Week 7 Discussion - Aggregate Planning

[Steve Prevette]

Chapter 13 covered "Aggregate Planning" which includes ways for a company to plan when demand is unstable. Please provide a real-world example for at least one of the strategies in the chapter. Include some thought as to the effect on the company and the effects on the employees.

[mark child]

We have as many as 47 tractors on the farm I work for per year. These tractors range in price from $120K to $280K. It seems ridiculous to have these machines sit for 3 months during the winter. Therefore we trade all of them in at the end of the year, November, and recieve new tractors in the the spring, March. We plan our demands for the following year, usually in November, and order the tractors necessary three months in advance. This allows the manufacturer to only build what they need to and keeps their inventory low. Also, we have moved to a lease program on these machines based on an hourly rate. This allows us to only pay for the times that the engine is actually running. This program has provided a win/win situation, as far as costs, for ourselves and the manufacturer.

[Jamie Morris]

My experience has been more with aggregate scheduling. The attempt was made to compile a massive schedule that was named the Integrated Mission Execution Schedule. The attempt was to compile an overall schedule for each activity and to link activities logically and sequentially to include resource demand for each activity, as some of the activities had overlapping demand for the same resources. Execution became the operative word in the title of this schedule, as it was developed to a level of micromanagement that is unparalleled in the modern world. Although the planning and scheduling of projects and activities are necessary, a schedule to this level grows into a life of its own and requires massive amounts of resources just for maintenance. Additionally, management and the workforce lose sight of the overall objective and become overally focused on just meeting the next activity milestone. Daily meetings are scheduled to discuss progress on every activity. These meetings become public execution boards for those not meeting their scheduled activities, irregardless of factors completely outside of their control.
In summary, good aggregate planning and scheduling are necessary for a company to be successful and to continually improve. However, due diligence must be exercised in determining the level of tracking and control that is needed to successfully lead a project, business or company.

[Roberta]

I have seen similar attempts at “mega scheduling” like Jamie described. A schedule that is too detailed leads to incredible amounts of time in meetings and in discussion to declare the status of activities and any changes that need to be incorporated. I have seen multiple FTEs put on a project just to maintain large project schedules. A reasonable level must be determined to be effective.

A real-world example of aggregate planning that I can provide involves managing inventory at corporate and branch levels of a company. I have a friend who is a purchasing agent for a branch of a plumbing supply wholesaler. The inventory levels for the branch warehouse are set based on the history of normal sales to consistently maintain enough for the normal demand. However, sometimes a builder will request a large quantity of something that is not standard for a complex of apartments, etc., which will wipe out the entire inventory and possibly even require shipping from other branches to meet the order. When that sale is made, it is recorded in the history. The salesperson that made the sale is supposed to mark the order as an “exceptional sale”, indicating that it should not be taken as part of the normal demand for that product. If this indicator is not applied, then the corporate buying department sees that there has been an increase in demand and it needs to place a large order to accommodate the new demand it perceives. It is the responsibility of the PA at the branch to monitor these automatic orders at corporate to ensure that such spikes do not influence the amount of product that gets sent to the branch.

[jlowens]

An example of aggregate planning would be an electric utilities company and its demand during an unexpected seasonal change. The production of fuel for electricity is forecast based on past history. The forecast of how much electricity that will be used during the winter months may improve as the season gets closer. Yet, in a part of the country where you never expect months of bad weather , the season changes. These variables were not added into the equation. The expected demand is based is a probability variable when the production decision was made. Neither was the resources that will be needed for this unexpected change in weather are included for the expected demand. Utilities prices increase to the customer. Next season, fuels prices based on the past year experience will increase also.