Production Planning (Aggregate Planning)

1
Production Planning(Aggregate Planning)
2
SOM 464 Manufacturing Resource
Planning

• Study of the efficient allocation of resources
  (material, equipment, people, money) in
  manufacturing and some service operations
• How many items should be ordered or made at a
  given time?
• Who is assigned which job?
• How do jobs flow through the firm?
• How is inventory maintained?

3
Manufacturing Resource Planning Flow of Materials

• Raw Materials Flow into Manufacturing/Service
  Company.
• Finished Goods/Services Distributed to End
  Customers.
• Supply Chain Management (SCM) is the Study of
  this Linked Chain of Activities.
• Manufacturing Resource Planning (or Materials
  Management) is the Study of the Planning and
  Materials Flow.

4
Manufacturing Resource Planning Flow of Materials

• Supply Chain Diagram
• Supplier ? Manufacturer ? Distribution ?
  Customer
  System

5
Manufacturing Resource Planning Criteria

• High Customer Service (Probability of Meeting
  Demand)
• Minimize Production Costs
• Minimize Inventory Holding Costs and Other
  Inventory Investment Costs Avoid Shortages
• Minimize Distribution Costs
• These Objectives Often Conflict with Objectives
  of Marketing and Finance.

6
Production Planning

• There are Five Major Levels in Planning and
  Control
• Strategic Business Plan
• Production Plan (Example is Tuffy Case)
• Master Production Schedule (MPS)
• Material Requirements Plan (MRP) Can Also
  Include Manufacturing Resource Planning (MRP II)
  and Enterprise Resource Planning (ERP)
• Purchasing and Production Activity Scheduling and
  Control (Also Known as Shop Floor Control)

7
Production Planning

• Also Known as Aggregate Planning
• Problem in Tuffy Case Set Production Every
  Period, Allocate Resources, Meet Demand
• Set Pt Production for t
• Wt Workforce for t

8
Production Planning

• Inputs Resources (Rough-Cut Capacity Planning),
  Forecast, Inventory, Policies, Costs
• Demand Options Pricing, Promotion, Markets
  for New Demand, Allowing Back Orders (Shortages)
• Supply (Capacity) Options Hiring/Layoff,
  Overtime, Temporary Workers, Inventories,
  Subcontracting, Expediting

9
Relevant Costs

• 1. Change in Production (E.g. Hire/Layoff) Costs
• 2. Inventory Holding Costs
• 3. Shortage Costs
• 4. Payroll Costs
• 5. Subcontracting Costs
• 6. Expediting Costs

10
Scheduling Strategies

• Chase (Demand Matching)
• Production Leveling
• Level Workforce
• Subcontracting (Outsourcing)
• Hybrid or Mixed (Probably Used in Game)
• Given Beginning Inv. Demand Pt End Inv.

11
Scheduling Techniques (1)
Heuristics

• Informal Rules that Appear to Work.
• Rules are Developed (Often by Trial and Error)
  and Tested in Real World or Computer Simulation.
• Advantage Rules Can Be Realistic.
  Disadvantage Not Optimum.

12
Scheduling Techniques (2) Linear
Decision Rule

• Economic Order Quantity (Remember EOQ from SOM
  306?) Type of Approach
• TRC Payroll Holding Shortage Change in
  Pt f(Pt, Wt)
• Calculus Used to Find Best Pt and Wt
• E.g. Pt .2Ft .1Ft1 .05Ft2 -.1It .1Wt-1
• Advantage Optimum Given that Equations Fit.
  Disadvantage Cost

13
Scheduling Techniques (3) Search
Rules

• Used with Simulation
• Educated, Computer-Driven, Trial Error
• Advantage Realistic Costs, Not Optimum but
  Close. Disadvantage Uses Lots of Computer Time.

14
Master Production Schedule (MPS)

• Similar to Production Plan
• Time Periods or Buckets are Smaller
• Multiple Products are Shown Disaggregating
  Done by Heuristics or Linear Programming

15
Tuffy Teddy Bear Case

• Case Introduced You to Course Material. Case
  Involved Production Planning, Inventory Control,
  and Forecasting.
• Most Successful Strategies are Hybrid or Mixed
  Reduce Production ASAP to Lower Inventories and
  Increase Production Just After Vacation.

16
2008 Best Answer 41,960
17
2009 Best Answer 45,731
18
2010 Best Answer 42,615
19
Another Good Answer 47,600
20
Another Good Answer 48,923
21
Another Good Answer 68,577
22
(No Transcript)