Operations 9 473.31 Fall 2015 Bruce Duggan Providence University College

Operations9

473.31

Fall 2015

Bruce Duggan

Providence University College

Summary

Sales and operations planning and the aggregate plan translate corporate strategic plans into broad categories of workforce size, inventory quantity, and production levels.

Demand variations are a fact of life, so the planning system must include sufficient flexibility to cope with such variations.

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Know The Answers To These Questions1. What exactly is sales and operations planning?

2. What is the difference between the chase, variable hours, and level production planning strategies?

3. What are some things that can be done to avoid laying off full-time employees when demand fluctuates?

4. How is aggregate planning different for services- versus goods-producing organizations?

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Sales and Operations Planning

Sales and operations planning • the process that helps companies keep demand and supply in balance • requires an integrated effort with cooperation from

o saleso distribution and logisticso operationso financeo product development

Sales and Operations Planning

Long-range planning• done annually, focusing on a horizon greater than one year.

Intermediate-range planning• usually covers a period from 3 to 18 months• with weekly, monthly, or quarterly time increments

Short-range planning• covers a period from 1 day to 6 months• with daily or weekly time increments

Sales and Operations Planning

Aggregate Operations Plan

translates annual and quarterly business plans into labour and production plans for the intermediate term

Aggregate Operations Plan

purpose:• to specify the optimal combination of:

o production rate : # of units completed per unit of time.

o workforce level # of people needed for production

• production = production rate x workforce level

inventory on hand• unused inventory carried forward from previous period

Production Planning Environment

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Production Planning Strategies

1. chase strategy • matches the production rate to the order rate by hiring and laying off

employees as the order rate varies. • vary workforce size to meet demand

2. stable workforce with variable work hours • varies the output by varying the number of hours worked through flexible

work schedules or overtime.• work overtime and part-time

Production Planning Strategies

3. level strategy• maintains a stable workforce at a constant output rate• shortages & surpluses absorbed by fluctuating inventory levels

4. subcontracting• similar to chase strategy, but hiring and laying off are translated into

subcontracting and not subcontracting• subcontract to accommodate demand fluctuations

Production Planning Strategies

pure strategy• a production plan when just 1 of the above strategies are used to absorb

demand fluctuations

mixed strategy • a production plan that combines two or more strategies available for meeting

demand

Aggregate Planning Techniques

cut and try approach• costing out various production planning alternatives • selecting the one that is best

sophisticated approaches involve• linear programming and/or • simulation

A Cut-and-Try Example

A Cut-and-Try Example

A Cut-and-Try Example

Formulate alternative production plans for JCBS Company:• Plan 1:

o produce to exact monthly production requirementso use regular 8-hour day by varying workforce size

• Plan 2:o produce to meet expected average demand over the next six months o maintain constant workforce

A Cut-and-Try Example

Formulate alternative production plans for JCBS Company:• Plan 3:

o produce to meet minimum expected demano using a constant workforce on regular timeo subcontract out to meet additional output requirements

• Plan 4: o produce to meet expected demand for all but the first two months o use a constant workforce on regular timeo use overtime to meet additional output requirements

A Cut-and-Try Example

A Cut-and-Try Example

A Cut-and-Try Example

A Cut-and-Try Example

A Cut-and-Try Example

A Cut-and-Try Example

Level Scheduling

A level schedule • holds production constant over a period of time.• for each period, it keeps the workforce constant and inventory low• depends on demand to pull products through• backbone of JIT production

o “Just In Time”

Level Scheduling Advantages

advantages• entire system can be planned to minimize inventory and work-in-process. • product modifications are up-to-date because of low amount of work-in-

process.• a smooth flow throughout the production system• purchased items from vendors can be delivered when needed, and, in fact,

often to directly to the production line

Aggregate Planning in Practice

Aggregate Planning Applied to ServicesThe City of Calgary's Parks and Recreation Department

Aggregate Planning Applied to Services

Aggregate Planning Applied to Services

Alternative 1Days Per Year Hours Wages Fringe Benefits Administrative Cost Total Cost

116 Full time 252 233,856 3,040,128 516,822 608,026 4,164,975 120 part time 252 241,920 2,661,120 292,723 665,280 3,619,123

Total Cost 5,701,248 809,545 1,273,306 7,784,099

Alternative 2Days Per Year Hours Wages Fringe Benefits Administrative Cost Total Cost

50 Full time 252 100,800 1,310,400 222,768 262,080 1,795,248 120 part time 252 241,920 2,661,120 292,723 665,280 3,619,123 Subcontracting 2,700,000

Total Cost 3,971,520 515,491 927,360 8,114,371

Alternative 30 full time0 part timeSubcontract full time 3,900,000 Subcontract part time 4,500,000

Total Cost 8,400,000

End of Chapter 9