Beruflich Dokumente
Kultur Dokumente
ABSTRACT Among existing aggregate production planning (APP) approaches, the spreadsheet solver
approach is found to be the most applicable for industries due to the following reasons: (1) the solver
on spreadsheet software is readily available on virtually all personal computers, (2) the APP model is
relatively easy to formulate in a spreadsheet format, and (3) the results are easy to interpret. This paper
presents an APP model and a guideline to develop an optimal aggregate production plan using the
spreadsheet solver approach. A manufacturing case study is presented to demonstrate how the guideline
can be applied. The developed APP model is also evaluated whether it is satisfactory and can lead to
immediate implementation.
mathematical background, and is easy to understand, Most industries use a monthly planning period
to formulate the problem, and to interpret the results. for their master production plans. Therefore, the
Furthermore, it does not need additional investment aggregate production plan should also adopt the
on the software because the spreadsheet solver is monthly planning period in order to facilitate the
already included in the spreadsheet software. disaggregation of the aggregate plan into the master
At present, most manufacturing companies do production plan. The planning horizon of APP must
not systematically perform APP even though it is an be at least one year in order to cover the entire seasonal
important part for developing the detailed production cycle.
scheduling due to the following reasons. Firstly, the Parameters and decision variables of the model
APP model developed based on the requirements and are defined as follows.
constraints of their companies is not available.
Secondly, most industries are not interested in a Parameters
complex approach that requires an extensive m = Number of monthly planning periods
mathematical background since they lack well- in the planning horizon
qualified engineers. Thirdly, most industries require n(t) = Number of normal workdays in period
an approach that is easy to understand and verify in t
order to easily convince their management to agree h(t) = Number of holidays that can apply
with its solution. Finally, an approach should not overtime in period t.
require additional investment on any expensive RH = Number of regular working hours in
software due to the ongoing economic crisis. Based each normal workday
on these reasons, this study adopts the spreadsheet OHn = Number of allowable overtime hours
solver approach. in each normal workday
This paper has the following objectives: OHh = Number of allowable overtime hours
1. To propose a spreadsheet APP model which in each holiday
is based on the general requirements and constraints MIN W = Minimum number of permanent
of industries. workers that can operate the
2. To propose a guideline for developing the production line
optimal aggregate production plan using spreadsheet MAX W = Maximum number of permanent
solver approach. workers to operate the production line
3. To study the effectiveness of the spreadsheet KW = Average productivity rate per man-day
solver approach by evaluating whether the obtained of permanent worker
aggregate production plan is satisfactory and can lead KTW = Average productivity rate per man-day
to immediate implementation. of temporary worker
This paper is organized as follows. Firstly, a D(t) = Forecasted demand in period t
general APP model based on the situations and SS(t) = Safety stock level in period t
general requirements of industries is presented in MAX On(t) = Maximum overtime man-hours that
Section 2. Then, a guideline for developing the can be applied during normal workday
optimal aggregate production plan using spreadsheet in period t
solver approach is presented in Section 3. A case MAX Oh(t) = Maximum overtime man-hours that
study to demonstrate the validity of the proposed can be applied during holiday in
guideline and to serve as an example for developing period t
the optimal aggregate production plan is presented MAX TW = Maximum number of temporary
in Section 4. Finally, results are discussed and workers that can operate the production
concluded in Section 5. line
MAX I = Maximum allowable inventory level
THE APP MODEL MAX Sub = Maximum allowable subcontracting
units
The proposed APP model was developed with CW = Average salary per month of a per-
the requirements of the situations and general manent worker
characteristics of industries. Therefore, it is different CTW = Average wages per day of a temporary
from models available on textbooks and journals and worker
it seems to be more practical in industries. CH = Hiring cost per person of temporary
worker
ScienceAsia 28 (2002) 293
I(t) ≤ MAX I for t = 1, 2, ..., m (5) workers being hired at the beginning of that period
minus the number of temporary workers being laid
3. Production constraints off at the end of the previous period.
The production quantity in each period is equal
to the sum of production quantities generated by TW(t) = TW(t-1) + H(t) - L(t-1)
permanent and temporary workers during regular for t = 1, 2, ..., m (13)
time and overtime (both regular workdays and
holidays), plus subcontracted quantities, minus a The total number of temporary workers in each
loss of production due to undertime (idle time) in period cannot exceed the maximum allowable limit
that period. Note that undertime can help to reduce since the production line has limited number of
unnecessary inventory level during low demand workstations where the temporary workers can be
periods. Constraint (6) allows different productivity assigned.
rates between permanent and temporary workers.
TW(t) ≤ MAX TW
P(t) = W • KW • n(t) + (OWn(t) + OWh(t)) for t = 1, 2, ..., m (14)
KW /RH + TW(t) • KTW • n(t)
+ (OTWn(t) + OTWh(t)) KTW /RH + 6. Subcontracting constraints
Sub(t) - UW(t) • KW /RH Number of subcontracting units cannot exceed
- UTW(t) • KTW /RH the maximum allowable limit since subcontractors
for t = 1, 2, ..., m (6) have limited production capacity.
Workshop on APP for Thai Industries. Ten out of of temporary workers can be calculated from
eleven companies were satisfied with the concepts recruitment costs and training costs for new workers.
and results of the proposed model after the model It is recommended that a sensitivity analysis to
was slightly modified to match some specific analyze the effect of the estimated values on the
requirements of the companies. Only one company obtained solution be performed when the estimated
requires significant changes on the model. values are used instead of the exact values.
GUIDELINE FOR DEVELOPING OPTIMAL AGGREGATE Step. 2 Formulate APP model in the spreadsheet
PRODUCTION PLAN USING SPREADSHEET SOLVER format
After obtaining the necessary information, a
The following guideline is proposed for the spreadsheet APP model will be formulated following
companies that are interested in developing their the objective function and constraints discussed
own APP. The objective of this guideline is to provide earlier. Some constraints of the proposed APP model
an easy and practical way to develop the aggregate may be modified or deleted to match specific
production plan using the spreadsheet solver. The requirements of each company. The spreadsheet APP
guideline will recommend steps for developing model is then solved using the spreadsheet solver.
aggregate production plan and necessary information
to be collected. By following this guideline step-by- Step 3. Evaluate the obtained solutions
step, the companies will be able to construct their This step can be done by presenting the con-
own aggregate production plan. The recommended structed spreadsheet APP model and its solutions to
steps for developing the aggregate production plan related departments of the company, namely,
using the spreadsheet solver are summarized in production, personnel, planning, sales and marketing,
Figure 1. and warehousing, and let them judge whether the
solutions are acceptable. The comparison between
Step 1. Data collection the existing aggregate production plan and the
Necessary data to be collected for developing APP optimal plan generated from the APP model may
model are all parameters in the proposed APP model be done in monetary term. If the solution is not
presented in Section 2. In the case that the company acceptable, values of some input parameters may
does not have certain available information or some need to be reconsidered or the constraints may need
information cannot be exactly determined (such as to be modified. The spreadsheet APP model will be
inventory holding cost, and hiring cost), it can be revised until the solutions are satisfactory.
estimated from other known information. For
example, the inventory holding cost per year can be Step 4. Implement the aggregate production
estimated to be 20%-30% of the product cost. If plan
necessary, it can be divided by 12 to get the inventory After the spreadsheet APP model is satisfactorily
holding cost per unit per month. The hiring cost developed and solved, the obtained solutions can
be implemented. During the implementation of the
aggregate production plan, some parameters of the
1. Collect related data
model may be changed, for example, demands,
productivity rates, related costs, number of workers,
and inventory levels. These parameters should be
2. Formulate problem into speardsheet format
and solve problem using solver tool updated periodically and the APP model is solved
to determine the revised aggregate production plan.
Table 1. Number of workdays and holidays that can apply overtime, and forecasted demand in each period.
period 1 2 3 4 5 6 7 8 9 10 11 12
Number of 23 22 25 20 21 24 17 16 18 21 22 17
normal workdays
Number of 4 4 4 4 4 4 4 4 4 4 4 4
holidays that
can apply OT
Forecasted 136,000 140,000 146,000 147,000 160,000 140,000 82,000 38,000 45,000 81,000 105,000 117,000
demand (units)
ScienceAsia 28 (2002) 297
+ 0.5625 (OTWn(t) + OTWh(t)) + Sub(t) - into the corresponding cells. The second section
0.625 UW(t) is the calculation section. There are formulas
- 0.5625 UTW(t) for t = 1, 2, ..., 12(20) embedded in cells to calculate the needed output.
The decision variables are the number of temporary
4. Overtime constraint workers to be hired at the beginning of each period,
OWn(t) + OTWn(t) ≤ MAX On(t) numbers of overtime man-hours for permanent and
for t = 1, 2, ..., 12 (21) temporary workers during normal workdays and
OWh(t) + OTWh(t) ≤ MAX Oh(t) holidays in each period, number of undertime man-
for t = 1, 2, ..., 12 (22) hours in each period, and number of subcontracted
where MAX On(t) = 2 n(t) (600 + TW(t)) units in each period. The spreadsheet APP model is
for t = 1, 2, ..., 12 (23) solved and the optimal aggregate production plan is
and MAX Oh(t) = 8 h(t) (600 + TW(t)) shown in Table 2. The related costs are calculated
for t = 1, 2, ..., 12 (24) and shown in the bottom part of Table 2. The grand
OWn(t) / 600 = OTWn(t) / TW(t) total cost which is the objective function of the model
for t = 1, 2, ..., 12 (25) is shown in the lower right cell of the table.
OWh(t) / 600 = OTWh(t) / TW(t)
for t = 1, 2, ..., 12 (26) Step 3: Evaluate the obtained solutions
After the spreadsheet APP model and the
5. Temporary worker constraint obtained optimal aggregate production plan are
Thai labor law stated that temporary workers presented to the company, there are comments as
could not be continuously hired longer than four follows. Firstly, the model has a very good user
months. After four months they must become interface. The outputs (worker plan, production
permanent workers. Hence, Thai industries will lay plan, and summary of costs) of the model contain
off temporary workers after four months if they do useful information and are easy to understand. The
not want to transfer them to permanent ones. model requires some inputs, which are not currently
Therefore, the Constraint (13) that is a general one available, but they are possible to be estimated.
must be specifically modified into Constraint (27) Secondly, the model can be verified easily since
and (28). Constraint (27) shows that the total values of all parameters, decision variables, objective
number of temporary workers working in the current function, and constraints are explicitly shown on
period is the sum of the numbers of temporary only one page. Correctness of mathematical formula
workers hired at the beginning of the last three can be simply checked using a calculator. Manage-
periods and the current period. Constraint (28) ment team of the company is rapidly convinced to
indicates that temporary workers hired three periods trust the correctness of the model.
ago will be laid off at the end of the current period. Thirdly, the obtained optimal aggregate produc-
APP models developed from literature do not have tion plan shown in Table 2 is acceptable. During
these constraints.9-10, 14-15 low-demand periods (e.g., August and September),
the numbers of temporary workers are very low or
TW(t) = H(t-3) + H(t-2) + H(t-1) + H(t) zero, there is no overtime work, and some workers
for t = 1, 2, ..., 12 (27) must work undertime to avoid producing unnecessary
L(t) = H(t-3) inventories. During moderate-demand periods (e.g.,
for t = 1, 2, ..., 12 (28) October), some temporary workers are hired, but
TW(t) ≤ 500 there is no overtime work and no undertime. During
for t = 1, 2, ..., 12 (29) high-demand periods (e.g., January), temporary
workers are hired and they must work overtime
6. Non-negativity and integer conditions during workdays. However, there is no overtime
All decision variables are non-negative. H(t) are work during holidays. During very-high-demand
integer for t = 1, 2, ..., 12. periods (e.g., May), temporary workers are hired,
and they must work overtime during workdays and
Spreadsheet model holidays. Subcontracting is not recommended in
The spreadsheet APP model is shown in Table 2. any period since it is the highest cost alternative.
The model is divided into two sections. The first At the end of April (before entering the highest-
section (the top part of the table) is the input data demand period), creating 1,187 units of inventory
section. All collected information will be entered is recommended since carrying inventory for one
Table 2. Spreadsheet APP model.
298
ScienceAsia 28 (2002)
ScienceAsia 28 (2002) 299
period is less costly than subcontracting in May. This periods. The inventory at the beginning of the first
is due to the fact that the overtime schedules during period, target inventory at the end of the last period,
workdays and holidays reach their maximum limits and number of workers hired during last three
in May. With this situation, the production quantity months are also updated. Updating the input data
cannot be increased unless (costly) subcontracting before regenerating the optimal aggregate production
is allowed. Thus, producing additional units in April plan takes less than 10 minutes, and it takes less
and carrying them over to May can avoid utilizing than one minute of computation time by the spread-
subcontracting. sheet solver to obtain the optimal solution using a
Based on the optimal aggregate production plan 500 MHz, Pentium III PC. The company currently
with an objective to minimize the total cost, the takes about one day for manually generating an
optimal policy for adjusting production rates for Thai acceptable (but not optimal) aggregate production
industries is recommended and presented in Table plan. Therefore, the company can save significant
3. To increase the production rate, the first priority time of a planner in using the spreadsheet APP model
is to hire temporary workers, the second priority is instead of manually generating the aggregate
to apply overtime work during workdays, and production plan.
the last priority is to apply overtime work during
holidays. The undertime may be applied during low- DISCUSSION AND CONCLUSIONS
demand periods to reduce production rate and avoid
unnecessary inventory. This paper proposes a four-step guideline for
This optimal policy is different from the current developing the optimal aggregate production plan
normal practice of Thai industries that is also for industries. A general APP model is developed
presented in Table 3. Thai industries firstly apply based on real situations and requirements of
overtime work during workdays, and then during industries. A case study is presented to demonstrate
holidays, and finally use temporary workers since how to develop the optimal aggregate production
applying overtime work is the most convenient
plan using the proposed guideline.
(but costly) method. Moreover, they never allow
The proposed APP model and the obtained
undertime, which results in carrying unnecessary
optimal aggregate production plan are useful for
inventory. The normal practice of Thai industries is
different from the optimal policy since Thai most industries since they supply useful information
industries do not explicitly consider costs related to and recommend appropriate actions. They recommend
APP and do not try to minimize the total cost. the optimal number of temporary workers to be hired
Therefore, the proposed spreadsheet APP model is at the beginning of each period, the optimal number
very useful for Thai industries. of temporary workers to be laid off at the end of
each period, and the number of temporary workers
Step 4. Implement and revise the aggregate that should be available in each period. These pieces
production plan of information are useful for managing human
Since the optimal aggregate production plan is resources of the company. They also recommend
satisfactory, it is immediately implemented in the the optimal number of overtime man-hours of
company. After one month, the aggregate production permanent and temporary workers during workdays
plan is regenerated using a rolling horizon concept. and holidays, inventory level, number of subcon-
We need to add forecasted demand, number of tracting units, and number of undertime man-hours
workdays, and number of holidays that can apply for some periods. Related cost elements and the total
overtime of the last period to the spreadsheet APP cost are presented for financial consideration by top
model and update forecasted demands of other management.
Table 3. Comparison of the optimal policy and current normal practice of APP in Thai industries.
1. Priority to adjust 1st priority: Hire temporary workers 1st priority: Apply OT during workdays
production rates 2nd priority: Apply OT during workdays 2nd priority: Apply OT during holidays
3rd priority: Apply OT during holidays 3rd priority: Hire temporary workers
2. Application of undertime Undertime may be applied during Never allow undertime
low-demand periods
3. Cost consideration Explicitly consider costs related to Not consider costs related to APP
APP and optimize them
300 ScienceAsia 28 (2002)
The normal practice for adjusting production 5. Goss PE and Schroer JB (1990) The Use of Spreadsheet
rates adopted by most industries is different from Packages in Industrial Engineering-The Case of Regression
Analysis with Binary Dependent Variables. Computers &
the recommended aggregate production plan. The Industrial Engineering 18, 122-9.
industries tend to firstly select an alternative that is 6. Koo P, Moodie CL and Talavage JJ (1994) Performance
the most convenient to manage (such as applying Evaluation of Manufacturing Systems: A Spreadsheet Model.
overtime) although it is more costly than other Computers & Industrial Engineering 26, 673-88.
7. Beversluis WS and Jordan HH (1995) Using a Spreadsheet for
alternatives (such as hiring temporary workers). Capacity Planning and Scheduling. Production and Inventory
This normal practice occurs since firstly, the industries Management Journal, Second Quarter, 12-6.
do not explicitly consider costs or try to minimize 8. Kharab A (2000) An Advanced Macro Spreadsheet Program
the total cost when they develop the aggregate for the Simplex Method. Computers & Operations Research
27, 233-43.
production plan. Secondly, they lack well-qualified 9. Shafer MS (1991) A Spreadsheet Approach to Aggregate
engineers in production planning section to develop Scheduling. Production and Inventory Management Journal,
a workable APP model. Therefore, the proposed Fourth Quarter, 4-10.
guideline to develop the optimal aggregate production 10.Penlesky RJ and Srivastava R (1994) Aggregate Production
Planning using Spreadsheet Software. Production Planning &
plan using the spreadsheet APP model should be able Control 5, 522-4.
to help them reduce production costs and increase 11.Noori H and Radford R (1995) Production and Operation
competitive advantages. Management: Total Quality and Responsiveness. McGraw-Hill.
The proposed general APP model is applicable 12.Winston WL (1994) Operations Research: Applications and
Algorithms, 3rd ed. Duxbury Press.
for a wide range of industries in which the production 13.Albright SC, Winston WL and Zappe C (1999) Data Analysis
quantity per period can be adjusted by changing the and Decision Making with Microsoft Excel. Duxbury Press.
number of workstations and number of workers, and 14.Crandall RE (1998) Production Planning in a Variable Demand
by applying overtime. However, the proposed APP Environment. Production and Inventory Management Journal,
Fourth Quarter, 34-41.
model is not applicable for the process industries 15.Nahmias S (1997) Production and Operations Analysis, 3rd ed.
since the number of workstations and number of McGraw-Hill.
workers cannot be changed. In such cases, the
production quantity per period can be adjusted by
changing the number of working days and applying
overtime. A new APP model can be constructed with
different set of constraints to handle the process
industries. It is recommended that further studies
be conducted to develop APP models to match
specific requirements of the process industries and
others. Appropriate methods for disaggregating the
aggregate plan into the master production plan
should also be further developed based on situations
and requirements of industries.
ACKNOWLEDGEMENT
This research is supported by the Royal Golden
Jubilee Ph.D. Program of Thailand Research Fund,
Contract No PHD/00120/2541.
REFERENCES
1. Holt CC, Modigliani F, Muth JF and Simon HA (1960) Planning
Production Inventories and Work Force. Prentice Hall.
2. Riggs JL (1981) Production Systems: Planning, Analysis and
Control, 3rd ed. John Wiley & Sons.
3. Pan L and Kleiner BH (1995) Aggregate Planning Today. Work
Study 44, 4-7.
4. Heizer J and Render B (1996) Production and Operation
Management: Strategic and Tactical decisions, 4th ed. Prentice
Hall.