3Overview Production-Planning Hierarchy Aggregate Planning Master Production SchedulingTypes of Production-Planning and Control SystemsWrap-Up: What World-Class Companies Do
4Production Planning Hierarchy Long-Range Capacity PlanningAggregate PlanningMaster Production SchedulingProduction Planning and Control SystemsPond DrainingSystemsPushSystemsPullSystemsFocusing onBottlenecks
5Production Planning Horizons Long-Range(years)Long-Range Capacity PlanningAggregate PlanningMedium-Range(6-18 months)Short-Range(weeks)Master Production SchedulingProduction Planning and Control SystemsVery-Short-Range(hours - days)Pond DrainingSystemsPushSystemsPullSystemsFocusing onBottlenecks
6Production Planning: Units of Measure EntireProduct LineLong-Range Capacity PlanningAggregate PlanningProductFamilySpecificProduct ModelMaster Production SchedulingProduction Planning and Control SystemsLabor, Materials,MachinesPond DrainingSystemsPushSystemsPullSystemsFocusing onBottlenecks
8Why Aggregate Planning Is Necessary Fully load facilities and minimize overloading and underloadingMake sure enough capacity available to satisfy expected demandPlan for the orderly and systematic change of production capacity to meet the peaks and valleys of expected customer demandGet the most output for the amount of resources available
9InputsA forecast of aggregate demand covering the selected planning 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 costsThe current status of the system in terms of workforce level, inventory level and production rate
10OutputsA production plan: aggregate decisions for each period in the planning horizon aboutworkforce levelinventory levelproduction rateProjected costs if the production plan was implemented
11Medium-Term Capacity Adjustments Workforce levelHire or layoff full-time workersHire or layoff part-time workersHire or layoff contract workersUtilization of the work forceOvertimeIdle time (undertime)Reduce hours worked. . . more
14Pure Strategies for the Informal Approach Matching DemandLevel CapacityBuffering with inventoryBuffering with backlogBuffering with overtime or subcontracting
15Matching Demand Strategy Capacity (Production) in each time period is varied to exactly match the forecasted aggregate demand in that time periodCapacity is varied by changing the workforce levelFinished-goods inventories are minimalLabor and materials costs tend to be high due to the frequent changes
16Developing and Evaluating the Matching Production Plan Production rate is dictated by the forecasted aggregate demandConvert the forecasted aggregate demand into the required workforce level using production time informationThe primary costs of this strategy are the costs of changing workforce levels from period to period, i.e., hirings and layoffs
17Level Capacity Strategy Capacity (production rate) is held level (constant) over the planning horizonThe difference between the constant production rate and the demand rate is made up (buffered) by inventory, backlog, overtime, part-time labor and/or subcontracting
18Developing and Evaluating the Level Production Plan Assume that the amount produced each period is constant, no hirings or layoffsThe gap between the amount planned to be produced and the forecasted demand is filled with either inventory or backorders, i.e., no overtime, no idle time, no subcontracting. . . more
19Developing and Evaluating the Level Production Plan The primary costs of this strategy are inventory carrying and backlogging costsPeriod-ending inventories or backlogs are determined using the inventory balance equation:EIt = EIt-1 + (Pt - Dt )
20Aggregate Plans for Services For standardized services, aggregate planning may be simpler than in systems that produce productsFor customized services,there may be difficulty in specifying the nature and extent of services to be performed for each customercustomer may be an integral part of the production systemAbsence of finished-goods inventories as a buffer between system capacity and customer demand
21Preemptive Tactics There may be ways to manage the extremes of demand: Discount prices during the valleys.... have a salePeak-load pricing during the highs .... electric utilities, Nucor
23Objectives of MPSDetermine 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.
24Time Fences The rules for scheduling 6+ weeks 4-6 weeks 2-4 weeks 1-2 +/- 20%Change1-2weeks+/- 10%Change+/- 5%ChangeNo ChangeFrozenFirmFullOpen
25Time Fences The rules for scheduling: Do not change orders in the frozen zoneDo not exceed the agreed on percentage changes when modifying orders in the other zonesTry to level load as much as possibleDo not exceed the capacity of the system when promising orders.If an order must be pulled into level load, pull it into the earliest possible week without missing the promise.
26Developing 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
27Developing an MPS Schedulers must: estimate the total demand for products from all sourcesassign orders to production slotsmake delivery promises to customers, andmake the detailed calculations for the MPS
28Example: Master Production Scheduling Arizona Instruments produces bar code scanners for consumers and other manufacturers on a produce-to-stock basis. The production planner is developing an MPS for scanners for the next 6 weeks.The minimum lot size is 1,500 scanners, and the safety stock level is 400 scanners. There are currently 1,120 scanners in inventory. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.
29Example: Master Production Scheduling Demand EstimatesCUSTOMERSBRANCH WAREHOUSESMARKET RESEARCHPRODUCTION RESEARCH50020010150300100040023470065WEEK
31Example: Master Production Scheduling MPS for Bar Code Scanners123465WEEKSCANNER PRODUCTION1500
32Rough-Cut Capacity Planning As orders are slotted in the MPS, the effects on the production work centers are checkedRough cut capacity planning identifies underloading or overloading of capacity
33Example: Rough-Cut Capacity Planning Texprint Company makes a line of computer printers on a produce-to-stock basis for other computer manufacturers. Each printer requires an average of 24 labor-hours. The plant uses a backlog of orders to allow a level-capacity aggregate plan. This plan provides a weekly capacity of 5,000 labor-hours.Texprint’s rough-draft of an MPS for its printers is shown on the next slide. Does enough capacity exist to execute the MPS? If not, what changes do you recommend?
34Example: Rough-Cut Capacity Planning Rough-Cut Capacity AnalysisWEEK12345TOTALPRODUCTION1002002002502801030LOAD2400480048006000672024720CAPACITY5000500050005000500025000UNDER or OVER LOAD260020020010001720280
35Example: Rough-Cut Capacity Planning Rough-Cut Capacity AnalysisThe plant is underloaded in the first 3 weeks (primarily week 1) and it is overloaded in the last 2 weeks of the schedule.Some of the production scheduled for week 4 and 5 should be moved to week 1.
36Demand ManagementReview customer orders and promise shipment of orders as close to request date as possibleUpdate MPS at least weekly.... work with Marketing to understand shifts in demand patternsProduce to order..... focus on incoming customer ordersProduce to stock focus on maintaining finished goods levelsPlanning horizon must be as long as the longest lead time item
37Types of Production-Planning and Control Systems
38Types of Production-Planning and Control Systems Pond-Draining SystemsPush SystemsPull SystemsFocusing on Bottlenecks
39Pond-Draining Systems Emphasis on holding inventories (reservoirs) of materials to support productionLittle information passes through the systemAs the level of inventory is drawn down, orders are placed with the supplying operation to replenish inventoryMay lead to excessive inventories and is rather inflexible in its ability to respond to customer needs
40Push SystemsUse information about customers, suppliers, and production to manage material flowsFlows 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 productionCan result in great reductions of raw-materials inventories and in greater worker and process utilization than pond-draining systems
41Pull SystemsLook only at the next stage of production and determine what is needed there, and produce only thatRaw materials and parts are pulled from the back of the system toward the front where they become finished goodsRaw-material and in-process inventories approach zeroSuccessful implementation requires much preparation
42Focusing on Bottlenecks Bottleneck OperationsImpede production because they have less capacity than upstream or downstream stagesWork arrives faster than it can be completedBinding capacity constraints that control the capacity of the systemOptimized Production Technology (OPT)Synchronous Manufacturing
43Synchronous Manufacturing Operations performance measured bythroughput (the rate cash is generated by sales)inventory (money invested in inventory), andoperating expenses (money spent in converting inventory into throughput). . . more
44Synchronous Manufacturing 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), andrope (information sent upstream of the bottleneck to prevent inventory buildup and to synchronize activities)
45Wrap-Up: World-Class Practice Push systems dominate and can be applied to almost any type of productionPull systems are growing in use. Most often applied in repetitive manufacturingFew companies focusing on bottlenecks to plan and control production.