PPT:-Production Planning and Inventory Management

7/16/2019 PPT:-Production Planning and Inventory Management

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Production Planning Activities

Capacity Planning1. Facility Size2. Equipment Procurement

Aggregate Planning

1. Facility Utilization2. Personnel needs3. Subcontracting

Master Production Scheduling

1. MRP2. Disaggregation of master plan

Short-term Scheduling1. Work center loading2. Job sequencing

Long-term(years)

Intermediate-term(6 to 18 months)

Short-term(weeks)

Very Short-term(hours days)


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Master Production Scheduling

Production Planning and Control Systems

Aggregate Planning

Long-Range Capacity Planning EntireProduct Line

Product

FamilySpecific

Product ModelLabor, Materials,

Machines

Production Planning: Units ofMeasurement


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Aggregate Planning Strategies PureStrategies

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


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Why Aggregate Planning Is

Necessary Fully load facilities and minimize

overloading and underloading

Make sure enough capacity available tosatisfy expected demand

Plan for the orderly and systematic change

of production capacity to meet the peaksand valleys of expected customer demand

Get the most output for the amount of

resources available


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InputsA forecast of aggregate demand covering

the selected planning horizon (6-18 months)

The alternative means available to adjustshort- to medium-term capacity, to whatextent 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


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OutputsA production plan: aggregate decisions

for each period in the planning horizon

about workforce level

inventory level

production rate

Projected costs if the production planwas implemented


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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.

ExecutiveLine DurableLine

Compact

Line


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Inventory Management 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 andcontrols that monitors levels of inventory anddetermines what levels should be maintained,when stock should be replenished, and howlarge orders should be


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Types of Inventories Raw Materials

Works-in-Process

Finished Goods

Distribution Inventory

Supplies: Maintenance, Repair and Operating (MRO)


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Managing Facilitating Goods

Factory Wholesaler Distributor Retailer Customer

Replenishment

order

Replenishment

order

Replenishment

order

Customer

order

Production

Delay

Wholesaler

Inventory

Shipping

Delay

Shipping

Delay

Distributor

InventoryRetailer

Inventory

Item Withdrawn


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Inventory Positions in the

Supply Chain

Raw

MaterialsWorks

in

Process

Finished

Goods

Finished

Goods

in Field


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Understocking (too few) results in missed deliveries, lostsales, dissatisfied customers, and production bottlenecks(idle workers or machines).

Resulting underage cost.

Overstocking (too many) ties up funds that might bemore productive elsewhere.

Resulting overage cost.

Goal: matching supply with demand!

Inadequate control of inventories can result

in both under- and overstocking of items.


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Reasons for Inventories Improve customer service

Economies of purchasing

Economies of production

Transportation savings

Hedge against future

Unplanned shocks (labor strikes, naturaldisasters, surges in demand, etc.)

To maintain independence of supply chain


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Reasons Against Inventory Non-value added costs

Opportunity cost

Complacency

Inventory deteriorates, becomesobsolete, lost, stolen, etc.


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Inventory Related CostsProcurement Costs:

Order processing Shipping Handling

Carrying (Holding) Costs Capital (opportunity) costs Inventory risk costs Space costs Inventory service costs

Out-of-Stock Costs Lost sales cost Back-order cost


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Independent and DepenedentDemand

Independent demand items arefinished 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 producea finished product.


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Objectives of InventoryControl

1) Maximize the level of customerservice by avoiding understocking.

2) Promote efficiency in production andpurchasing by minimizing the cost ofproviding an adequate level of customer

service.


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Balance in Inventory Levels

When should the company replenish itsinventory, or when should the company

place an order or manufacture a newlot?

How much should the company order or

produce? Next: Economic Order Quantity (EOQ)


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Balancing Carrying againstOrdering Costs

AnnualCost ($)

Order Quantity

Minimum

Total Annual

Stocking Costs

AnnualCarrying Costs

AnnualOrdering Costs

Total AnnualStocking Costs

Smaller Larger

Lower

H

igher

EOQ


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Classifying Inventory Items

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, minimalrecords, large inventories, periodic reviewand reorder


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ABC Classification System

Classifying inventory according tosome measure of importance and

allocating control efforts accordingly.

A -very important

B- mod. importantC- least important

Annual

$ valueof items

A

B

C

High

Low

Low High

Percentage of Items


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PPT:-Production Planning and Inventory Management

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Transcript of PPT:-Production Planning and Inventory Management