Chapter 6

Challenge

- Balancing capacity vs. output requirements. Operations managers are continuously involved in balancing capacity & output.

Master Production Schedule (MPS)

A detailed breakdown of the aggregate production plan, listing the exact end items to be produced by a specific period. More detailed than APP & easier to plan under stable demand. Breaks down months into weeks / days Planning horizon is shorter than APP, but longer than the lead time to produce the item so product is completed within the plan. For the service industry, the master production schedule may just be the appointment log or book, where capacity (e.g., skilled labor or professional service) is balanced with demand

Production (Materials) Planning

Aggregate Production Plan (APP) - The long-range plan that translates annual business & marketing plans & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility. Strategic decision Master Production Schedule (MPS) - The medium-range plan that provides a detailed breakdown of the aggregate production plan, listing the exact end items to be produced by a specific period. Tactical decision Material Requirements Plan (MRP) - The short-range plan from a computer-based materials management system that calculates the exact quantities, need dates, & planned order releases for subassemblies & materials required to manufacture a final product. Execution decision

Available-to-Promise (ATP) Quantity

Available-to-Promise (ATP) Quantity - The difference between confirmed customer orders & the quantity the firm planned to produce (amount available to other orders). Discrete available-to-promise Need to know: Beginning inventory Production schedule (firm and tentative) Confirmed Customer orders

Bill of Materials

Bill of Materials- document that shows an inclusive listing of all component parts & assemblies making up the final product. Dependent Demand - the internal demand for parts based on the demand of the final product in which the parts are used (e.g., subassemblies). Independent Demand - demand for final products affected by trends, seasonal patterns, & general market conditions. Multilevel Bill of Materials - shows the parent-component relationships & the specific units of components known as the planning factor. Can be presented as an indented bill of materials. Common Component - used in more then one subassembly

Three basic production strategies

Chase Strategy - Adjusts capacity to match demand. Firm hires & lays off workers to match demand. Finished goods inventory remains constant. Works well for make-to-order firms. Level Strategy - Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms. Mixed Production Strategy - Maintains stable core workforce while using other short-term means, such as overtime, subcontracting & part time helpers to manage short-term demand.

Material Planning Examples

Production Planning strategies Discrete Available to Promise (ATP) Bill of Materials (BOM) Materials Requirements Plan (MRP)

Capacity Planning

Resource Requirement Plan (RRP) - The long-range capacity plan that checks whether aggregate resources are capable of satisfying the aggregate production. STRATEGIC decision Rough-cut Capacity Plan (RCCP) - The medium-range capacity plan used to check the feasibility of the Master Production Schedule (MPS). Converts MPS from production needed to capacity required, then compares it to capacity available. TACTICAL decision Capacity Requirement Plan (CRP) - a short-range capacity plan that is used to check the feasibility of the material requirements plan. EXECUTION decision

Master Production Schedule MPS 2

The MPS - the production quantity to meet demand from all sources & is used for computing the requirements of all time-phased end items. System nervousness - is defines as a small change in the upper-level-production plan which causes major changes in the lower-level production plan. To address this most firms use a time fence system which separates the planning horizon into: Firmed Segment (demand time fence), from current period to several weeks into future. This is determined by component and resource lead times and can only be altered by senior management due to impact on profitability. Tentative segment (planning time fence), from end of firmed segment to several weeks into the future. This is determined by long lead time components, capacity and demand planning

Distribution Resource Planning

Ties physical distribution to manufacturing planning and control system by determining the time phased net requirements of the finished goods. Tied to the Independent demand of the finished good Establish requirements for the distribution network and balances warehouse capacity with production plans

Resource

a source of supply, support, or aid, especially one that can be readily drawn upon when needed.*

Enterprise Resource Planning

is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. All applications work from common database. All areas are updated simultaneously as data is updated eliminates duplicate data entry and inconsistent information across an organization Now a key enabler to efficient operations, access to critical information, speed and flexibility

Resource Planning

is the process of determining the required resources to effectively and efficiently produce the output required. The AGGREGATION of all resources committed to production (space, equipment, personnel) determines the capacity to meet demand. capacity=the maximum amount or number that can be received or contained

Production Capacity

the maximum amount an organization can complete in a given period of time based on the resources available.

Aggregate Production Plan (APP)

Long Range Plan that translates annual business, marketing & demand plans into an overall production plan. Planning horizon of APP is at least one year & is usually rolled forward by three months every quarter Sets the production output requirements, workforce needs and inventory plans Enables firm to see its capacity requirements Determines the production strategy the firm will use (discussed later)

Operational Planning Cycles

Long-range: Normally > 1 year (typically 3-5) STRATEGIC PLANS (investment in facilities & major equipment ) Multi-year business plans Intermediate - Quarterly (up to 18 months) BUSINESS PLANS (financial, operational, roadmap) Shows the quantity & timing of end items produced Impacted by lead times Short-range - (daily, weekly, monthly) detailed planning process for components & parts to support the planned production schedule execution

Material Resource Planning

MRP - A (typically) computer-based materials management system that calculates the exact quantities, need dates, & planned order releases for subassemblies & materials required to manufacture a final product. The MRP requires the following information: The independent demand information Parent-component relationships from the Bill of Materials Inventory status of final product & components. Lead time for each component (buy) Time required for each process step (make) Output from MRP system - Planned order releases (purchase and produce) The MRP system relies on information provided and ignores capacity & shop floor conditions. (Utopian plan