Operations and Supply Chain Management The Core

242 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
THE PRODUCT FAMILY OF CANON CAMERAS.
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Intermediate-term activities include
forecasting and demand management and
sales and operations planning. The determination
of expected demand is the focus
of forecasting and demand management.
From these data, detailed sales and operations
plans for meeting these requirements
are made. The sales plans are inputs to
sales force activities, which are the focus
of marketing books. The operations plan
provides input into the manufacturing,
logistics, and service planning activities
of the firm. Master scheduling and material
requirements planning are designed to
generate detailed schedules that indicate
when parts are needed for manufacturing
activities. Coordinated with these plans
are the logistics plans needed to move the
parts and finished products through the
supply chain.
Short-term details are focused mostly
on scheduling production and shipment
orders. These orders need to be coordinated
with the actual vehicles that transport
material through the supply chain.
On the service side, short-term scheduling
of employees is needed to ensure that adequate customer service is provided and fair
worker schedules are maintained.
Production rate
Number of units
completed per unit
of time.
Workforce level
Number of workers
needed in a period.
Inventory on-hand
Inventory carried
from the previous
period.
The Aggregate Operations Plan
The aggregate operations plan is concerned with setting production rates by product group
or other broad categories for the intermediate term (3 to 18 months). Note again from
Exhibit 8.1 that the aggregate plan precedes the master schedule. The main purpose of the
aggregate plan is to specify the optimal combination of production rate, workforce level,
and inventory on-hand. Production rate refers to the number of units completed per unit
of time (such as per hour or per day). Workforce level is the number of workers needed
for production (production = production rate × workforce level). Inventory on-hand is
unused inventory carried over from the previous period.
Here is a formal statement of the aggregate planning problem: Given the demand
forecast F t for each period t in the planning horizon that extends over T periods, determine
the production level P t , inventory level I t , and workforce level W t for periods
t = 1, 2, . . . , T that minimize the relevant costs over the planning horizon.
The form of the aggregate plan varies from company to company. In some firms, it is a
formalized report containing planning objectives and the planning premises on which it is
based. In other companies, particularly smaller ones, the owner may make simple calculations
of workforce needs that reflect a general staffing strategy.
The process by which the plan itself is derived also varies. One common approach is to
derive it from the corporate annual plan, as shown in Exhibit 8.1. A typical corporate plan
contains a section on manufacturing that specifies how many units in each major product