Production Planning (Aggregate Planning)

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Production Planning(Aggregate Planning)
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SOM 464 Manufacturing Resource
Planning

• Study of the efficient allocation of resources
  (material, equipment, people, money) in
  manufacturing and some service operations
• How many items should be ordered or made at a
  given time?
• Who is assigned which job?
• How do jobs flow through the firm?
• How is inventory maintained?

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Manufacturing Resource Planning Flow of Materials

• Raw Materials Flow into Manufacturing/Service
  Company.
• Finished Goods/Services Distributed to End
  Customers.
• Supply Chain Management (SCM) is the Study of
  this Linked Chain of Activities.
• Manufacturing Resource Planning (or Materials
  Management) is the Study of the Planning and
  Materials Flow.

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Manufacturing Resource Planning Flow of Materials

• Supply Chain Diagram
• Supplier ? Manufacturer ? Distribution ?
  Customer
  System

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Manufacturing Resource Planning Criteria

• High Customer Service (Probability of Meeting
  Demand)
• Minimize Production Costs
• Minimize Inventory Holding Costs and Other
  Inventory Investment Costs Avoid Shortages
• Minimize Distribution Costs
• These Objectives Often Conflict with Objectives
  of Marketing and Finance.

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Production Planning

• There are Five Major Levels in Planning and
  Control
• Strategic Business Plan
• Production Plan (Example is Tuffy Case)
• Master Production Schedule (MPS)
• Material Requirements Plan (MRP) Can Also
  Include Manufacturing Resource Planning (MRP II)
  and Enterprise Resource Planning (ERP)
• Purchasing and Production Activity Scheduling and
  Control (Also Known as Shop Floor Control)

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Production Planning

• Also Known as Aggregate Planning
• Problem in Tuffy Case Set Production Every
  Period, Allocate Resources, Meet Demand
• Set Pt Production for t
• Wt Workforce for t

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Production Planning

• Inputs Resources (Rough-Cut Capacity Planning),
  Forecast, Inventory, Policies, Costs
• Demand Options Pricing, Promotion, Markets
  for New Demand, Allowing Back Orders (Shortages)
• Supply (Capacity) Options Hiring/Layoff,
  Overtime, Temporary Workers, Inventories,
  Subcontracting, Expediting

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Relevant Costs

• 1. Change in Production (E.g. Hire/Layoff) Costs
• 2. Inventory Holding Costs
• 3. Shortage Costs
• 4. Payroll Costs
• 5. Subcontracting Costs
• 6. Expediting Costs

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Scheduling Strategies

• Chase (Demand Matching)
• Production Leveling
• Level Workforce
• Subcontracting (Outsourcing)
• Hybrid or Mixed (Probably Used in Game)
• Given Beginning Inv. Demand Pt End Inv.

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Scheduling Techniques (1)
Heuristics

• Informal Rules that Appear to Work.
• Rules are Developed (Often by Trial and Error)
  and Tested in Real World or Computer Simulation.
• Advantage Rules Can Be Realistic.
  Disadvantage Not Optimum.

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Scheduling Techniques (2) Linear
Decision Rule

• Economic Order Quantity (Remember EOQ from SOM
  306?) Type of Approach
• TRC Payroll Holding Shortage Change in
  Pt f(Pt, Wt)
• Calculus Used to Find Best Pt and Wt
• E.g. Pt .2Ft .1Ft1 .05Ft2 -.1It .1Wt-1
• Advantage Optimum Given that Equations Fit.
  Disadvantage Cost

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Scheduling Techniques (3) Search
Rules

• Used with Simulation
• Educated, Computer-Driven, Trial Error
• Advantage Realistic Costs, Not Optimum but
  Close. Disadvantage Uses Lots of Computer Time.

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Master Production Schedule (MPS)

• Similar to Production Plan
• Time Periods or Buckets are Smaller
• Multiple Products are Shown Disaggregating
  Done by Heuristics or Linear Programming

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Tuffy Teddy Bear Case

• Case Introduced You to Course Material. Case
  Involved Production Planning, Inventory Control,
  and Forecasting.
• Most Successful Strategies are Hybrid or Mixed
  Reduce Production ASAP to Lower Inventories and
  Increase Production Just After Vacation.

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2008 Best Answer 41,960
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2009 Best Answer 45,731
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