Aggregate planning


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Aggregate planningmanagementmanagementPresentations By Rajendran Ananda Krishnan,

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Aggregate planning

  1. 1. Aggregate planningRajendran Ananda Krishnan ettythings
  2. 2. Aggregate planningAggregate planning involves planning the best quantity to produce inthe intermediate-range horizon (3 months to one year) and planning thelowest cost method of providing the adjustable capacity toaccommodate the production requirements.For ExampleAt the end of the aggregate production planning exercise , a garmentsmanufacturer may arrive at the following planProduce at the rate of 9000 meters of cloth everyday during themonths of January to marchIncrease it to 11000 meters during April to august and change theproduction rate 10,000 meters during September to DecemberCarry 10% of monthly production as inventory during the first ninemonths of productionWork on a one-shift basis throughout the year with 20% overtimeduring July to October ettythings
  3. 3. Model Machine Hrs MonthlyType(bicycle) Required DemandBasic 30 1000Deluxe 60 500Sports 90 250Aggregate units for production planningSl.No Product Aggregate unit of Capacity1 Phenyl Acetic acid Metric tonnes2 Data entry system Numbers3 Mini Computer Value in Rs4 Printed circuit board Square meters5 Alloy iron casing Metric tonnes6 Cement Metric tonnes ettythings
  4. 4. Inputs to and Outputs from Aggregate Production Planning ettythings
  5. 5. NecessaryDemand fluctuationEx- Demands for garments in India-high (aug-sept) –festiveseasonCapacity fluctuationsCapacity available- 10% lower in the month of FebDifficulty level in altering production ratesEx- manufacturing Diesel gen sets at the rate of 4000- 5000Benefits of multi-period planningSupply and demand not match exactly on a period by periodbasis in an organization ettythings
  6. 6. A framework for aggregate production planningForecasting Alternatives for modifying demand Arriving at effective periodTargeted demand to be by period demand to be fulfilled metActual period-by-period Arriving at period-by-period supply schedules supply schedules Alternatives for modifying supply ettythings
  7. 7. Alternatives for managing demand1. Reservations of capacityShifting the demand from one period to anotherEx- Multi specialty health care unit-appointment system Electronic equipment2. Influencing demandInfluence the demand during a particular period through some mechanisms and induce the customers to voluntarily shift the demand to other periods when there is a low demandDifferential tariffs- telecommunication co’sSpecial off-season discountsVideocon and BPL – Wait-buy-save scheme ettythings
  8. 8. Alternatives for managing SupplyModifying supply can be done in one of the following ways1. Inventory based alternativesEx- Arvind Mills- forecast demand for denimApril-june-35000 mts/mnt, july-sept- 55000, Avg production capacity-45000 Fast food restaurantBack ordering- is a method of pushing an order to future period on account of insufficient inventory or capacity to supply during the current periodStock out – inability to supplyEx - watch manufacturing companyOctober actual demand- 40000, capacity- 30,000 , on hand inventory- 5000. ettythings
  9. 9. • Capacity Adjustment AlternativesTwo factors affect capacity in any organization The number of working hours The number of people employed Hiring/layoff workers Varying Shifts Varying working hours- OT• 3. Capacity augmented alternatives Subcontracting- ITI –PCB boards Rescheduling maintenance New capacity ettythings
  10. 10. Strategies for aggregate planningAPP APP alternatives applicableStrategyLevel Inventory based alternativesStrategy A. Build inventory B. Back orderChase Capacity augmentation alternativesStrategy a. Over time/ under time b. Vary no. of shifts c. Hire/layoff workers Capacity augmentation alternatives Subcontract/ outsource Add a new capacity ettythings
  11. 11. Master Production SchedulingMPS sets the quantity of each end item to be completed in each time period ( week /month/quarter) of the short-range planning horizonObjectives of Master Production Scheduling 1. To schedule end items to be completed promptly and when promised to customers. 2. To avoid overloading or under loading the production facility so that production capacity is efficiently utilized and low production costs result.Functions of MPS: • Translating aggregate plans • Evaluating alternative master schedules • Generating material and capacity requirements • Facilitating information processing • Maintaining priorities • Utilizing the capacity effectively ettythings
  12. 12. Master Production Schedule - Flow Chart ettythings
  13. 13. Material Requirements PlanningMaterial Requirements Planning is a computerized information system that aids the planning of materials in manufacturing organizations.MRP is a computer based system in which the given MPS is exploded in to the required amounts of raw materials, parts and sub assemblies ,needed to produce the end items in each time period (week or month) of the planning horizon Objectives of MRP1. To improve customer service by meeting delivery schedules promised and shortening delivery lead times.2. To reduce inventory costs by reducing inventory levels.3. To improve plant operating efficiency by better use of productive resources. Three main purposes of a basic MRP system are to: • Control inventory levels • Assign operating priorities • Assign capacity to load production systems. ettythings
  14. 14. Operation of MRP System ettythings
  15. 15. Bills of material or product structure file• This file provides the information regarding all the materials, parts and sub-assemblies that go in to the end of the product. Is having series of levels each of which represents a stage in the manufacture of the end product• The product structure graphically depicts the dependency relationships among various items that make up the end product ettythings
  16. 16. Telephone Connecting Connecting jack Base Unit 1 Hand Set 1 Level Table 1 2 MicroOperating Panel B.Cover Speaker H.Cover phone Unit 1 Board 1 plate 1 1 plate 2 1 Button Control Assy 1 Panel 1 Button 12 Screw 12 Dial 3 Screw 3 Screw 4 Screw 4 ettythings
  17. 17. Inventory status file• The inventory status file gives the complete and up-tp-date information on the on-hand quantities, gross requirements, scheduled receipts and planned order releases for the item. It also includes other information such as lot sizes, lead times, safety stock levels and scrap allowances etc…Net requirement for a period =Gross requirement for the period – Scheduled receipt for the period + on hand inventory at the end of the period ettythings
  18. 18. MRP -Outputs• Primary1. Planned orders- A schedule indicating the amount and timing of future orders2. Order Release- authorizing the execution of planned orders3. Changes- to planned orders , revision of due dates, order quantities, cancellation of orders. Secondary Performance control reports- evaluation of system operations Planning Reports- data useful for assessing future MRP Exception reports- any major discrepancies encountered , late and over due orders, excessive scraps ettythings
  19. 19. Capacity Requirement Planning• It is a technique for determining what labor /personnel equipment capacities are needed to meet the production objectives symbolized in the master production schedule and MRP• The process of determining the short range capacity requirements ettythings
  20. 20. Capacity Requirement Planning ettythings
  21. 21. CRPCRP Inputs Planned orders and Released orders from the MRP System Loading information from the work centre status file Routing information from the shop routing file Changes with modify capacity, give alternative routings or alterd planned ordersCRP Outputs• Rescheduling information which call for capacity modifications or revisions of MPS• Verification of planned orders for MRP system• Load Reports ettythings
  22. 22. • Automobile factory- no of vehicles• Steel mill- tonnes of steelAirlines- no of seatsHospitals- no of bedsUniversity- no of students ettythings
  23. 23. Hierarchical Approach ton planning Business Plan Marketing Plan Financil plan Production plan ( Capacity) MPS MRP CRP Detail Scheduling Shop floor Control ettythings
  24. 24. Capacity Planning• Production capacity is defined as the maximum production rate of a facility or a plantMeasurement of CapacityCapacity of a plant can be expressed as the rate of output, units per day or per week or per month, tonnes per month, gallons per hour, labor hour per dayCapacity may be measured in terms of inputs or output of the conversion process ettythings
  25. 25. • Capacity Decisions• Major considerations in capacity decisions are a. What size of plant? How much capacity to install? b. When capacity is needed? When to phase-in capacity or phase-out capacity? c. At what cost? How to budget for the cost?• Factors Affecting Determination of Plant Capacity 1. Market demand for a product/service. 2. The amount of capital that can be invested. 3. Degree of automation desired. 4. Level of integration (i.e., vertical integration). 5. Type of technology selected. 6. Flexibility for capacity addition ettythings
  26. 26.  Capacity planning involves activities such as: a. Assessing existing capacity b. Forecasting future capacity needs c. Identifying alternative ways to modify capacity d. Evaluating financial, economical and technological capacity alternatives e. Selecting a capacity alternative most suited to achieve the strategic mission of the firm. Capacity planning involves capacity decisions that must merge consumer demands with human, material and financial resources of the organization. ettythings
  27. 27. Types of capacity• 1. Fixed capacity• Adjustable Capacity• Design Capacity• System Capacity• Potential Capacity• Immediate capacity• Effective Capacity• Normal Capacity• Actual Capacity ettythings