om 16 aggsales&opsplanning
TRANSCRIPT
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Aggregate Sales and Operations
PlanningSelected Slides from Jacobs et al, 9th Edition
Operations and Supply Management
Chapter 16Edited, Annotated and Supplemented by
Peter Jurkat
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Sales and Operations Planning Activities
Long-range planning Greater than one year planning horizon
Usually performed in annual increments
Medium-range planning Six to eighteen months
Usually with weekly, monthly or quarterlyincrements
Short-range planning One day to less than six months
Usually with weekly or daily increments
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Process planning
Strategic capacity
planning
Sales and operations
(aggregate) planning
Sales plan Aggregateoperations
plan
Supply network
planning
Forecasting and
demand management
Master scheduling
Material requirements
planning
Order scheduling
Vehicle capacity
planning
Vehicle loading
Vehicle dispatching
Warehouse receipt
planning
Weekly workforce
(regular/overtime,
subcontracting, etc.)scheduling
Daily workforce
scheduling
Manufacturing Logistics
Services
Long
range
Medium
range
Short
range
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The Aggregate Operations Plan
Main purpose: Specify the optimalcombination of production rate (units completed per
unit of time)
workforce level (number of workers) inventory on hand (inventory carried
from previous period) Product group or broad category
(Aggregation)
This planning is done over anintermediate-range planning period of 3to 18 months
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Balancing Aggregate Demand
and Aggregate Production Capacity
0
2000
4000
6000
8000
10000
Jan Feb Mar Apr May Jun
45005500
7000
10000
8000
6000
0
2000
4000
6000
8000
10000
Jan Feb Mar Apr May Jun
4500 4000
90008000
4000
6000
Suppose the figure to the
right represents forecast
demand in units
Now suppose this lowerfigure represents the
aggregate capacity of the
company to meet demand
What we want to do isbalance out the
production rate, workforce
levels, and inventory to
make these figures match
up
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Required Inputs to the Production Planning System
Planningfor
production
External
capacity
Competitors'behavior
Raw materialavailability
Marketdemand
Economic
conditions
Current
physical
capacity
Current
workforce
Inventory
levels
Activities
required
for
production
External
to firm
Internal
to firm
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Key Strategies for Meeting Demand
Chase adjust production to just meet
demand for every period Level - produce at constant level (often that
required to meet demand in period ofminimum demand, adjust with overtime,subcontractors, etc)
Stable workforce find some workforce leveland stick to it, adjust with overtime, etc.)
Find workforce level, overtime,subcontracting by hiring/firing to minimizeoverall cost of production for entire timehorizon
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Aggregate Planning Examples: Unit Demand and Cost Data
Materials $5/unit
Holding costs $1/unit per mo.
Marginal cost of stockout $1.25/unit per mo.
Hiring and training cost $200/workerLayoff costs $250/worker
Labor hours required .15 hrs/unit
Straight time labor cost $8/hour
Beginning inventory 250 unitsProductive hours/worker/day 7.25
Paid straight hrs/day 8
Suppose we have the following unit demand and cost information:
Demand/mo Jan Feb Mar Apr May Jun
4500 5500 7000 10000 8000 6000
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SeeAggregatePlanning.xls - Assignment: expand to include
overtime and subcontractors
find minimum cost plan
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Yield Management
Allocating resources to customers at variousprices that will maximize yield or revenue if
1. Service or product can be sold in advance of
consumption2. Demand fluctuates
3. Capacity is relatively fixed
4. Demand can be segmented
5. Variable costs are low and fixed costs arehigh
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DemandCurve
Yield Management Example
Passed-upcontribution
Money lefton the table
Potential customers exist who arewilling to pay more than the $15variable cost of the room
Some customers who paid $150were actually willing to paymore for the roomTotal
$ contribution= (Price) x (50
rooms)= ($150 - $15)
x (50)= $6,750
Price
Room sales
100
50
$150
Price chargedfor room
$15
Variable costof room
All rooms at same price
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Total $ contribution =(1st price) x 30 rooms + (2nd price) x 30 rooms =
($100 - $15) x 30 + ($200 - $15) x 30 =$2,550 + $5,550 = $8,100
DemandCurve
Yield Management Example
Price
Room sales
100
60
30
$100
Price 1for room
$200
Price 2for room
$15
Variable costof room
Different rooms at different prices
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Yield Management Matrix
D
uration
ofuse
Unpredicta
ble
Predictable
Price
Tend to be fixed Tend to be variable
Quadrant 1: Quadrant 2:
Movies Hotels
Stadiums/arenas AirlinesConvention centers Rental cars
Hotel meeting space Cruise lines
Quadrant 3: Quadrant 4:
RestaurantsGolf courses Hospitals
Internet serviceproviders
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Making Yield Management Work
1. Multiple pricing structures must befeasible and appear logical to thecustomer
2. Forecasts of the use and duration ofuse
3. Changes in demand