Transcript Production Planning - Home

Production Planning
All manufacturing and service operations require
planning and controlling, although the formality
and detail may vary. Some operations are more
difficult to plan than others. Those with high
unpredictability can be difficult to plan. Some are
more difficult to control than others. The day to
day running of manufacturing and service system
rests with Production Planning.
The purpose of the production planning is to
ensure that manufacturing run effectively and
efficiently and produces products as required by
customers.
Production Planning Activities
Capacity Planning
1. Facility Size
2. Equipment Procurement
Aggregate Planning
1. Facility Utilization
2. Personnel needs
3. Subcontracting
Master Production Scheduling
1. MRP
2. Disaggregation of master plan
Short-term Scheduling
1. Work center loading
2. Job sequencing
Long-term
(years)
Intermediate-term
(6 to 18 months)
Short-term
(weeks)
Very Short-term
(hours – days)
Production Planning: Units of
Measurement
Long-Range Capacity Planning
Entire
Product Line
Aggregate Planning
Product
Family
Master Production Scheduling
Specific
Product Model
Production Planning and Control Systems
Labor, Materials,
Machines
Aggregate Planning Strategies Pure
Strategies
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Capacity Options --change capacity:
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changing inventory levels
varying work force size by hiring or layoffs
varying production capacity through overtime or
idle time
subcontracting
using part-time workers
Demand Options --change demand:
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Influencing demand
backordering during high demand periods
counterseasonal product mixing
Why Aggregate Planning Is
Necessary
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Fully load facilities and minimize
overloading and underloading
Make sure enough capacity available to
satisfy expected demand
Plan for the orderly and systematic change
of production capacity to meet the peaks
and valleys of expected customer demand
Get the most output for the amount of
resources available
Inputs
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A forecast of aggregate demand covering
the selected planning horizon (6-18 months)
The alternative means available to adjust
short- to medium-term capacity, to what
extent each alternative could impact capacity
and the related costs
The current status of the system in terms of
workforce level, inventory level and
production rate
Outputs
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A production plan: aggregate decisions
for each period in the planning horizon
about
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workforce level
inventory level
production rate
Projected costs if the production plan
was implemented
Aggregate Planning Example
Keepdry, a small manufacturing company (200 employees),
produces umbrellas. The company, founded in 1991 produces the
following three product lines: 1) the Executive Line, 2) the Durable
Line and 3) the Compact line shown in the following figure.
Compact
Line
Executive
Line
Durable
Line
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Aggregate Demand for the
Executive Line
Number of working days:
Jan 22
Feb 19
Mar 21
Apr 21
May 22
Jun 20
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Cost Information
Materials
Holding costs
Marginal cost of stockout
Hiring and training cost
Layoff costs
Labor hours required
Straight time labor cost
Beginning inventory
Productive hours/worker/day
Paid straight hrs/day
$5/unit
$1/unit per mo.
$1.25/unit per mo.
$200/worker
$250/worker
.15 hrs/unit
$8/hour
250 units
7.25
8
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Determining Straight Labor
Costs and Output
Days/mo
Hrs/worker/mo
Units/worker
$/worker
Jan
22
159.5
1063.33
$1,408
Feb
19
137.75
918.33
1,216
M ar
21
152.25
1015
1,344
Apr
21
152.25
1015
1,344
M ay
22
159.5
1063.33
1,408
Jun
20
145
966.67
1,280
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Chase Strategy
(Hiring & Firing--meet demand)
Days/mo
Hrs/wo rker/mo
Units/wo rker
$ /wo rker
Demand
Beg. inv.
Net req.
Req. wo rkers
Hired
Fired
W o rkfo rce
Ending invento ry
Jan
22
1 5 9 .5
1 ,0 6 3 .3 3
$ 1 ,4 0 8
Beginning workforce level: 7 employees
Jan
4 ,5 0 0
250
4 ,2 5 0
3 .9 9 7
3
4
0
13
Days/mo
Hrs/worker/mo
Units/worker
$/worker
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
Workforce
Ending inventory
Jan
22
159.5
1,063
$1,408
Feb
19
137.75
918
1,216
Mar
21
152.25
1,015
1,344
Apr
21
152.25
1,015
1,344
May
22
159.5
1,063
1,408
Jun
20
145
967
1,280
Jan
4,500
250
4,250
3.997
Feb
5,500
Mar
7,000
Apr
10,000
May
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
3
4
0
6
0
7
0
10
0
14
Demand
Beg. inv.
Net req.
Req. workers
Hired
Fired
W orkforce
Ending inventory
M aterial
Labor
Hiring cost
Firing cost
Jan
4,500
250
4,250
3.997
3
4
0
Feb
5,500
M ar
7,000
Apr
10,000
M ay
8,000
Jun
6,000
5,500
5.989
2
7,000
6.897
1
10,000
9.852
3
8,000
7.524
6,000
6.207
2
8
0
1
7
0
6
0
7
0
10
0
Jan
Feb
M ar
Apr
M ay
Jun
$21,250.00 $27,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00
5,627.59
7,282.76
9,268.97 13,241.38 10,593.10
7,944.83
400.00
200.00
600.00
750.00
500.00
250.00
Costs
203,750.00
53,958.62
1,200.00
1,500.00
$260,408.62
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Inventory Management
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Inventory-A physical resource that a firm
holds in stock with the intent of selling it or
transforming it into a more valuable state.
Inventory System- A set of policies and
controls that monitors levels of inventory and
determines what levels should be maintained,
when stock should be replenished, and how
large orders should be
Types of Inventories
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Raw Materials
Works-in-Process
Finished Goods
Distribution Inventory
Supplies: Maintenance, Repair and Operating (MRO)
Managing Facilitating Goods
Replenishment
order
Factory
Production
Delay
Replenishment Replenishment
order
order
Wholesaler
Distributor
Shipping
Delay
Wholesaler
Inventory
Retailer
Shipping
Delay
Distributor
Inventory
Customer
order
Customer
Item Withdrawn
Retailer
Inventory
Type of Inventory
Type of Organization
A. Retail systems
1. Sale of goods
2. Sale of services
B. Wholesale / Distribution
systems
C. Manufacturing systems
1. Special project
2. Intermittent process
.
3. Continuous process
a. Process industries
b. Repetitive mfging.
Supplies
Raw
Materials
In-Process
Goods
Finished
Goods
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Inventory Positions in the
Supply Chain
Raw
Materials
Works
in
Process
Finished
Goods
Finished
Goods
in Field
Inadequate control of inventories can result
in both under- and overstocking of items.
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Understocking (too few) results in missed deliveries, lost
sales, dissatisfied customers, and production bottlenecks
(idle workers or machines).
Resulting underage cost.
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Overstocking (too many) ties up funds that might be
more productive elsewhere.
Resulting overage cost.
Goal: matching supply with demand!
Reasons for Inventories
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Improve customer service
Economies of purchasing
Economies of production
Transportation savings
Hedge against future
Unplanned shocks (labor strikes, natural
disasters, surges in demand, etc.)
To maintain independence of supply chain
Reasons Against Inventory
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Non-value added costs
Opportunity cost
Complacency
Inventory deteriorates, becomes
obsolete, lost, stolen, etc.
Inventory Related Costs
Procurement Costs:
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Order processing
Shipping
Handling
Carrying (Holding) Costs
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Capital (opportunity) costs
Inventory risk costs
Space costs
Inventory service costs
Out-of-Stock Costs
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Lost sales cost
Back-order cost
Independent and Depenedent
Demand
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Independent demand items are
finished products or parts that are
shipped as end items to customers.
Dependent demand items are raw
materials, component parts, or
subassemblies that are used to produce
a finished product.
Independent vs. Dependent
Demand
Independent Demand
(finished goods and spare parts)
Dependent Demand
A
(components)
C(2)
B(4)
D(2)
E(1)
D(3)
F(2)
Objectives of Inventory
Control
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1) Maximize the level of customer
service by avoiding understocking.
2) Promote efficiency in production and
purchasing by minimizing the cost of
providing an adequate level of customer
service.
Balance in Inventory Levels
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When should the company replenish its
inventory, or when should the company
place an order or manufacture a new
lot?
How much should the company order or
produce?
Next: Economic Order Quantity (EOQ)
Balancing Carrying against
Ordering Costs
Higher
Annual Cost ($)
Minimum
Total Annual
Stocking Costs
Lower
Total Annual
Stocking Costs
Annual
Carrying Costs
Annual
Ordering Costs
Smaller
EOQ
Larger
Order Quantity
Classifying Inventory Items
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ABC Classification (Pareto Principle)
A Items: very tight control, complete and
accurate records, frequent review
B Items: less tightly controlled, good
records, regular review
C Items: simplest controls possible, minimal
records, large inventories, periodic review and
reorder
ABC Classification System
Classifying inventory according to
some measure of importance and
allocating control efforts accordingly.
A - very important
B - mod. important
C - least important
High
A
Annual
$ value
of items
B
C
Low
Low
High
Percentage of Items
ABC Classification System