Session 4
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  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV
  • Production and Operations Management - session#4/Summary of Overheads SAV

Session 4 Presentation Transcript

  • 1. Lesson 4
    • Production-Planning Systems:
    • Aggregate Planning and
    • Master Production Scheduling
  • 2. Overview
    • Production-Planning Hierarchy
    • Aggregate Planning
    • Master Production Scheduling
    • Types of Production-Planning and Control Systems
  • 3. Lesson 4
    • Readings:
      • Textbook: chapter 9
    • Homework :
      • Review and discussion questions:
      • 4, 5, 7, 8, 9, 15, 18, 19
      • Problems:
      • 1, 3, 4, 8, 9, 10, 14, 15
  • 4. Learning Objectives
    • After completing this lesson you should be able to
    • explain what aggregate planning is and how it is useful
    • identify the variables decision makers have to work with in aggregate planning and some of the possible strategies they can use
    • prepare aggregate plans and compute their costs
    • describe the basic concepts of master production scheduling
    • prepare an MPS
    • explain the differences between the Push and Pull systems in Production Planning and Control
  • 5. Production Planning Hierarchy Master Production Scheduling Production Planning and Control Systems Pond Draining Systems Aggregate Planning Push Systems Pull Systems Focusing on Bottlenecks Long-Range Capacity Planning
  • 6. Production Planning Horizons Master Production Scheduling Production Planning and Control Systems Pond Draining Systems Aggregate Planning Push Systems Pull Systems Focusing on Bottlenecks Long-Range Capacity Planning Long-Range (years) Medium-Range (6-18 months) Short-Range (weeks) Very-Short-Range (hours - days)
  • 7. Long-range Capacity Planning
    • Long-range capacity planning is necessary to develop facilities & equipment, major suppliers, and production processes and become constraints on the medium- and short-range planning
  • 8. Forecasting long-range Capacity Demand
    • Consider the life of the input (e.g. facility is 10-30 yr)
    • Understand product life cycle as it impacts capacity
    • Anticipate technological developments
    • Anticipate competitors’ actions
    • Forecast the firm’s demand
  • 9. Aggregate Planning
  • 10. Why Aggregate Planning Is Necessary
    • Fully load facilities and minimize overloading and underloading
    • 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 resources available
  • 11. Aggregate Demand
    • Total demand for all products. Must use the same unit of measure to facilitate planning at the highest level of a firm
    • When the types of items produced are similar, an aggregate production unit can correspond to an “average” item
    • When many different types of items are produced it would be more appropriate to consider aggregate units in terms of: weight (tons of steel), volume (gallons of gasoline), amount of work required (labor-hours, machine-hours), or dollar value
  • 12. Inputs to Aggregate Planning
    • A forecast of aggregate demand covering the selected planning horizon (3-18 months)
    • The alternative means available to adjust short- to medium-term capacity, to what extent each alternative could impact capacity and the related costs
      • Examples: cost of inventory, back orders, Hiring / firing, Overtime, Subcontracting
  • 13. Inputs to Aggregate Planning
    • The current status of the system in terms of workforce level, inventory level and production rate
    • Company policy regarding
        • workforce changes (layoffs, overtime)
        • subcontracting
        • inventory levels
        • back orders
  • 14. Outputs
    • A production plan: aggregate decisions for each period in the planning horizon about
      • workforce level
      • inventory level
      • production rate
    • Projected costs if the production plan was implemented
  • 15. Medium-Term Capacity Adjustment Options
    • Subcontract
    Workforce level Utilization of the work force Inventory
  • 16. Medium-Term Capacity Adjustment Options
    • 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
  • 17. Medium-Term Capacity Adjustment Options
    • Inventory level
      • Finished goods inventory
      • Backorders/lost sales
    • Subcontract
  • 18. Aggregate Planning Approaches
    • Informal or Trial-and-Error Approach
    • Mathematically Optimal Approaches
      • Linear Programming
      • Linear Decision Rules
    • Computer Search
    • Heuristics
  • 19. Strategies for the Informal Approach
    • Matching Demand
    • Level Capacity
      • Buffering with inventory
      • Buffering with backlog
      • Buffering with overtime or subcontracting
    • Mixed strategies: Combing elements from the above pure strategies
  • 20. Matching Demand Strategy
    • Capacity (Production) in each time period is varied to exactly 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
    • Employee moral can suffer
  • 21. Developing and Evaluating the Matching Production Plan
    • Production rate is dictated by the forecasted aggregate demand
    • 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
  • 22. 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/or subcontracting
  • 23. Pure Strategies
  • 24. Choosing a Strategy
    • Two important factors to be considered when selecting an aggregate plan
    • Cost
    • Company policy
    • Aggregate planners seek to match supply and demand within constraints imposed by policies and at minimum cost.
  • 25. Aggregate planning process
    • 1. Sales forecast for each product: the quantities to be sold in each time period (weeks, months, or quarters) over the planning horizon (6 -18 months)
    • 2. Total all the individual product or service forecasts into one aggregate demand
    • 3. Transform the aggregate demand for each time period into production resource requirements (workers, materials, machines, etc.)
  • 26. Aggregate planning process
    • 4. Develop alternative resource plans to support the cumulative aggregate demand and compute the cost for each.
    • 5. Select the best alternative which satisfies aggregate demand and best meets the organization’s objectives.
  • 27. Example
    • Aggregate Demand
    • J F M A M J
    • 200 200 300 400 500 200
    • Capacity: Regular work-force can meet the average demand (1800 / 6 = 300 units / month)
    • Initial Inventory = 0 = Ending inventory
    • Costs: Regular time: $ 2 / unit
      • Overtime $ 3 / unit
      • Subcontracting $ 6 / unit
      • Inventory (average)$1 / unit / month Backorder $ 5/ unit / month
  • 28. Example
    • Policy: Steady rate of regular time-output
    • Use inventory, backordering, or subcontracting to meet uneven demand Plan 1
  • 29. Example: plan 1
  • 30. Example
    • Policy: Chasing demand
      • Use inventory, backordering, overtime, or subcontracting to meet uneven demand
      • Maximum over time = 50 units / month
    • plan 2
  • 31. Example: plan 2
  • 32. Master Production Scheduling (MPS)
  • 33. Introduction
    • The MPS is the plan that states what is to be produced, how many are to be completed and when they are to be completed.
    • As contrasted with aggregate plans, MPS is more detailed: it deals with individual products and when they will be produced usually week by week
  • 34. Objectives of MPS
    • Determine the quantity and timing of completion of end 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.
  • 35. Time Fences
    • The rules for scheduling
    No Change +/- 5% Change +/- 10% Change +/- 20% Change Frozen Firm Full Open 1-2 weeks 2-4 weeks 4-6 weeks 6+ weeks
  • 36. 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.
  • 37. 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
  • 38. 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
  • 39. Example
    • A company produces three different products on a produce-to-stock basis. The demands for these products over the 8-week planning horizon are:
  • 40. Example
    • The safety stock levels, minimum lot size, and beginning inventory levels for the products are:
    • Prepare the next 8-week MPS. Assume ample production capacity exists
  • 41.  
  • 42. Example (continued)
    • Assume that the final assembly line has a weekly capacity of 12000 hours available. Each product A requires 0.88 hours of final assembly capacity, and each product B and C require 0.66 and 1.08 hours respectively.
      • Compute the actual final assembly hours required to produce the MPS for three products ( referred to as the load) .
      • Compare the load to the final assembly capacity available in each week.
  • 43. Example (continued)
    • Sufficient final assembly capacity exists to produce the MPS
    • However, the MPS underloads final assembly in weeks 4, 6, 7 and 8
    • What changes to the MPS would you recommend?
  • 44. Demand Management
    • Review customer orders and promise shipment of orders 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
  • 45. Types of Production-Planning and Control Systems
  • 46. Types of Production-Planning and Control Systems
    • Pond-Draining Systems
    • Push Systems
    • Pull Systems
    • Focusing on Bottlenecks
  • 47. Pond-Draining Systems
    • Emphasis on holding inventories (reservoirs) of materials 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
  • 48. Push Systems
    • Use information about customers, suppliers, and production 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 stage of production
    • Can result in great reductions of raw-materials inventories and in greater worker and process utilization than pond-draining systems
  • 49. Pull Systems
    • Look only at the next stage of production and determine 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
  • 50. 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)
  • 51. Wrap-Up
    • Push systems dominate and can be applied to almost any type of production
    • Pull systems are growing in use. Most often applied in repetitive manufacturing
    • Few companies focusing on bottlenecks to plan and control production.