chapter9_productionplanning

Production Planning and Control UTCC

Production Planning and Control

School of Engineering The University of the Thai Chamber of Commerce


Aggregate Planning

School of Engineering The University of the Thai Chamber of Commerce


Agenda

• The concept of aggregation• Basic strategies for meeting uneven demand• Master scheduling • Time fences


Planning Horizon

Aggregate planning: Intermediate-range capacity planning, usually covering 2 to 12 months.

Shortrange

Intermediate range

Long range

Now 2 months 1 Year


• Short-range plans (Detailed plans)– Machine loading– Job assignments

• Intermediate plans (General levels)– Employment– Output

• Long-range plans– Long term capacity– Location / layout

Overview of Planning Levels


Overview of Planning Levels

Long range plans

Long term capacityLocationLayoutProduct designWork system design

Intermediate plans

General levels of:EmploymentOutputFinished goodsInventoriesSubcontractingbackorders

Short range plans

Detailed plans:Machine loadingJob assignmentsJob sequencingProduction lot size Order quantitiesWork schedule


Planning Sequence

Business Plan Establishes operationsand capacity strategies

Aggregate plan Establishesoperations capacity

Master schedule Establishes schedulesfor specific products

Corporatestrategies

and policies

Economic,competitive,and political conditions

Aggregatedemand

forecasts

Figure 12.1


• Resources– Workforce– Facilities

• Demand forecast• Policies

– Subcontracting– Overtime– Inventory levels– Back orders

• Costs– Inventory carrying– Back orders– Hiring/firing– Overtime– Inventory changes– subcontracting

Aggregate Planning Inputs


• Total cost of a plan• Projected levels of inventory

– Inventory– Output– Employment– Subcontracting– Backordering

Aggregate Planning Outputs


Aggregate Planning Strategies

• Proactive– Alter demand to match capacity

• Reactive– Alter capacity to match demand

• Mixed– Some of each


• Pricing

• Promotion

• Back orders

• New demand

Demand Options


• Hire and layoff workers• Overtime/slack time• Part-time workers• Inventories• Subcontracting

Capacity Options


Aggregate Planning Strategies

• Maintain a level workforce

• Maintain a steady output rate

• Match demand period by period

• Use a combination of decision variables


Chase Approach

• Advantages– Investment in inventory is low

– Labor utilization in high

• Disadvantages– The cost of adjusting output rates and/or workforce

levels


• The goal of this strategy is to continuously produce an amount equal to the average demand.

• The level production strategy avoids the disadvantages of chase strategy. However, inventory builds up.

Level Production Strategy


Level Approach

• Advantages– Stable output rates and workforce

• Disadvantages– Greater inventory costs

– Increased overtime and idle time

– Resource utilizations vary over time


1. Determine demand for each period2. Determine capacities (regular time, overtime,

subcontracting) for each period3. Identify policies that are pertinent4. Determine units costs for regular time, overtime,

subcontracting, holding inventories, back orders, layoffs, and other relevant costs

5. Develop alternative plans and costs6. Select the best plan that satisfies objectives. Otherwise

return to step 5.

Techniques for Aggregate Planning


Cumulative Graph

1 2 3 4 5 6 7 8 9 10

Cumulativeproduction

CumulativedemandC

umul

ativ

e ou

tput

/dem

and

Figure 12.3


Example 1 • Planners for a company that makes several models of skateboards are

about to prepare the aggregate plan that will cover six periods. They have assembled the following information:

• Output Costs– Regular time = $2 per skateboard– Overtime = $3 per skateboard– Subcontract = $6 per skateboard

• Inventory costs = $1 per skateboard per period on average inventory• Back orders cost = $5 per skateboard per period

Period 1 2 3 4 5 6 Total

forecast 200 200 300 400 500 200 1,800


Example 2

• After receiving the plan developed in the preceding example, planners have decided to develop an alternative plan. They have learned that one person is about to retire from the company. Rather than replace that person, they would like to stay with the smaller workforce and use overtime to make up for the lost output. The reduced regular time output is 280 units per period. The maximum amount of overtime output per period is 40 units. Develop a plan and compare it to the previous one.


Solution 2Period 1 2 3 4 5 6 Total Forecast 200 200 300 400 500 200 1,800OutputRegular 280 280 280 280 280 280 1,680

Overtime 0 0 40 40 40 0 120Subcontract - - - - - - -

Output-forecast

80 80 20 (80) (180) 80 0

Inventory Beginning 0 80 160 180 100 0

Ending 80 160 180 100 0 0Average 40 120 170 140 50 0 520

Backlog 0 0 0 0 80 0 80


Solution 2

Period 1 2 3 4 5 6 Total Costs

OutputRegular 560 560 560 560 560 560 3360

Overtime 0 0 120 120 120 0 360Subcontract - - - - - -

Hire/ Lay off - - - - - -Inventory 40 120 170 140 50 0 520Back orders 0 0 0 0 400 0 400

Total 600 680 850 820 1130 560 4640


Aggregate Plan to Master Schedule

AggregatePlanning

Disaggregation

MasterSchedule

Figure 12.4


Disaggregating the aggregate plan

Jan. Feb. Mar.200 300 400

Jan. Feb. Mar.Push 100 100 100Self propelled 75 150 200

Riding 25 50 100

Aggregate plan

Month planned output

Master schedule

Month planned output


Master Scheduling

• Master schedule– Determines quantities needed to meet demand– Interfaces with

• Marketing• Capacity planning• Production planning• Distribution planning


Master Scheduler

• Evaluates impact of new orders• Provides delivery dates for orders• Deals with problems

– Production delays or late deliveries of purchased goods. – Revising master schedule when necessary because of

insufficient supplies or capacity.– Insufficient capacity to attention of production and

marketing personnel so that they can participate in resolving conflicts.


Master Scheduling Process

MasterScheduling

Beginning inventory

Forecast

Customer orders

Inputs OutputsProjected inventory

Master production schedule

Uncommitted inventory Or available to promise (ATP)

Figure 12.6


• Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon.

• Rough-cut capacity planning: Approximate balancing of capacity and demand to test the feasibility of a master schedule.

Disaggregating the Aggregate Plan


Projected On-hand Inventory

Projected on-handinventory

Inventory fromprevious week

C urrent w eek’srequirements

-=


Projected OnProjected On--hand Inventoryhand Inventory

64 1 2 3 4 5 6 7 8Forecast 30 30 30 30 40 40 40 40Customer Orders (committed) 33 20 10 4 2Projected on-hand inventory 31 1 -29

JUNE JULY

Beginning Inventory

Customer orders are larger than forecast in week 1

Forecast is larger than Customer orders in week 2

Forecast is larger than Customer orders in week 3

Figure 12.8


Projected on hand inventory and MPS are added to the master schedule

June July

1 2 3 4 5 6 7 8

Forecast 30 30 30 30 40 40 40 40

Customer orders (committed)

33 20 10 4 2

Projected on hand Inventory 31 1 41 11 41 1 31 61

MPS 70 70 70 70


Lot size = 100 units

Problem - Preliminary MPS

Period 1 2 3 4 5 6

Forecast 60 60 60 60 60 60

Projected availablebalance 80



Lot size = 100 units

Problem - Solution

Period 1 2 3 4 5 6

Forecast 60 60 60 60 60 60



20

100

60 0 40

100

80 20

100


Problem

Weeks 1 2 3 4 5 6

Forecast 100 500 250 500 100 150



The Wicked Witch Whisk Company manufactures a line of broomsticks. The most popular one is the 36-inch model, and the sales department has prepared a forecast for six weeks. The opening inventory is 200. as master scheduler, you must prepare an MPS. The broomsticks are manufactured in lots of 1,000.


Problem - Solution

Weeks 1 2 3 4 5 6

Forecast 100 500 250 500 100 150



100

1,000

600 350

1,000

850 750 600


Problem 1

Amalgamated Boat Anchors makes several models of anchors. One of the most popular is model 10x35. The sales department has prepared the following five-week forecast for this model. The anchors are assembled in lots of 200, and the opening inventory is 100. Complete the projected on hand and the MPS schedule receipts.


Problem 1

Weeks 1 2 3 4 5

Forecast 80 150 300 120 100

Projectedon hand

MPS scheduledreceipts

100


Problem 1 - Solution

Weeks 1 2 3 4 5

Forecast 80 150 300 120 100

Projectedon hand 100 20 70 170 50 150

MPS scheduledreceipts 200 400 200

3-38a


Problem 2

3-39

Calculate the available-to-promise using the data in next slide table. There is no opening inventory.

If there was an order for five more to be delivered in week 3, could they delivered? Where would the stock come from?


Problem 2

Period 1 2 3 4 5

Customer orders 15 5 25 5

MPS scheduled receipts 30 30 30

ATP

3-39


Problem 2 -Solution

Period 1 2 3 4 5

Customer orders 15 5 25 5

MPS scheduled receipts 30 30 30

ATP 10 0 30

3-39a

If there was an order for five more to be delivered in week 3, could they delivered? Where would the stock come from?

From ATP in week 1.


Problem 3

• A manager is attempting to put together an aggregate plan for the coming nine months. She has obtained a forecast of expected demand for the planning horizon. The plan must deal with highly seasonal demand; demand is relatively high in periods 3 and 4 and again in period 8, as can be seen from the following forecasts:

Period 1 2 3 4 5 6 7 8 9 total

Forecast 190 230 260 280 210 170 160 260 180 1940


Problem 3

• The department now has 20 full time employees, each of whom can produce 10 units of output per period at a cost of $6 per unit. Inventory carrying cost is $5 per unit per period, and backlog cost is $10 per unit per period. The manager is considering a plan that would involve hiring two people to start working in period 1, one on a temporary basis who would work only through period 5. This would cost $500 in addition to unit production costs.– What is the rationale for this plan?– Determine the total cost of the plan, including production,

inventory, and back order costs.


Solution 3

• With the current capacity is 1800 units. That is 140 units less than expected demand. Adding one worker would increase regular capacity to 1800+90 = 1890 units. That would still be 50 units short, or just the amount one temporary would could produce in five periods. Since one of the two seasonal peaks is quite early, it would make sense to start the temporary worker right away to avoid some of the backorder cost.


Solution 3

chapter9_productionplanning

Documents

master production schedule

master schedule

period forecast projected

production planning

regular time

customer orders

expected demand

thai chamber