasonal
Allows flexibility
premiums, tired
fluctuations without
within the
workers, may not
hiring/training costs
aggregate plan
meet demand
Permits flexibility
SUBCONTRACTING and smoothing of
the firm's output
POM - J. Galván
Loss of quality
control; reduced
profits; loss of
future business
Applies mainly in
production
settings
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Advantages/Disadvantages continued
Advantage
Disadvantage
Some
Comments
Using PARTTIME WORKERS
Less costly and
more flexible than
full-time workers
High
turnover/training
costs; quality
suffers;
scheduling difficult
Good for unskilled
jobs in areas with
large temporary
labor pools
Influencing
DEMAND
Tries to use
excess capacity.
Discounts draw
new customers.
Uncertainty in
demand. Hard to
match demand to
supply exactly.
Creates marketing
ideas.
Overbooking used
in some
businesses.
Option
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Advantage/Disadvantage continued
Option
BACK
ORDERING
during highdemand periods
COUNTER
SEASONAL
products and
service mixing
Advantage
Disadvantage
Some
Comments
May avoid
overtime. Keeps
capacity constant
Customer must be
Many companies
willing to wait, but
backlog.
goodwill is lost.
Fully utilizes
resources; allows
stable workforce.
Risky finding
May require skills
products or
or equipment
services with
outside a firm's
opposite demand
areas of expertise.
patterns.
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Aggregate Scheduling
Strategies

Mixed strategy
• Combines 2 or more aggregate scheduling
options

Level scheduling strategy
•
•
•
•
Produce same amount every day
Keep work force level constant
Vary non-work force capacity or demand
options
Often results in lowest production costs
POM - J. Galván
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Aggregate Scheduling Methods

Graphical & charting techniques
•
•

Popular & easy-to-understand
Trial & error approach
Mathematical approaches
•
•
•
•
Transportation method
Linear decision rule
Management coefficients model
Simulation
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The Graphical Approach to
Aggregate Planning





Forecast the demand for each period
Determine the capacity for regular
time, overtime, and subcontracting,
for each period
Determine the labor costs, hiring and
firing costs, and inventory holding
costs
Consider company policies which may
apply to the workers or to stock levels
Develop alternative plans, and
examine their total costs
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Comparison of Aggregate
Planning Methods
Techniques
Charting/graphical
methods
Approaches
Trial and error
Optimization
Transportation
method
Management
coefficient model
Aspects
Simple to understand, easy
to use. Many solutions; one
chosen may not be optimal
LP software
available;permits sensitivity
analysis and constraints.
Linear function may not be
realistic
Heuristic
POM - J. Galván
Simple, easy to implement;
tries to mimic manager’s
decision process; uses
regression
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Controlling the Cost of Labor in
Service Firms




Close control of labor hours to ensure
quick response to customer demand
Some form of-on-call labor resource
that can be added or deleted to meet
unexpected demand
Flexibility of individual worker skills to
permit reallocation of available labor
Individual worker flexibility in rate of
output or hours of work to meet
demand
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