Aggregate Planning in Supply Chains

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary goal of aggregate planning within a supply chain?

To maximize customer satisfaction by always meeting demand.

To minimize production costs regardless of other factors.

To optimize supply chain profit by determining production, inventory, capacity, and backlogs for each period. (correct)

To ensure all stages of the supply chain operate independently.

Which of the following is NOT a key operational parameter identified through aggregate planning?

Machine maintenance schedule (correct)

Inventory on hand

Production rate

Subcontracting

What is the typical time horizon for aggregate planning?

1-2 weeks

2-5 years

3-18 months (correct)

2-4 months

Which of the following information is essential for developing an aggregate plan?

Aggregate demand forecast for each period. (B) Signup and view all the answers

Which cost category is typically considered in aggregate planning?

Cost of changing capacity, like hiring or layoffs. (D) Signup and view all the answers

What does the term 'backlog' refer to in the context of aggregate planning?

Unmet demand that is delayed to be filled. (C) Signup and view all the answers

Why is it important for all supply chain stages to collaborate on an aggregate plan?

To optimize overall supply chain performance and profitability. (B) Signup and view all the answers

Besides labor hours, what other type of resource usage is a key input to an aggregate plan?

Machine hours required per unit. (A) Signup and view all the answers

Which of the following is NOT considered a typical output of an aggregate plan?

Customer satisfaction ratings (D) Signup and view all the answers

What is the primary focus of a 'chase' strategy in aggregate planning?

Adjusting capacity to match demand fluctuations (C) Signup and view all the answers

A company utilizing a flexibility strategy is most likely to:

Use overtime to increase output (B) Signup and view all the answers

A level strategy in aggregate planning is best characterized by:

Maintaining stable workforce and output, and inventory fluctuations (C) Signup and view all the answers

When is a chase strategy most suitable?

When inventory holding costs are high and the cost of changing capacity is low (D) Signup and view all the answers

Which strategy is likely to accumulate large inventories and backlogs?

Level strategy (C) Signup and view all the answers

In the context of aggregate planning, what does 'safety inventory' refer to?

The additional inventory that is built and carried to satisfy higher than forecasted demand (B) Signup and view all the answers

How does linear programming typically contribute to aggregate planning?

It helps maximize profits while respecting supply chain constraints (B) Signup and view all the answers

What is the primary purpose of selecting aggregate units of production?

To ensure the production schedule can be realistically accomplished in practice (C) Signup and view all the answers

According to presented formulas for aggregate planning in Excel, what does P sub t represent?

The production output for period t (D) Signup and view all the answers

In the given formula for inventory, $I_t = max(I_{t-1} + P_t + C_t - D_t - S_{t-1}, 0)$, what does $C_t$ represent?

The subcontracted production in period t (B) Signup and view all the answers

What does a negative value in the calculated 'stockout' in Excel aggregation denote?

No stockout occurred, inventory is able to meet demand (D) Signup and view all the answers

What is meant by safety capacity?

Excess capacity used to satisfy higher-than-forecasted demand (D) Signup and view all the answers

Overtime is best considered a form of:

Safety capacity (D) Signup and view all the answers

What is most important when implementing software for aggregate planning?

The ability to handle large amounts of data (B) Signup and view all the answers

Study Notes

Aggregate Planning in Supply Chains

Aggregate planning aims to optimize production, inventory, capacity, and backlog levels over a specified time horizon (typically 3-18 months) to maximize profit for the entire supply chain.
It considers demand forecasts for each period, production costs (regular time, overtime, subcontracting), capacity costs (hiring/layoffs, machine additions), inventory holding costs, stockout costs, and various constraints.
Effective aggregate planning requires collaboration between all stages of the supply chain.

Key Elements of Aggregate Planning

Demand: Forecasted aggregate demand (Ft) for each period (t) over the planning horizon (T).
Costs: Production (labor, overtime, subcontracting) and capacity (hiring/layoff, machine), inventory holding, and stockout/backlog costs.
Resources: Labour/machine hours per unit, capacity constraints (overtime, layoffs, capital), and supply constraints from external sources.
Outputs: Production quantities (regular, overtime, subcontracted), inventory levels, backlog/stockout quantities, workforce adjustments, and capacity changes. A poor plan can lead to lost sales, profits, excess inventory, or capacity.

Aggregate Planning Strategies

Chase Strategy: Adjusts capacity (workforce, machine hours) to match demand. Results in low inventory, but can be costly and disrupt morale. Suitable when inventory holding is high and capacity adjustments are relatively low-cost.
Utilization Flexibility Strategy: Maintains a stable workforce but varies working hours (overtime). It uses available excess capacity. Suitable when inventory holding costs are high and adjusting capacity is relatively low-cost.
Level Strategy: Maintains stable capacity and workforce levels, leading to fluctuating inventory levels. Suitable when inventory holding and backlog costs are relatively low and worker morale is important.
Hybrid Strategy: Combines multiple strategies to optimize performance under various situations in the supply chain.

Aggregate Planning Using Linear Programming

Aims to maximize profit while respecting supply chain constraints.
Often employs a linear approximation of non-linear problem functions.

Aggregate Planning Inputs and Outputs (Example)

Input: Demand forecast for each time period, production costs (regular and overtime, subcontracting), inventory holding costs, stockout costs, workforce/machine availability
Output: Production levels (regular, overtime, subcontracted), inventory levels, workforce adjustments, capacity increase/decrease, stockouts, backlogs

Aggregate Planning Considerations

Aggregate Units: Identifying relevant production units considering production constraints (setups, maintenance).
Forecast Error: Incorporating safety inventory (extra inventory) and safety capacity (overtime, extra workforce, subcontracting, open market) as mitigating factors for demand forecasting uncertainty.
Software Tools: Using software is crucial for handling large amounts of data and complex problems in aggregate planning. Software can use linear programming techniques for optimal solutions. Accuracy and stability of data are essential.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz focuses on the key concepts of aggregate planning in supply chains, highlighting techniques to optimize production, capacity, and inventory. It covers demand forecasting, cost considerations, and the importance of collaboration across supply chain stages. Test your understanding of how effective planning can maximize profits.