Chapter 4 Planning Resources
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1 Chapter 4 Planning Resources Dr. Vin Pheakdey Ph.D. in Economics, France 1 Contents 1. Types of Planning 2. Capacity Planning 3. Adjusting Capacity 4. Tactical Planning 5. Short-Term Schedules 2
2 Learning Objectives After learning this chapter, you should be able to: Discuss the role of planning in logistics Measure the capacity of a supply chain Use a standard approach to capacity planning Discuss some practical difficulties with capacity planning See how to design medium-term tactical plans Expand the tactical plans into short-term schedules 3 1. Types of Planning An Approach to Planning Logistics 4
3 1. Types of Planning Level of planning: Capacity plans, which make sure there is enough capacity to meet long-term demand. Aggregate plans, which give summaries of the work done in related activities, typically by month at each location. Master schedules, which show a detailed timetable for all activities, typically by week. Short-term schedules, which show detailed timetables for jobs and resources, typically by day Capacity Planning The capacity of a supply chain sets the maximum amount of product that can be delivered to final customers in a given time. Capacity is divided into: Designed capacity is the maximum possible throughput in ideal conditions. Effective capacity is the maximum realistic throughput in normal conditions. Actual throughput is normally lower than effective capacity. 6
4 Bottleneck Not all parts of a supply chain have the same capacity. The bottlenecks in a supply chain limit its overall capacity. 7 Example The main bottling plant at J&R Softdrinks has a capacity of 80,000 liters a day, and works a seven-day week. It fills standard bottles of 750 ml, and these are passed to a packing area which can form up to 20,000 cases a day with 12 bottles each. The packing area works a five-day week. The cases are taken to warehouses by a transport company whose 8 lorries can each carry 300 cases, and make up to 4 trips a day for 7 days a week. There are two main warehouses, each of which can handle up to 30,000 cases a week. Local deliveries are made from the warehouses by a fleet of small vans that can handle everything passed to them by the warehouse. What is the capacity of this part of the distribution system? How can J&R increase the capacity? 8
5 Matching Capacity and Demand The aim of capacity planning is to match the available capacity of facilities to the demands put on them. Any mismatch can be expensive. If capacity is less than demand, bottlenecks restrict the movement of materials, and customer service declines. If capacity is greater than demand, the organization can move all its materials but it has spare capacity and underused resources. 9 Matching Capacity and Demand An approach to capacity planning is to follow the steps below: 1. examine forecast demand and translate this into a capacity needed 2. find the capacity available in present facilities 3. identify mismatches between capacity needed and that available 4. suggest alternative plans for overcoming any mismatch 5. compare these plans and find the best implement the best and monitor performance.
6 Example Anne Jenkins has a contract to deliver 100 computer systems a week to schools in South Wales. The systems have customized software installed, which takes an hour to test before delivery. The testing is done by trained staff, who achieve an average efficiency of 75%. They work a single eight-hour shift five days a week, but could move to double shifts or have overtime at weekends. How many testers should Anne employ? Adjusting Capacity There is sometimes excess capacity and sometimes a shortage, compared to demand. Capacity planning is largely a strategic function. Organizations can increase the overall capacity of a supply chain by opening a warehouse, designing a new process, opening new offices, or moving to a new location. They can reduce excess capacity by closing warehouses, shutting down a plant, or transferring facilities to other products. These are strategic decisions with long-term 12 consequences.
7 3. Adjusting Capacity An organization can also adjust capacity by leasing extra space, working overtime, employing temporary staff, or sub-contracting parts of their work. These are clearly tactical and operational decisions. There are two ways of making these short-term adjustments to capacity: capacity management adjusts capacity to match demand demand management adjusts demand to match available capacity. 13 Capacity Management Ways of adjusting capacity include: changing the work pattern to match demand employing part-time staff to cover peak demands using outside contractors renting or leasing extra facilities adjusting the speed of working rescheduling maintenance periods making the customer do some work, such as packing their own bags in supermarkets. 14
8 Demand Management Ways to adjust demand include: vary the price limit the customers served, by demanding specific qualifications change the marketing effort offer incentives to change demand patterns, such as off-peak travel rates change related products to encourage substitution, such as holiday destinations vary the lead time use a reservation or appointment system use stocks to cushion demand Tactical Planning Tactical plans bridge the gap between longer term strategic plans and operational details. They show how the capacity will be used, and develop medium-term timetables for activities. Aggregate planning makes the tactical decisions that translate forecast demand and available capacity into schedules for families of activities. 16
9 4. Tactical Planning Overall approach of tactical planning Step 1 translate forecasts and other information into a demand for resources Step 2 find the resources currently available Step 3 identify mismatches between resources needed and available Step 4 suggest alternative plans for overcoming any mismatches Step 5 compare these plans and find the best Step 6 implement the best plan and monitor performance. 17 Example A&B Coaches of Blackpool plan their capacity in terms of coach-days. They classify their business as either full day, which are long distance journeys, or half day which are shorter runs. Forecasts show expected annual demands for the next two years to average 400,000 full-day passengers and 750,000 half-day passengers. A&B have 61 coaches, each with an effective capacity of 40 passengers a day for 300 days a year. Breakdowns and other unexpected problems reduce efficiency to 90%. They employ 86 drivers who work an average of 220 days a year, but illness and other absences reduce 18 their efficiency to 85%.
10 Example If there is a shortage of coaches the company can buy extra ones for 110,000 or hire them for 100 a day. If there is a shortage of drivers they can recruit extra ones at a cost of 20,000 a year, or hire them from an agency for 110 a day. How can the company approach its tactical planning? Short-Term Schedules Short-term schedules give detailed timetables for jobs, people, materials, equipment and all other resources. Approaches to scheduling: Backward scheduling, where schedulers know when a job has to be finished. Then they can work back through all the activities to find the date when the job must be started. Forward scheduling, where schedulers know when a job can start. Then they can work forward through all activities to find the date when the job will be 20 finished.
11 5. Short-Term Schedules Short-term schedules give detailed timetables for jobs, people, materials, equipment and all other resources. Four scheduling rules: 1. First come, first served 2. Most urgent job first 3. Shortest job first 4. Earliest due date first 21 End 22
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