Planning. Planning Horizon. Stages of Planning. Dr. Richard Jerz

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1 Planning Dr. Richard Jerz 1 Planning Horizon Aggregate planning: Intermediate-range capacity planning, usually covering 2 to 12 months. Long range Short range Intermediate range Now 2 months 1 Year 2 Stages of Planning 3 1

2 Overview of Planning Levels Long-range plans Products and markets Long term capacity Location / layout (capital investment) Intermediate plans (General levels) Employment levels Raw material Operating hours Process output Short-range plans (Detailed plans) Number of workers and daily production Machine loading Job assignments 4 Planning Sequence Corporate strategies and policies Economic, competitive, and political conditions Aggregate demand forecasts Business Plan Establishes production and capacity strategies Production plan Establishes production capacity Master schedule Establishes schedules for specific products 5 Aggregate Planning Inputs Resources Workforce Facilities Demand forecast Policy statements Subcontracting Overtime Inventory levels Back orders Costs Inventory carrying Back orders Hiring/firing Overtime Inventory changes subcontracting 6 2

3 Planning Techniques Technique Solution Characteristics Graphical/ charting Linear programming Linear decision rule Simulation Trial and error Optimizing Optimizing Trial and error Intuitively appealing, easy to understand; solution not necessarily optimal. Computerized; linear assumptions not always valid. Complex, requires considerable effort to obtain pertinent cost information and to construct model; cost assumptions not always valid. Computerized models can be examined under a variety of conditions. 7 Tableau Method Aggregate Planning Clear Number of periods: 6 1 Period Total Forecast ,800 Output Regular ,800 Part Time 0 Overtime 0 Subcontract 0 Output - Forecast Inventory Beginning Ending Average Backlog Costs: ,600 Part Hire/Layoff Back Total , , ,000 1,800 1,600 1,400 1,200 1, Cum Forecast Cum Production Aggregate Planning - Costs 1,400 1,200 1, Cumulative Forecast ,100 1,600 1,800 Cumulative Production ,200 1,500 1,800 Ending Inventory Backlog Re gular Part Time Overtime Inventory Hire/Layoff Inventory Back orders 8 Excel Demand Resources (facilities and equipment) People Leveling When is product demand level never. This becomes the challenge for OM. Our own resources, the effects on inventory 9 3

4 Strategies JIT Produce ahead with plan (MRP) Manage bottlenecks (Theory of Constraints) Lean 10 JIT Fundamental Concepts Theme: minimize inventory Wait for demand before building (pull versus push) 11 Elements of JIT Smooth flow of work (the ultimate goal) Elimination of waste Continuous improvement Eliminating anything that does not add value Simple systems that are easy to manage Small lots, reduced setup Cell layouts Use of product layouts to minimize moving materials and parts Quality at the source Preventative maintenance Set-up time reduction Cross-trained employees A pull system (Kanban) 12 4

5 Theory of Constraints Eli Goldratt Theme: bottleneck management 13 Steps in TOC Identify system constraints Determine how to exploit system s constraints Elevate constraints next higher Do not let inertia become new constraint 14 MRP Material requirements planning (MRP): Computer-based information system for ordering and scheduling of dependent demand inventories 15 5

6 MRP Overview MRP Inputs MRP Processing MRP Outputs Master schedule Bill of materials Inventory records MRP computer programs Primary reports Secondary reports Changes Order releases Planned-order schedules Exception reports Planning reports Performancecontrol reports Inventory transaction 16 Requirements of MRP Computer and necessary software Accurate and up-to-date Master schedules Bills of materials Inventory records 17 Benefits of MRP Low levels of in-process inventories Ability to track material requirements Ability to evaluate capacity requirements Means of allocating production time 18 6

7 MRP II Expanded MRP with and emphasis placed on integration Financial planning Marketing Engineering Purchasing Manufacturing 19 Enterprise Resource Planning (ERP) An expanded effort to integrate standardized record-keeping that will permit information sharing throughout the organization Big computers systems, such as SAP 20 Disaggregating Master schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon. Rough-cut capacity planning: Approximate balancing of capacity and demand to test the feasibility of a master schedule. 21 7

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