Operations Management: An Integrated Approach, 5th Edition

DEVELOPING THE AGGREGATE PLAN

Here are the steps in developing an aggregate plan:

Step 1 Identify the aggregate plan that matches your company's objectives: level, chase, or hybrid.

Step 2 Based on the aggregate plan, determine the aggregate production rate.

• If you use the level plan with inventories and back orders, the aggregate production rate is set equal to average demand. In addition, if you allow no back orders, the size of the workforce is changed initially so that all demand is met on time.
• If you use the chase aggregate plan, calculate how much output capacity you need each period. Calculate how many units will be produced on regular time and overtime and how many units will be subcontracted.

Step 3 Calculate the size of the workforce.

• If you use the level aggregate plan, calculate how many workers you need to achieve the average production rate needed.
• If you change capacity each period with hires and fires, calculate how many workers you need each period and make the necessary change in the workforce.
• If you change capacity through a variety of options, calculate how much of a particular option you need each period.

Step 4 Test the aggregate plan.

• Using the production rate and initial workforce size, calculate your inventory levels (excesses and shortages), any shortages you face, expected number of employees hired and fired, and when you will need overtime.
• Calculate the total costs for your plan.

Step 5 Evaluate the plan's performance in terms of cost, ...