Supply Chain Management
Muhammad Zahid Malik
[Link]@[Link]
AGGREGATE PLANNING
AND
PRODUCTION PLANNING
Aggregate planning
• Definition
Choosing production rates, work force levels, and inventory
levels
• Horizon
6-18 months into future
• Prerequisites
• Forecasting
• Company policies on
Max./min. inventories
Hiring/firing
Overtime
Policy considerations in aggregate planning
• Flexibility
Are work force and inventories maintained at a level
sufficient to meet unexpected demand?
• Work force stability
Improves quality, productivity, union relations
• Production rate stability
Makes materials planning easier, reduces uncertainty in
physical distribution
Policy considerations in aggregate
planning (cont.)
• Production capacity
Will overtime reduce quality? When will physical capacity
(space, machinery, equipment) become inadequate?
• Customer service
Have lead time and stock availability goals been met?
Aggregate planning in services
• Definition
Balancing service capacity with demand
• Tactics
• Change operating hours
• Change staffing
Nbr. of workers
Full vs. part-time
• Modify type of service
• Influence demand
Advertising
Pricing
• Build more service outlets
Aggregate planning in services (cont.)
• Evaluation
• Waiting time
• Throughput
• Service time
• Nbr. of lost customers
WHAT IS PRODUCTION PLANNING?
• Production planning is a process used by manufacturing companies
to optimize the efficiency of their processes.
Production Planning
Purpose
• Effectivelyutilize limited resources in the
production of goods so as to satisfy customer
demands and create a profit for investors.
• Resourcesinclude the production facilities, labor
and materials.
• Constraintsinclude the availability of resources,
delivery times for the products, and management
policies.
Production Planning Main Functions
• Forecasting
• Aggregate planning
• Materials Requirement Planning
• Inventory Management
• Sequencing and Scheduling
Forecasting
• Objective: predict demand for planning purposes.
• Laws of Forecasting:
• 1. Forecasts are always wrong!
• 2. Forecasts always change!
• 3. The further into the future, the less reliable the forecast will be!
Aggregate Planning
• Objective: generate a long-term production plan that establishes a rough
product mix, anticipates bottlenecks, and is consistent with capacity and
workforce plans.
Material Requirement Planning
• Objective: Determine all purchase and production components
needed to satisfy the aggregate/disaggregate plan.
• Issues:
• Bill of Materials: Determines components, quantities and
lead times.
• Inventory Management: Must be coordinated with
inventory.
Production Planning 14
Sequencing and Scheduling
• Objective: develop a plan to guide the release of work into
the system and coordination with needed resources (e.g.,
machines, staffing, materials).
• Methods:
• Sequencing:
• Gives order of releases but not times.
• Scheduling:
• Gives detailed release times.
Production Planning 15
CAPACITY PLANNING
• Capacity planning or capacity requirements planning is the
function of establishing, measuring and adjusting limits or levels of
capacity.
Production Planning 16
The Capacity Planning Decision Hierarchy
Production Planning 17
WHAT IS PRODUCTION PLAN?
• A production plan is the portion of your intermediate-range
business plan that your manufacturing operations department is
responsible for developing.
Production Planning 18
Why is it important to have a carefully
developed production plan?
• Firms need to have a production planning strategy to
ensure that there is sufficient capacity to meet the
demand forecast and to determine the best plan to
meet this demand.
Production Planning 19
A carefully developed production plan will allow your
company to meet the following objectives :
• Minimize costs/maximize profits
• Maximize customer service
• Minimize inventory investment
Production Planning 20
A carefully developed production plan will allow your
company to meet the following objectives :
• Minimize changes in production rates
• Minimize changes in work-force levels
• Maximize the utilization of plant and equipment
Production Planning 21
Production – Inventory System
Response of inventories
10,000 10
Retail inventory (units)
-4%
+45% Factory production output (units/week)
7500 7.5
Distributor inventory (units)
+10%
+32% +12%
Retail sales RRR
5000 5
-10% (units/week)
-15% -3%
Factory warehouse inventory
(units)
2500 2.5
0 0
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