Aggregate Planning
Below shows the forecast
demands for a year assume a stock of 6200 units. An analysis of this will
follow using ‘chase’ and ‘level’ strategies
|
Month
|
Sales Forecast
|
Cumulative Demand
|
Average Demand to Month Shown
|
Cumulative Net Demand
|
Average Net Demand to Month Shown
|
|
January
|
3000
|
3000
|
3000
|
-3200
|
-3200
|
|
February
|
4000
|
7000
|
3500
|
-800
|
-400
|
|
March
|
5000
|
12000
|
4000
|
5800
|
1934
|
|
April
|
6000
|
18000
|
4500
|
11800
|
2950
|
|
May
|
8400
|
26400
|
5280
|
20200
|
4040
|
|
June
|
11000
|
37400
|
6233
|
31200
|
5200
|
|
July
|
12000
|
49400
|
7057
|
43200
|
6172
|
|
August
|
11000
|
60400
|
7550
|
54200
|
6775
|
|
September
|
10000
|
70400
|
7822
|
64200
|
7134
|
|
October
|
6600
|
77000
|
7700
|
70800
|
7080
|
|
November
|
5000
|
82000
|
7455
|
75800
|
6891
|
|
December
|
4000
|
86000
|
7167
|
79800
|
6650
|
Illustrating different
aggregate planning approaches:
The three plans are shown
below, note:
1.
The production
levels for each.
2.
The inventory
levels for each.
|
Month
|
Plan-1
|
Plan-2
|
Plan-3
|
|||
|
Production
|
End of Month Inventory
|
Production
|
End of Month Inventory
|
Production
|
End of Month Inventory
|
|
|
December
|
|
6200
|
0
|
6200
|
0
|
6200
|
|
January
|
0
|
3200
|
6650
|
9850
|
7134
|
10334
|
|
February
|
800
|
0
|
6650
|
12500
|
7134
|
13468
|
|
March
|
5000
|
0
|
6650
|
14150
|
7134
|
15602
|
|
April
|
6000
|
0
|
6650
|
14800
|
7134
|
16736
|
|
May
|
8400
|
0
|
6650
|
13050
|
7134
|
15470
|
|
June
|
11000
|
0
|
6650
|
8700
|
7134
|
11604
|
|
July
|
12000
|
0
|
6650
|
3350
|
7134
|
6738
|
|
August
|
11000
|
0
|
6650
|
-1000
|
7134
|
2872
|
|
September
|
10000
|
0
|
6650
|
-4350
|
7134
|
6
|
|
October
|
6600
|
0
|
6650
|
-4300
|
7134
|
540
|
|
November
|
5000
|
0
|
6650
|
-2650
|
7134
|
2674
|
|
December
|
4000
|
0
|
6650
|
0
|
7134
|
5808
|
Calculating
the cost of the plans :
|
Production Cost
|
€62000
|
|
Labor Cost
|
20% of production cost:12400
|
|
Backorder Cost
|
€20/unit
|
|
Inventory Carrying Cost
|
3% of production cost
|
|
Over Time Cost(weekday)
|
€10/unit
|
|
Overtime Cost(weekend)
|
€20/unit
|
|
Idle Time Cost
|
labor Cost
|
|
Production Level Change
Cost
|
€1000
|
|
Normal Capacity
|
7000units/month
|
|
Extra Overtime(weekday)
Capacity
|
1000/month
|
|
Extra Overtime(weekend)
Capacity
|
1500/month
|
Hire/Fire policy is not
considered
Plan
1- Chase:
Inventory hold cost or
backlog cost but will involve production change, overtime, subcontracting &
under utilization costs
|
Month
|
Evening overtime
|
Weekend overtime
|
Sub-
contact |
Under until Units
|
Evening
OT
@€10
|
Weekend OT
@€ 20
|
Sub-
Contact @€30
|
Under Until
@€12400
|
Production
Change
@€1000
|
Inventory
|
Inventory costs
@€1860
|
|||
|
January
|
0
|
0
|
0
|
7000
|
0
|
0
|
0
|
86800000
|
0
|
3200
|
5952000
|
|||
|
February
|
0
|
0
|
0
|
6200
|
0
|
0
|
0
|
76880000
|
1000
|
0
|
0
|
|||
|
March
|
0
|
0
|
0
|
2000
|
0
|
0
|
0
|
24800000
|
1000
|
0
|
0
|
|||
|
April
|
0
|
0
|
0
|
1000
|
0
|
0
|
0
|
12400000
|
1000
|
0
|
0
|
|||
|
May
|
1000
|
400
|
0
|
0
|
10000
|
8000
|
0
|
0
|
1000
|
0
|
0
|
|||
|
June
|
1000
|
1500
|
1500
|
0
|
10000
|
30000
|
45000
|
0
|
1000
|
0
|
0
|
|||
|
July
|
1000
|
1500
|
2500
|
0
|
10000
|
30000
|
75000
|
0
|
1000
|
0
|
0
|
|||
|
August
|
1000
|
1500
|
1500
|
0
|
10000
|
30000
|
45000
|
0
|
1000
|
0
|
0
|
|||
|
September
|
1000
|
1500
|
500
|
0
|
10000
|
30000
|
15000
|
0
|
1000
|
0
|
0
|
|||
|
October
|
0
|
0
|
0
|
400
|
0
|
0
|
0
|
4960000
|
1000
|
0
|
0
|
|||
|
November
|
0
|
0
|
0
|
2000
|
0
|
0
|
0
|
24800000
|
1000
|
0
|
0
|
|||
|
December
|
0
|
0
|
0
|
3000
|
0
|
0
|
0
|
37200000
|
1000
|
0
|
0
|
|||
|
Total
|
50000
|
128000
|
180000
|
267840000
|
11000
|
|
595200
|
|||||||
Plan
2-Level (Back Order):
Inventory & backlog costs
also Under Utilization cost but no overtime, subcontracting or production
costs
|
Month
|
Inventory
|
Backlog
|
Inventory Holding @€3
|
Backlog cost @€20
|
Under Utilization
|
Under Utilization cost
@12400
|
|
|
January
|
9850
|
0
|
29550
|
0
|
350
|
4340000
|
|
|
February
|
12500
|
0
|
37500
|
0
|
350
|
4340000
|
|
|
March
|
14150
|
0
|
420540
|
0
|
350
|
4340000
|
|
|
April
|
14800
|
0
|
44400
|
0
|
350
|
4340000
|
|
|
May
|
13050
|
0
|
391050
|
0
|
350
|
4340000
|
|
|
June
|
8700
|
0
|
26100
|
0
|
350
|
4340000
|
|
|
July
|
3350
|
0
|
10050
|
0
|
350
|
4340000
|
|
|
August
|
0
|
1000
|
0
|
20000
|
350
|
4340000
|
|
|
September
|
0
|
4350
|
0
|
87000
|
350
|
4340000
|
|
|
October
|
0
|
4300
|
0
|
86000
|
350
|
4340000
|
|
|
November
|
0
|
2650
|
0
|
53000
|
350
|
4340000
|
|
|
December
|
0
|
0
|
0
|
0
|
350
|
4340000
|
|
|
Total
|
959190
|
246000
|
|
52080000
|
|||
Plan
3-Level (Stock Holding):
Inventory costs, Evening overtime cost, but
no subcontracting or production costs.
|
Month
|
Inventory
|
Units on Evening OT
|
Inventory Holding @€3
|
Evening Overtime @€10
|
|
|
January
|
10334
|
134
|
31002
|
1340
|
|
|
February
|
13468
|
134
|
40404
|
1340
|
|
|
March
|
15602
|
134
|
46806
|
1340
|
|
|
April
|
16736
|
134
|
50208
|
1340
|
|
|
May
|
15470
|
134
|
46410
|
1340
|
|
|
June
|
11604
|
134
|
34812
|
1340
|
|
|
July
|
6738
|
134
|
20214
|
1340
|
|
|
August
|
2872
|
134
|
8616
|
1340
|
|
|
September
|
6
|
134
|
18
|
1340
|
|
|
October
|
540
|
134
|
1620
|
1340
|
|
|
November
|
2674
|
134
|
8022
|
1340
|
|
|
December
|
5808
|
134
|
17424
|
1340
|
|
|
Total
|
|
305556
|
16080
|
||
Plan
Summary Cost:
|
|
Plan-1
|
Plan-2
|
Plan-3
|
|
Inventory Holding Cost
|
5952000
|
959190
|
305556
|
|
Backlog Cost
|
0
|
246000
|
0
|
|
Evening overtime
|
50000
|
0
|
16080
|
|
Weekend overtime
|
128000
|
0
|
0
|
|
Subcontracting
|
180000
|
0
|
0
|
|
Under utilization
|
267840000
|
52080000
|
0
|
|
Changing Production Level
|
11000
|
0
|
0
|
|
Total
|
274161000
|
53285190
|
321636
|
Comments:
Out of three plans we see in
plan summary that plan-3 is the most cost saving operation. So plan-3 is the
best aggregate planning.
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