2. P RODUCTION PLANNING What do we need to produce? Process Machinery & Equipment Labor Skills Material 1

3. Q UESTIONS OF A PLANNING SYSTEM What are we going to make? What does it take to make? What do we have? What do we need? 2

4. Q UESTIONS OF A PLANNING SYSTEM Priority (Demand) Capacity (Resources) 3

5. Q UESTIONS OF A PLANNING SYSTEM Priority: What is needed?When?How much?(Market) Capacity: Capability to produce what is needed and when? 4

6. CAPACITY Capacity is the capability of manufacturing in a period of time. Capacity is up to resources of company as machinery, labor, financial resources and availability of materials form suppliers. 5

7. M AJOR LEVELS OF PLANNING Strategic Business Plan Sales and Operations Plan Master Schedule Material Requirements Plan(MRP) Purchasing and Production Activity Control 6

8. M AJOR LEVELS OF PLANNING At each level we need to decide, What to produce? How much? When? What is the available capacity? How can the differences between priorities and capacities best be resolved? 7

9. P LANNING HIERARCHY Strategic Business Plan Production Plan Master Production Schedule Material Requirements Plan Production Activity Control and Purchasing Master Plan Planning Implementation 8

10. P RODUCTION PLAN Quantities of each product group to be produced in each period Desired inventory levels Resources needed Equipment Labor Material Availability of needed sources 9

11. M ASTER PRODUCTION SCHEDULE Shows, for each period, the quantity of each end item to be made. Level of detail is higher than the production Plan End items versus groups of items Time periods usually shorter(weeks versus months) 10

12. D ETAILED PLANNING AND CONTROL Material Requirements Plan End item requirements broken down into specific components – what to make or buy, when? Production Activity Control Execution plan, detailing specific orders to produce items from MRP Purchasing Similar to Production Activity Control, only includes items to be purchased rather than produced. 11

13. C APACITY MANAGEMENT At each level of the planning and control system, reconcilation with resources must be made. Inadeqaute resources=missed production schedules Resources significantly exceed planned production=idle resources and extra cost. 12

14. S ALES AND OPERATIONS PLAN Strategic Business Plan Marketing PlanProduction Plan Detailed Sales Plan Master Production Schedule SALES AND OPERATIONS PLAN Annual Monthly Weekly or Daily 13

15. S ALES AND OPERATIONS PLANNING It can be used to update the strategic plan. It provides a tool to manage change. It enforces functional plans to be realistic and coordinated. It represents a plan to achieve company objectives It provides management visibility of production, inventory and backlogs. 14

16. D EVELOPING THE PRODUCTION PLAN Some key questions that must be answered to develop an effective planning strategy: How flexible are the resources not only in quantity but also timing? Are outside sources available?(Subcontracting) Can we utilize inventory to meet demand? 15

17. B ASIC PRODUCTION PLAN STRATEGIES Chase:Vary production rates to meet changes in demand Often used when inventory cannot be used or when resources are flexible and inexpensive to change Level:Establish average demand level and set production rate to that level Often used when resources difficult or very expensive to change Hybrid: A combination of two strategies. 16

18. D EMAND CURVE Demand Number of Units Time 17

19. C HASE PRODUCTION CURVE Demand Number of Units Time Chase Production 18

20. LEVEL PRODUCTION CURVE Demand Number of Units Time Level Production 19

21. LEVEL PRODUCTION CURVE Demand Number of Units Time Level Production CREATE Inventory USE Inventory 20

22. H YBRID CURVE Demand Number of Units Time Hybrid 21

23. A CASE STUDY Suppose the forecasted demand for a product family looks like the table below. Assume the product family is a Make-to- Stock family with a starting inventory of 100. Make the production plans according to plan methods. Period123456Total Forecast (Demand)150160180175155140960 22

24. A CASE STUDY Production Plan Using a Level Strategy Period123456Total Forecast (Demand)150160180175155140960 Planned Production 160 960 Planned Inventory110 907580100 23

25. A CASE STUDY Production Plan Using a Chase Strategy Period123456Total Forecast (Demand) 150160180175155140960 Planned Production 150160180175155140960 Planned Inventory 100 24

26. A CASE STUDY Production Plan using a Hybrid Strategy Period123456Total Forecast (Demand)150160180175155140960 Planned Production140 175 945 Planned Inventory907030 5085 25

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28. M ASTER SCHEDULE The formal link between production planning and actual production. The basis for calculation of resorces needed. The driving source behind the material requirements plan. The primary priority plan for manufacturing. 28

29. I NFORMATION Production Plan Data Forecasts Actual Customer Orders Inventory Levels Capacity Constraints. 29

30. O BJECTIVES FOR THE MPS Maintain good customer service Make effective use of resources Maintain efective levels of inventory. 30

31. STEPS FOR THE MPS Develop a preliminary MPS Check MPS against capacity and resources Reconcile any differences 31

32. M PS PLANNING HORIZON Minimum time horizon over which the master schedule must extend to ensure complete planning. Calculated as the longest end-to-end lead time of the product structure 32

33. M PS PLANNING HORIZON 33

34. 34

35. DEMAND Independent Demand: Not related to demand for other assemblies or products, instead from outside sources Dependent Demand: Generally related to production of an end product (as defined on the MPS) Can be calculated instead of forecasted 35

36. MRP Determine Requirements – Calculated to meet product requirements defined in the MPS. What to order How much to order When to order When to schedule delivery Keep priorities current 36

37. INPUTS AND OUTPUTS OF MRP 37

38. M AJOR I NPUTS TO MRP o Master Production Schedule quantities and times o Inventory records of all items to be planned. o Planning factors such as lead times, order quantities, and safety stock o Current status of each item 38

39. BOM 39

40. BOM The BOM shows all parts to make one of the item Each part has one, and only one, part number A part is defined by form, fit, and function – any change requires a new part number 40

41. BOM Defines the product Provides method for design change control Planning: What is needed and when? Order Entry,order configuration and pricing Production:Parts needed to assemble Costing: Material cost of goods sold 41

42. BOM 42

43. BOM 43

44. INDENTED BOM 44

45. K EY TERMS Lead Time: Span of time for a process Exploding: Process of multiplying requirements by usage to get BOM Requirements Offsetting: Placing requirements in the proper period based on lead-time 45

46. K EY TERMS Scheduled Receipts: Open orders released for processing(production or purchase) scheduled to be received at a defined time. Gross Requirements: Total of a component needed to meet requirements not taking any existing inventory into account Net Requirements : Actual amount of a component needed to meet requirement after existing requirements taken into account. 46

47. S AMPLE MRP 47

48. M RP EXPLOSION 48

49. P LANNER RESPONSIBILITIES OF MRP Launch Orders: Production or Purchasing Reschedule orders as required Reconcile errors and search for causes Solve critical material shortages Coordinate with the other functions to resolve problems 49