Chapter 7 Operations Planning and Control

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Chapter 7Operations Planning and Control
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Objective

• To have an overview of the production planning
  and control process in industry.

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Representation of a typical manufacturing plant
Plant
Finished Products
Raw material
Storage
Storage
Assembly
Fabrication
Storage
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• Demand forecasting
• Operations Planning
• Inventory Planning
• Inventory Control
• Operations scheduling

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Demand forecasting

• Inputs
• Product markets Historical demand
• Marketing programs variation in demand because
  of promotions
• External economics The health of the economy
• Actual demand coming from sales
• Outputs
• A statement of the expected demand quantities for
  all products over some planning period
• Recognition of declining demand for a product.

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Operations Planning

• Inputs
• Demand forecasting
• Engineering new or modified product designs
• Financial control budget limitations and
  monetary constraints
• External perturbations emergency orders,
  canceled orders, labor strikes, unavailability of
  resources, etc.
• Outputs
• Long range plans plant expansions and new
  facility acquisition
• Short term plans allocation of resources to
  production requirements

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Inventory Planning and Control

• Inventory planning determines the material
  requirements to satisfy operations planning needs
• Inputs
• The time-phased Operations plan
• Output
• Time-phased requirements for components, parts,
  raw material, assemblies, and supplies forward to
  inventory control

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Inventory control

• Determines the proper inventory levels, reorder
  points, and safety stocks.
• Inputs
• Time-phased requirements
• Sales orders
• Output
• Order quantities
• Order points
• Safety stock of raw material, assemblies,
  fabricated parts and raw finished products

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Operations scheduling

• Inputs
• Request for fabrication and assembly
• Corrective actions updated priorities and
  adjustments of orders
• Outputs
• Operations sequence and start and stop times

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Techniques for Demand Forecasting

• Moving Average The average of the actual demand
  values for the last n time periods is used to
  forecast the demand for the next period.
• n is determined by experimentation.

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Example of Three- and Five-Period Moving Average
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• Waited moving average gives more weight for more
  recent data.
• The choice of n and the weighting coefficients
  are determined by experimentation.

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(Let us continue with the same problem as we
had in Example 1.) Market Mixer, Inc. sells can
openers. Monthly sales for an eight-month period
were as follows Month Sales Month Sales
1 450 5 460 2 425 6
455 3 445 7 430 4 435
8 420 Forecast next months sales using a
3-month weighted moving average, where the weight
for the most recent data value is 0.60 the next
most recent, 0.30 and the earliest,
0.10. Solution Period Sales Weighted Moving
Average Forecast 1 450 2 425 3
445 4 435 (450.10) (425.30)
(445.60) 440 5 460 (425.10)
(445.30) (435.60) 437 6 455
(445.10) (435.30) (460.60) 451 7
430 (435.10) (460.30) (445.60)
455 8 420 (460.10) (455.30)
(430.60) 441 9 (455.10)
(430.30) (420.60)
Weighted Moving Average Illustration
Comments 1. Any forecasts beyond Period 9 will
have the same value as the Period 9 forecast,
i.e., 427. 3. WMA gives greater weight to more
recent values in the moving average and is more
responsive to recent changes in the data.
427
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