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OperationsManagement
Topic 5 ProductionPlanning and Control
UiTM Shah AlamLecturer: Pn. Noriah YusoffT1-A16-6C
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Organizational Strategy andProduction Planning
Decision Level Decision Process Forecast NeededProduction
Planning andAllocation
Determinesseasonal plan by
product type
Determines
monthly itemproductionschedules
Monthly Demandfor 6 mths by items
Monthly Demandfor 12 mths byproduct types
Annual Demand byItem and Region
Corporate
(Top Management)
ShopSupervisor
Plant Manager
It explains the relationship between planning structure and organizational structure
It also tells who are responsible for the for the decision making.
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The Planning Process
Long Range Planning
Covers a period of 5 years and made up of :
Product & Market Planning
Financial Planning Resource Planning
Medium Range Planning
Covers 6 8 months and made up of :
Aggregate Planning Item Forecasting
Master Production Schedule (MPS)
Capacity Planning
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The Planning Process
Short Range Planning Covers from 1 day to a few weeks and consists of :
Material Requirement Planning (MRP)
(Specify when production and purchase orders must be made)
Capacity Requirement Planning(Provide detailed schedule when each operation is to be run on each
work center and how long it will take to process).
Final Assembly Scheduling
(Operations required to put product in its final form).
Production Planning and Control
(Scheduling and shop-floor control activities).
Purchase Planning and Control
(Acquisition and control of purchased items).
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Aggregate Planning
An AP means combining the
appropriate resources into general, oroverall terms.
It is concerned with determining the
quantity and timing of production forimmediate future.
Definitions
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Aggregate Planning
Objectives
To minimize costs over the planningperiod.
To minimize fluctuations in the workforce or inventory levels.
To obtain a certain standard ofservice performance.
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Aggregate Planning Strategies
Changing inventory levels
Varying work force size by hiring or layoffs. Varying production rates through overtime
or idle time. Subcontracting.
Using part-time workers. Influencing demand.
Back ordering during high demand periods. Counter-seasonal product mixing.
Mixed strategies (combination of two or morecontrollable variables) often works best.
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Phases of Aggregate Planning
1. Prepare an aggregate demand forecast.2. Specify organization policies for smoothing
capacity utilization.
3. Determine feasible production alternatives : Changing production rate (same work force) Changing production rate (changing the size of work force). Absorbing demand through inventories. Absorbing demand through back ordering. Absorbing demand through subcontract.
Using part-time workers.
4. Determination of optimal productionstrategy.
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Aggregate Planning
Graphical or Charting Methods1. Popular they are easy to understand and use.
2. They are trial-and-error approaches that do notguarantee an optimal plan.
3. The five steps involved are:
Determine the demand in each period. Determine the capacity for regular, OT, hired
workers and subcontracting for each period.
Find production costs, hiring and layoff costs,
and inventory holding costs. Consider company policy on workers and stock
levels.
Develop alternative plans, examine their totalcosts and select the best plan (lowest total cost).
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Roofing Supplier Example 1
Table 13.2
Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57
May 1,500 22 68
June 1,100 20 55
6,200 124
= = 50 units per day6,200
124
Averagerequirement =
Total expected demand
Number of production days
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Roofing Supplier Example 1
Figure 13.3
70
60
50
40
30
0Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
P
roductionrateperworkingday
Level production using averagemonthly forecast demand
Forecast demand
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Roofing Supplier Example 3
Table 13.2
Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57
May 1,500 22 68
June 1,100 20 55
6,200 124
Minimum requirement= 38 units per day
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Roofing Supplier Example 3
70
60
50
40
30
0Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
P
roductionratep
erworkingday
Level productionusing lowest
monthly forecast
demand
Forecast demand
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Roofing Supplier Example 4
Table 13.2
Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57
May 1,500 22 68
June 1,100 20 55
6,200 124
Production = Expected Demand
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Roofing Supplier Example 4
70
60
50
40
30
0Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
P
roductionratep
erworkingday
Forecast demand andmonthly production
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Aggregate Planning
Example 1:
Period 1 2 3 4 5 6 Total
Forecast 200 200 300 400 500 200 1800
Planners for a company that makes several models of skateboards have gatheredthe following information:
Associated data and costs:
Current work force = 15 peopleRegular time labour = RM0.25 per hourOvertime labour = RM3.00 per unitInventory = RM1.00 per unit per period on average inventory.Back orders = RM5.00 per unit per periodHire workers = RM50 per worker.
(A temporary worker can produce 15 units per period).Layoff workers = RM50 per worker.Labour hours = 8 hour per unitWorkdays = 20 days per periodSubcontract = RM6.00 /unit
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Aggregate Planning
Prepare an aggregate plan and determine its cost using a steadyrate of regular-time output. Use inventory to absorb the unevendemand but allowing some backlog. Start with zero inventory onhand in the first period. Note that the planned ending inventory iszero. Assume 8 hour of work per day.
Example 2 & 3Planners have learned that one person is about to retire from thecompany. Rather than replace him, they would like to :
stay with smaller work force and use overtime to makeup for the lost output.
Use temporary workers to fill in during month of higherdemand.
Develop alternative plans and compare their costs to theprevious one.
Solutions
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Aggregate Planning
Example 4: Month Jul Aug Sept Oct Nov Dec
Forecast 400 500 550 800 700 700
Cost:
Holding Cost = RM6 per DVD per mth Normal time labour = RM8 per hr
Overtime = RM12 per hr
Hiring = RM 400 per worker
Layoff = RM 800 per worker
Current work force = 8 workers
Labour hrs per DVD = 4 hrs
Work days per mth = 20 days
Begin inventory = 100DVDs
No backlog is allowed Labour hr per day = 8hrs
Max hrs for OT are 50% ofthe normal working hrs
Solutions
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Master Production Schedule(MPS)
Specifies what is to be made and when
Must be in accordance with the aggregateproduction plan
Inputs from financial plans, customerdemand, engineering, supplier performance
As the process moves from planning to
execution, each step must be tested forfeasibility
The MPS is the result of the productionplanning process
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Master Production Schedule
(MPS) MPS is established in terms of specific
products
Schedule must be followed for areasonable length of time
The MPS is quite often fixed or frozen inthe near term part of the plan
The MPS is a rolling schedule The MPS is a statement of what is to be
produced, not a forecast of demand
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The Planning Process
Figure 14.1
Is capacityplan being
met?
Is executionmeeting the
plan?
Changemaster
productionschedule?
Changecapacity?
Changerequirements?
No
Executematerial plans
Execute capacityplans
Yes
Realistic?
Capacityrequirements plan
Materialrequirements plan
Master productionschedule
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MPS Examples
Gross Requirements for Crabmeat Quiche
Gross Requirements for Spinach Quiche
Day 6 7 8 9 10 11 12 13 14 and so onAmount 50 100 47 60 110 75
Day 7 8 9 10 11 12 13 14 15 16 and so on
Amount 100 200 150 60 75 100
Table 14.1
For Nancys Specialty Foods
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MRP
Material Requirement Planning is atool geared specifically to assembledoperations
MRP provides answers for severalquestions for the suppliers:
What items are required?
How many are required?
When are required ?
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Dependent Demand
The demand for one item is relatedto the demand for another item
Given a quantity for the end item,
the demand for all parts andcomponents can be calculated
In general, used whenever a
schedule can be established for anitem
MRP is the common technique
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Dependent Demand
1. Master production schedule
2. Specifications or bill of material
3. Inventory availability4. Purchase orders outstanding
5. Lead times
Effective use of dependent demandinventory models requires thefollowing
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Benefits of MRP
1. Better response to customerorders
2. Faster response to marketchanges
3. Improved utilization of facilities
and labor4. Reduced inventory levels
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Bills of Material
List of components, ingredients,and materials needed to make
product Provides product structure
Items above given level are calledparents
Items below given level are calledchildren
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BOM Example
B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster1
E(2)E(2) F(2)
Packing box and
installation kit of wire,bolts, and screws
Std. 12 Speakerbooster assembly
2
D(2)
12 Speaker
D(2)
12 Speaker
G(1)
Amp-booster
3
Product structure for Awesome(A)
A
Level
0
Independent Demand
Dependent Demand
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BOM Example
B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster1
E(2)E(2) F(2)
Packing box and
installation kit of wire,bolts, and screws
Std. 12 Speakerbooster assembly
2
D(2)
12 Speaker
D(2)
12 Speaker
G(1)
Amp-booster
3
Product structure for Awesome(A)
A
Level
0
Part B: 2 x number of As= (2)(50) = 100Part C: 3 x number of As= (3)(50) = 150
Part D: 2 x number of Bs+ 2 x number of Fs= (2)(100) + (2)(300) = 800
Part E: 2 x number of Bs+ 2 x number of Cs= (2)(100) + (2)(150) = 500
Part F: 2 x number of Cs= (2)(150) = 300
Part G: 1 x number of Fs= (1)(300) = 300
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Time-Phased Product Structure
| | | | | | | |
1 2 3 4 5 6 7 8Time in weeks
F
2 weeks
3 weeks
1 week
A
2 weeks
1 week
D
E
2 weeks
D
G
1 week
1 week
2 weeks toproduce
B
C
E
Start production of DMust have D and Ecompleted here so
production canbegin on B
Figure 14.4
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MRP Structure
Figure 14.5
Output Reports
MRP byperiod report
MRP bydate report
Planned orderreport
Purchase advice
Exception reports
Order early or lateor not needed
Order quantity toosmall or too large
Data Files
Purchasing data
BOM
Lead times
(Item master file)
Inventory data
Masterproduction schedule
Materialrequirement
planningprograms(computer and
software)
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Expanded MRP with emphasisplaced on integration
Financial planning
Marketing
Engineering
Purchasing
Manufacturing
MRP IIMaterial Resource Planning II(MRP II)
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Material Resource Planning II
(MRP II)
Once an MRP system is in place, inventorydata can be augmented by other usefulinformation
Labor hours
Material costs
Capital costs
Virtually anyresource
System is generally calledMRP II orMaterial Resource Planning
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Material Requirements Planning
Draw up a production schedule for 2000 units of product A.Assume the units are required on week 20
DB
A
C
E
E E
DC E E
Item LT BatchQty
OnHand
A 4 - 0
B 4 100 200
C 3 500 750
D 4 200 400
E 3 400 2000
Solution
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
16 B 2000 200 1800 4 12 18(100) 0
16 C 2000 750 1250 3 13 3(500) 250
16 D 2000 400 1600 4 12 8(200) 0
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
16 B 2000 200 1800 4 12 18(100) 0
16 C 2000 750 1250 3 13 3(500) 250
16 D 2000 400 1600 4 12 8(200) 0
12 C 1800 0 1800 3 9 4(500) 200
12 D 1800 0 1800 4 8 9(200) 0
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
16 B 2000 200 1800 4 12 18(100) 0
16 C 2000 750 1250 3 13 3(500) 250
16 D 2000 400 1600 4 12 8(200) 0
12 C 1800 0 1800 3 9 4(500) 200
12 D 1800 0 1800 4 8 9(200) 0
13 E 1250 1250 0 3 - - 0
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
16 B 2000 200 1800 4 12 18(100) 0
16 C 2000 750 1250 3 13 3(500) 250
16 D 2000 400 1600 4 12 8(200) 0
12 C 1800 0 1800 3 9 4(500) 200
12 D 1800 0 1800 4 8 9(200) 0
13 E 1250 1250 0 3 - - 0
12 E 2(1600) 750 2450 3 9 7(400) 350
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
DB
A
C
E
E E
DC E E
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/ -
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Material Requirements Planning
Week Item GrossReqmt
OnHand
NetReqmt
LT OrderWeek
OrderQty
Remain
20 A 2000 0 2000 4 16 2000 0
16 B 2000 200 1800 4 12 18(100) 0
16 C 2000 750 1250 3 13 3(500) 250
16 D 2000 400 1600 4 12 8(200) 0
12 C 1800 0 1800 3 9 4(400) 200
12 D 1800 0 1800 4 8 9(200) 0
13 E 1250 1250 0 3 - - 0
12 E 2(1600) 750 2450 3 9 7(400) 350
8 E 2(1800) 0 3600 3 5 9(400) 0
http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/http://aggre_examples.doc/