Hybrid aggregate plan

5.Compare and contrast the level and chase aggregate plans. These plans are similar since both plans ensure that demand is met. However, they meet demand in different ways. A level plan maintains the same workforce size and equipment, thus producing the same amount of product each time period. This causes inventory to increase when demand is below average and decrease when demand is above average. A chase plan adjusts the size of the workforce and equipment capacities in order to meet the demand rate for each time period. In this plan, inventory is not used to support the plan. Instead, people are hired and fired as needed to deal with changes in demand. 6.Describe the different demand-based options used in aggregate planning and their implications for your company. Reactive demand-based options use inventories and backorders to deal with changes in demand. This option causes our inventory costs to increase and our customer service levels to decrease because some orders may be shipped late. The proactive or capacity-based option attempts to shift the demand patterns in order to minimize changes in demand. This option can increase expenses, such as overtime and subcontracting. 7.Describe the different capacity-based options used in aggregate planning and their implications for your company.The different options are overtime, undertime, subcontracting, hiring and firing. Overtime causes labor expenses to increase since we typically pay time and a half for each overtime hour. Undertime increases the labor cost per unit since we have idle time. Subcontracting costs money since we have to send our product for outside manufacturing. This is usually more costly than the expense of making the product in house. Hiring causes us to incur expenses related to position advertising, interviewing steps and training. Firing expenses may include increased unemployment compensation premiums and severance packages for those fired. 8.Explain what the hybrid aggregate plan is and why it is used. A hybrid aggregate plan uses options from both the level and chase aggregate plans. It is used because we may not prefer to use a level or aggregate plan. We can combine our preferred decisions from each plan 11. Explain the managerial significance of aggregate planning.Managers have a wide range of decision options they can consider for achieving a balance of demand and capacity in aggregate planning. Since the options that are most suited to influencing demand fall more in the realm of marketing than in operations (with the exception of backlogging), we shall concentrate on the capacity options, which are in the realm of operations but include the use of back orders. Aggregate planners might adopt a number of strategies. Some of the more prominent ones are thefollowing: 1. Maintain a level workforce. 2. Maintain a steady output rate. 3. Match demand period by period. 4. Use a combination of decision variables. While other strategies might be considered, these will suffice to give you a sense of how aggregate planning operates in a vast number of organizations. The first three strategies are “pure” strategies because each has a single focal point; the last strategy is “mixed” because it lacks the single focus. Contrast independent and dependent demand. Dependent demand demands for items that are subassemblies or component parts to be used in the production of finished goods. When demand for items is derived from plans to make certain products, as it is with raw materials, parts, and assemblies used in producing a finished product, those items are said to have dependent demand. The parts and materials that go into the production of an automobile are examples of dependent demand because the total quantity of parts and raw materials needed during any time period is a function of the number of cars that will be produced. Conversely, demand for the finished cars is independent—a car is not a component of another item. Independent demand is fairly stable once allowances are made for seasonal variations, but dependent demand can be sporadic or “lumpy”; large quantities are used at specific points in time with little or no usage at other times. 3.Briefly define or explain each of these terms. a. Master schedule. Is also referred to as the master production schedule, states which end items are to be produced, when they are needed, and in what quantities. b. Bill of materials. A bill of materials (BOM) contains a listing of all of the assemblies, subassemblies, parts, and raw materials that are needed to produce one unit of a finished product.