Ch 09 Aggregate Planning and Mps

8/11/2019 Ch 09 Aggregate Planning and Mps

1/59

Slide 0 of 48

Chapter 9

Production-Planning Systems:Aggregate Planning and

Master Production Scheduling


2/59

Slide 1 of 48

Overview

Production-Planning Hierarchy Aggregate Planning


Types of Production-Planning and Control Systems Wrap-Up: What World-Class Producers Do


3/59

Slide 2 of 48

Capacity Planning, Aggregate Planning, Master Schedule, and Short-Term

Scheduling

Capacity Planning

1. Facility Size

2. Equipment Procurement

Aggregate Planning

1. Facility Utilization2. Personnel needs

3. Subcontracting

Master Schedule

1. MRP2. Disaggregation of master plan

Short-term Scheduling

1. Work center loading

2. Job sequencing

Long-term

Intermediate-term

Intermediate-term

Short-term


4/59

Slide 3 of 48

Overview

Process Planning

Strategic Capacity Planning

Aggregate Planning


Material Requirements Planning

Order Scheduling Weekly Workforce &Customer Scheduling

Daily Workforce &

Customer Scheduling

Long

Range

Medium

Range

Short

Range

Manufacturing Services

4


5/59

Slide 4 of 48

Production Planning Hierarchy


Production Planning and Control Systems

Pond Draining

Systems

Aggregate Planning

Push

Systems

Pull

Systems

Focusing on

Bottlenecks

Long-Range Capacity Planning Chapter 7

Chapter 10 Chapter 11 Chapter 14 Chapter 9,12

Chapter 9


6/59


7/59Slide 6 of 48

Production Planning: Units of Measure


Production Planning and Control Systems

Pond Draining

Systems

Aggregate Planning

Push

Systems

Pull

Systems

Focusing on

Bottlenecks

Long-Range Capacity Planning EntireProduct Line

Product

Family

Specific

Product Model

Labor, Materials,

Machines


8/59Slide 7 of 48 5

Hierarchical Production Planning

Annual demand by

item and by region

Monthly demand

for 15 months by

product type

Monthly demand

for 5 months by

item

Forecasts needed

Allocates

production

among plants

Determines

seasonal plan by

product type

Determines monthly

item production

schedules

Decision ProcessDecision Level

Corporate

Plant manager

Shop

superintendent


9/59Slide 8 of 48

Relationships of the Aggregate Plan

Marketplaceand Demand

Research andTechnology

Product

Decisions

Process

Planning &

Decisions

Aggregate

Plan for

Production

Detailed Work

Schedules

Master

Production

SchedulePriority

Planning &

Scheduling

Demand

Forecasts

,orders

External

Capacity

Plant

Capacity

Raw Materials

Available

Inventory

On Hand

Work Force


10/59Slide 9 of 48

Aggregate Planning Strategies Pure Strategies

Capacity Options --change capacity: 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:

Influencing demand

backordering during high demand periods

counterseasonal product mixing


11/59Slide 10 of 48

Comparison of Aggregate Planning Methods

Advantages

Graphical Methods:- Simple, easy to use and understand

Linear Programming:

- Provides optimal solution

- Popular in some industries

- Sensitivity & dual analysis provide

useful information

- Constraints readily added.

Linear Decision Rule

- Provides optimal solution- Handles non-deterministic demand

Limitations

Graphical Methods:- Many solutions; solution need not be

optimal

Linear Programming:

- Mathematical functions must be

linear, and deterministic -- notnecessarily realistic

Linear Decision Rule:

- Incorporates some non-standard costs.

Skilled personal required. Quadratic

model not always realistic. Value ofvariables unconstrained. Feasible

solution is optimal if it exists - not

guaranteed.


12/59Slide 11 of 48

Advantages(continued)

Management coefficients Model:

- Attempts to duplicate managersdecision-making process. Simplest, last

disruptive, easiest to implement

Simulation:

- Places no restrictions on mathematical

structure or cost functions. Can testmany relationships.

Limitations (continued)

Managment coefficients Model:

- Solution need not be optimal.

- Assumes past decisions are good.

- Built on individuals invalidate model.

Simulation

- No optimal solution guaranteed.

- Often a long, costly, process.

Comparison of Aggregate Planning Methods


13/59Slide 12 of 48

Aggregate Planning


14/59Slide 13 of 48

Why Aggregate Planning Is Necessary

Fully load facilities and minimize overloading andunderloading

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 resourcesavailable


15/59Slide 14 of 486

Aggregate Planning

Goal: Specify the optimal combination ofproduction rate

workforce level

inventory on hand

Product group or broad category (Aggregation)

Medium-Range: 6-18 months


16/59Slide 15 of 487

Aggregate Planning

Terminology

Production Rate

Workforce Level

Inventory on Hand


17/59Slide 16 of 48

Inputs

A forecast of aggregate demand covering the selectedplanning 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


18/59Slide 17 of 48

Outputs

A production plan: aggregate decisions for eachperiod in the planning horizon about

workforce level

inventory level

production rate

Projected costs if the production plan was

implemented


19/59Slide 18 of 48

Medium-Term Capacity Adjustments

Workforce level Hire or layoff full-time workers

Hire or layoff part-time workers

Hire or layoff contract workers Utilization of the work force

Overtime

Idle time (undertime)

Reduce hours worked

. . . more


20/59

Slide 19 of 48

Medium-Term Capacity Adjustments

Inventory level Finished goods inventory

Backorders/lost sales

Subcontract


21/59

Slide 20 of 48

Approaches

Informal or Trial-and-Error Approach Mathematically Optimal Approaches

Linear Programming

Linear Decision Rules Computer Search

Heuristics


22/59

Slide 21 of 48

Pure Strategies for the Informal Approach

Matching Demand Level Capacity

Buffering with inventory

Buffering with backlog Buffering with overtime or subcontracting

Hybrid strategies


23/59

Slide 22 of 48

Matching Demand Strategy

Capacity (Production) in each time period is varied toexactly match the forecasted aggregate demand in

that time period

Capacity is varied by changing the workforce level

Finished-goods inventories are minimal

Labor and materials costs tend to be high due to the

frequent changes

. . . more


24/59

Slide 23 of 48

Matching Capacity & Demand

Demand Management

Vary prices

change lead time

encourage/discourage business

Capacity Management

adjust staffing

adjust equipment and processes

change methods to facilitate production

redesign the product to facilitate production

D l i d E l i


25/59

Slide 24 of 48

Developing and Evaluating

the Matching Production Plan

Production rate is dictated by the forecasted aggregatedemand

Convert the forecasted aggregate demand into the

required workforce level using production time

information

The primary costs of this strategy are the costs of

changing workforce levels from period to period, i.e.,

hirings and layoffs


26/59

Slide 25 of 48

Level Capacity Strategy

Capacity (production rate) is held level (constant)over the planning horizon

The difference between the constant production rate

and the demand rate is made up (buffered) by

inventory, backlog, overtime, part-time labor and/orsubcontracting

D l i d E l ti


27/59

Slide 26 of 48


the Level Production Plan

Assume that the amount produced each period isconstant, no hirings or layoffs

The gap between the amount planned to be produced

and the forecasted demand is filled with either

inventory or backorders, i.e., no overtime, no idletime, no subcontracting

. . . more

D l i d E l ti


28/59

Slide 27 of 48


the Level Production Plan

The primary costs of this strategy are inventorycarrying and backlogging costs

Period-ending inventories or backlogs are determined

using the inventory balance equation:

EIt= EIt-1+ (Pt- Dt )


29/59

Slide 28 of 48

Aggregate Plans for Services

For standardized services, aggregate planning may besimpler than in systems that produce products

For customized services,

there may be difficulty in specifying the nature and

extent of services to be performed for each

customer

customer may be an integral part of the production

system Absence of finished-goods inventories as a buffer

between system capacity and customer demand


30/59

Slide 29 of 48

Preemptive Tactics

There may be ways to manage the extremes ofdemand:

Discount prices during the valleys.... have a sale

Peak-load pricing during the highs .... electric

utilities, Nucor


31/59

Slide 30 of 48

Aggregate Planning Example


32/59

Slide 31 of 48



33/59

Slide 32 of 48



34/59

Slide 33 of 488


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.

Executive

Line

Durable

Line

Compact

Line


35/59

E l


36/59

Slide 35 of 4811

ExamplesCost I nformation

Materials $5/unit

Holding costs $1/unit per mo.

Marginal cost of stockout $1.25/unit per mo.

Hiring and training cost $200/workerLayoff costs $250/worker

Labor hours required .15 hrs/unit

Straight time labor cost $8/hour

Beginning inventory 250 unitsProductive hours/worker/day 7.25

Paid straight hrs/day 8


37/59

Slide 36 of 4812

Determining Straight Labor Costs and Output

Jan Feb Mar Apr May Jun

Days/mo 22 19 21 21 22 20

Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145Units/worker 1063.33 918.33 1015 1015 1 063.33 966.67

$/worker $1,408 1,216 1,344 1,344 1,408 1,280

Chase Strategy


38/59

Slide 37 of 4813

Chase Strategy

(Hiring & Firing--meet demand)

Beginning workforce level: 7 employees

Jan

Days/mo 22

Hrs/worker/mo 159.5

Units/wo rke r 1 ,0 63 .3 3

$/worker $1,408

Jan

Demand 4,500

Beg. inv. 250

Net req. 4,250Req. workers 3.997

Hired

Fired 3

W orkforce 4

Ending inventory 0


39/59

14


Days/mo 22 19 21 21 22 20

Hrs/worker/mo 159.5 137.75 152.25 152.25 159.5 145

Units/worker 1,063 918 1,015 1,015 1,063 967

$/worker $1,408 1,216 1,344 1,344 1,408 1,280


Demand 4,500 5,500 7,000 10,000 8,000 6,000

Beg. inv. 250

Net req. 4,250 5,500 7,000 10,000 8,000 6,000

Req. workers 3.997 5.989 6.897 9.852 7.524 6.207

Hired 2 1 3Fired 3 2 1

Workforce 4 6 7 10 8 7

Ending inventory 0 0 0 0 0 0

Irwin/McGraw-Hill The McGraw-Hill Companies, Inc.,


40/59

15


Demand 4,500 5,500 7,000 10,000 8,000 6,000

Beg. inv. 250

Net r eq. 4,250 5,500 7,000 10,000 8,000 6,000

Req. workers 3.997 5.989 6.897 9.852 7.524 6.207

Hired 2 1 3

Fired 3 2 1

Workforce 4 6 7 10 8 7

Ending inventory 0 0 0 0 0 0

Jan Feb Mar Apr May Jun Costs

Mate rial $21,250.00 $27,500.00 $35,000.00 $50,000.00 $40,000.00 $30,000.00 203,750.00

Labor 5,627.59 7,282.76 9,268.97 13,241.38 10,593.10 7,944.83 53,958.62

Hiring cost 400.00 200.00 600.00 1,200.00

Firing cost 750.00 500.00 250.00 1,500.00

$260,408.62

The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Level Workforce


41/59

Slide 40 of 4816

Level Workforce

(Surplus and Shortage Allowed)

Workforce level: 6 employees

Jan

Demand 4,500

Beg. inv. 250

Net req. 4,250

Workers 6

Production 6,380

Ending inventory 2,130

Surplus 2,130

Shortage


42/59

17

Jan Feb Mar Apr May JunDemand 4,500 5,500 7,000 10,000 8,000 6,000

Beg. inv. 250 2,130 10 -910 -3,910 -1 ,620

Net req. 4,250 5,500 7,000 10,000 8,000 6,000

Workers 6 6 6 6 6 6

Production 6,380 5,510 6,090 6 ,090 6,380 5,800

Ending inventory 2,130 10 -910 -3 ,910 -1,620 -200

Surplus 2,130 10

Shortage 910 3 ,910 1,620 200



43/59

18


Demand 4,500 5,500 7,000 10,000 8,000 6,000

Beg. inv. 250 2,130 10 -910 -3,910 -1,620

Net req. 4 ,250 5,500 7,000 10,000 8,000 6,000

Workers 6 6 6 6 6 6

Production 6,380 5,510 6,090 6,090 6,380 5,800

Ending inventory 2,130 10 -910 -3,910 -1,620 -200

Surplus 2 ,130 10

Shortage 910 3,910 1,620 200


Labor $8,448 $7,296 $8,064 $8,064 $8,448 $7,680 $48,000.00

Material 31,900 27,550 30,450 30,450 31,900 29,000 181,250.00

Carrying 2,130 10 2,140.00

Stockout 1,138 4,888 2,025 250 8,300.00

$239,690.00



44/59

Slide 43 of 48

Master Production Scheduling (MPS)


45/59

Slide 44 of 48

Objectives of MPS

Determine the quantity and timing of completion ofend items over a short-range planning horizon.

Schedule end items (finished goods and parts shipped

as end items) to be completed promptly and when

promised to the customer.

Avoid overloading or underloading the production

facility so that production capacity is efficiently

utilized and low production costs result.


46/59

Slide 45 of 48

The rules for scheduling

No Change

+/- 5%

Change

+/- 10%

Change

+/- 20%

Change

Frozen Firm

FullOpen

1-2weeks

2-4

weeks

4-6

weeks

6+weeks

Time Fences


47/59

Slide 46 of 48

Time Fences

The rules for scheduling: Do not change orders in the frozen zone

Do not exceed the agreed upon percentage changes

when modifying orders in the other zones

Try to level load as much as possible

Do not exceed the capacity of the system when

promising orders.

If an order must be pulled in to level load, pull itinto the earliest possible week without missing the

promise.


48/59

Slide 47 of 48

Developing an MPS

Using input information Customer orders (end items quantity, due dates)

Forecasts (end items quantity, due dates)

Inventory status (balances, planned receipts)

Production capacity (output rates, planned

downtime)

Schedulers place orders in the earliest available open

slot of the MPS

. . . more


49/59

Slide 48 of 48

Developing an MPS

Schedulers must: estimate the total demand for products from all

sources

assign orders to production slots

make delivery promises to customers, and

make the detailed calculations for the MPS

As orders are slotted in the MPS, the effects on the

production work centers are checked

Rough cut planning - identify underloading or

overloading of capacity


50/59

Slide 49 of 48

Demand Management

Review customer orders and promise shipment oforders as close to request date as possible

Update MPS at least weekly.... work with Marketing

to understand shifts in demand patterns

Produce to order..... focus on incoming customer

orders

Produce to stock ..... focus on maintaining finished

goods levels Planning horizon must be as long as the longest lead

time item


51/59

Slide 50 of 48

Types of

Production-Planningand Control Systems

Types of Production-Planning


52/59

Slide 51 of 48

Types of Production Planning

and Control Systems

Pond-Draining Systems Push Systems

Pull Systems

Focusing on Bottlenecks

P d D i i S [Ch 10]


53/59

Slide 52 of 48

Pond-Draining Systems [Chapter 10]

Emphasis on holding inventories (reservoirs) ofmaterials to support production

Little information passes through the system

As the level of inventory is drawn down, orders are

placed with the supplying operation to replenish

inventory

May lead to excessive inventories and is rather

inflexible in its ability to respond to customer needs

P h S [Ch 11]


54/59

Slide 53 of 48

Push Systems [Chapter 11]

Use information about customers, suppliers, andproduction to manage material flows

Flows of materials are planned and controlled by a

series of production schedules that state when batches

of each particular item should come out of each stageof production

Can result in great reductions of raw-materials

inventories and in greater worker and process

utilization than pond-draining systems

P ll S t [Ch t 14]


55/59

Slide 54 of 48

Pull Systems [Chapter 14]

Look only at the next stage of production anddetermine what is needed there, and produce only that

Raw materials and parts are pulled from the back of

the system toward the front where they become

finished goods

Raw-material and in-process inventories approach

zero

Successful implementation requires much preparation

F i B ttl k


56/59

Slide 55 of 48

Focusing on Bottlenecks

Bottleneck Operations Impede production because they have less capacity

than upstream or downstream stages

Work arrives faster than it can be completed

Binding capacity constraints that control the

capacity of the system

Optimized Production Technology (OPT)

Synchronous Manufacturing

S h M f t i


57/59

Slide 56 of 48


Operations performance measured by throughput (the rate cash is generated by sales)

inventory (money invested in inventory), and

operating expenses (money spent in converting

inventory into throughput)

. . . more

S h M f t i


58/59

Slide 57 of 48


System of control based on: drum (bottleneck establishes beat or pace for other

operations)

buffer (inventory kept before a bottleneck so it is

never idle), and

rope (information sent upstream of the bottleneck

to prevent inventory buildup and to synchronize

activities)

W U W ld Cl P ti


59/59

Wrap-Up: World-Class Practice

Push systems dominate and can be applied to almostany type of production

Pull systems are growing in use. Most often applied

in repetitive manufacturing

Few companies focusing on bottlenecks to plan andcontrol production.

Ch 09 Aggregate Planning and Mps

Documents

Transcript of Ch 09 Aggregate Planning and Mps