Aggregate Production Planning

Master Production Scheduling (MPS)

-1st level is disaggregation -break down into more real end items (could be products or families) -horizon and buckets are no longer than APP (often shorter) Ex: 1 year APP with 12 month buckets would have a MPS of 3 to 6 months in length with time buckets of 1 week. -rolling horizon, but with greater frequency of revision and specificity, MPS is formulated and evaluated at a lower organizational level than the APP.

Shop Floor Scheduling (SFS)

-Detailed, actual production schedule -no fictitious or aggregated products used

Material Requirement Planning (MRP)

-Extreme detail, down to each nut and bolt -no fictitious or aggregated products used

Three Pure Aggregate Plans

1) Chase 2) Level 3) Stable Workforce Companies usually implement plans that fall in the middle though often are characterized as leaning towards one extreme than the other

Aggregation steps

1) aggregate-convert the forecasts for units of product to labor hours (example) 2) solve conditions with ei=bi+production-demand

Aggregate Production Planning

A managerial statement of 1) time phased production rates 2) workforce levels 3) inventory investment which takes into account customer requirements and capacity limitations.

Nature of APP

Aggregate Time horizon Time buckets Rolling horizon Nature of business determines

Rolling horizon

Always moving forward; when one month is done, we add another one to the plan. Ex: in a one year plan, once the first month is over, a meeting is held to evaluate and possibly revise the 11 remaining months and a 12th month is added on.

Negative ending inventories

Back orders

Level

Constant workforce/production level with fluctuating inventory levels Allow changes in inventory to buffer you from the changes in demand level

Time buckets

Division of labor Ex: days, hours, years, decades, semesters, quarters

Why we use aggregate production planning

Helps us attain our goals; helps attain in the best way possible the objective or objectives you set.

Lower levels of planning

Life after aggregate planning Next logical steps in tactical activities More specific, time frames get shorter 1) Master Production Scheduling (MPS) 2) Material Requirement Planning (MRP) 3) Shop Floor Scheduling (SFS)

Time horizon

Medium term Tactical Varies depending on nature of business Ex: industry with rapid new product development and high variability will typically have a shorter horizon with short time buckets. Industries with long lead times and stable products will often have longer planning horizons and time buckets.

Aggregate

Nature of APP depends on nature of problem -classes of products -labor or other inputs (skill) -geographic location of production -often fictitious or abstract Commonly done by 1) nature of product (paint company refers to gallons of paint) 2) amount of raw materials to be used (company that produces metal heating and cooling ducts may plan by square feet of material) 3) other type or resource/input (job shop with wide variety of products may refer to the number of labor hours or machine hours to be used, or dollars of output to be produced) Plan with largest time horizon

Chase

Production and manpower fluctuate to perfectly match demand and maintain no inventory

Solve back order problem

Recognize that in one of the six months inventory will be zero. If inventory never falls to zero, we are keeping more than needed. For each month, determine the production rate so that inventory is equal to zero. Don't forget to subtract beginning inventory.

Stable Workforce

Size of workforce is constant, but number of hours worked fluctuates allowing variable working hours to buffer against variation

Ways to aggregate

There are multiple ways to aggregate; depends on who needs it, for example, HR needs a sales forecast while marketing may want one for products or sales.

APP Graph

Two lines First line is cumulative demand. Second line is cumulative units available to satisfy demand. Intercept is demand at beginning, usually zero. Slope is monthly production rate. Intercept is beginning inventory. Difference between two lines at any point is the inventory level. In a chase plan, amount produced in any given period is equal to the minimum amount required to satisfy demand for that period (ei is zero). Production plan is no longer constant and slope changes.

Nature of business determines

Typically one year with one month buckets