Name : key

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EXAMINATION -1
PRODUCTION PLANNING AND CONTROL
1 OCTOBER 2013 / TIME DURATION 120 MINUTES / CLOOSED BOOK
CASE PROBLEM 1:
Krakatau Steel (KS) is one of company producing wide range of steel products. The production
manager of KS is considering latest data of production and sales to decide production planning for
2014. Here are available data :
Inventory Policy
At the end of Des 2013 = 500 tons
At the end of Des 2014 = 650 tons

Total Steel Demand 2012-203 (in tons)

2012
700
900
780
600

2013
740
980
740
700

Quarter-1
Production facility
Quarter-2
Production lines = 6 line-group
Quarter-3
Production rate = 2,5 ton/line group
Quarter-4
Cost information
Regular operation cost = 2200 US$/line-group/day
Overtime operating cost = 4000 US$/line-group/day
Holding cost = 700 US$/ton/year
Setup cost for operating line group = 8000 US$/line group
Shutdown cost for stopping line group = 6000 US$/line group

Question 1&2:
1. Determine steel demand for 2014. Give your reason for choosing a forecasting method and
evaluate the error of your forecast demand.
2. Based on forecast demand resulted from question no.1,
a. Build aggregate production planning for 2014.
b. What production strategy you use? Explain your reason by using data.
c. Calculate the total cost of production planning for 2014
Answers:
1. Demand data can be made into graphic as follows
1200
1000
800
600

980

900
700

780

740
600

740

700

400
200
0

Based on the graphic, we conclude that demand pattern is seasonal series. Therefore we use winters
method.
Here is calculation for finding forecast demand for 2014 (See text book page 86)

Name : key

NIM : 13400xxx

a. Calculate the sample mean for two separate seasons (

V 1=

1
N

V 2=

1
N

j=2 N +1

Dj =

j=N +1

Dj =

V 1 and V 2 ) of data

1
[ D + D + D5 + D4 ]=(700+ 900+780+600)/4=745
N 7 6

1
[ D + D + D1 + D0 ]=(740+980+740+700)/ 4=790
N 3 2

V
( 2V 1 )/ N=(790745)/ 4=11,25
G 0 =

b. Define

c. Set

[ ]
[ ]
N

Sign : 89dakc73jca6

S 0=V 2 +G0 [ (N 1)/2 ] =790+ ( 11,25 ) ( 1,5 )=806,875

d. Calculate seasonal factor

Dt

ct =
V i
Where

N +1
f G0
2

i=1 for first season and i=2 for second season,

j=1 for t=7 and 3 ,

j=2 for t=6 and 2 ,

j=3 for

t=5 and 1 ,

j=4 for t=4 and 0

c7=

700
=0,9614
4+1
745
1 (11,25)
2

c6=1,2172

c5=1,0391

c4 =0,7875

c3=0,9572

c2=1,2494

c1=0,9301

Average the seasonal factors

c3=

0,9614+0,9572
=0,9593
2

c2=

1,2172+1,2494
=1,2333
2

c1=

1,0391+ 0,9301
=0,9846
2

c1=

0,7875+0,8675
=0,8275
2

c 0=0,8675

Name : key

NIM : 13400xxx

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Normalize the seasonal factors:

[ ]

c j=

cj

N +1

. N ; j =3,2,1,0

cj

i=0

c3=

0,9593
x 4=0,9581
0,9593+1,2333+0,9846+ 0,8275

c2=

1,2333
x 4=1,2319
0,9593+1,2333+0,9846+ 0,8275

c1=

0,9846
x 4=0,9834
0,9593+1,2333+0,9846+ 0,8275

c0=

0,8275
x 4=0,8266
0,9593+1,2333+0,9846+ 0,8275

]
]

e. Forecast Demand for 2014 at t=0 / end of 2014.

S
( t+ Gt )c t + N
F 9t ,t + =

0+G
(
0 ) c3 =( 806,875+11,25 )( 0,9581 ) =774,05 775
tons
F 0,1=
S

0+2
G
(
0 )c 2= [ 806,875+(2)(11,25) ] ( 1,2319 ) =996,42 997
tons
F 0,2=
S
( 0+3 G0 ) c1= [ 806,875+(3)(11,25) ] ( 0,9834 )=796,47 797
tons
F 0,3 =
S
( 0+ 4 G0 )c 0= [ 806,875+( 4)(11,25) ] ( 0,8266 )=670,24 671
tons
F0,4 =
f. Error evaluation of Forecast demand
There are many measurement of forecast error. We use mean square error/MSE

MSE=

1
N

[ Dt Ft ]

t=7

t
Quarter
-7 2012-Q1 (D-7)

Dt

Error^
Ct
So
Go
Ft
Error
2
700
0,9581
806,87 11,25
698
2
6

Name : key

NIM : 13400xxx

-6 2012-Q2 (D-6)

900

1,2319

-5 2012-Q3 (D-5)

780

0,9834

-4 2012-Q4 (D-4)

600

0,8266

-3 2013-Q1 (D-3)

740

0,9581

-2 2013-Q2 (D-2)

980

1,2319

-1 2013-Q3 (D-1)

740

0,9834

0 2013-Q4 (D0)

700

0,8266

5
806,87
5
806,87
5
806,87
5
806,87
5
806,87
5
806,87
5
806,87
5

Sign : 89dakc73jca6

11,25

911

-11

117

11,25

738

42

1747

11,25

630

-30

884

11,25

741

-1

11,25

966

14

189

11,25

782

-42

1802

11,25

667

33

1094
5840
730

MSE
The winters method results MSE = 730.

2. a. Calculation of aggregate planning needs number of work days per quarter. Here, we assume
number of days as follows: Q1-2014 : 60 days, Q2-2014 : 90 days, Q3-2014 : 90 days, and Q42014 : 60 days. Total number of work days for 2014 are 320 days.
Net demands for 2014 are
= (sum of forecast demand + inventory at end of 2014 inventory at end 2013
= 775 + 997 + 797 + 671 + 650 500 = 3540 tons
We can determine average amount of production / days as (3450 tons)/(320 days) = 11,06
tons/days
From data we know capacity of one production line is 2,5 ton/day. To achieve 11.06 tons/days we
need in roughly = (11.06 tons/days)/(2.5/ton/days/production line)= 4,45 production line
Chase strategy with minimum number of line production line is choosing to build aggregate
production planning:
t
Q-1
Q-2
Q-3
Q-4

#Line- #Reg.
Grp
Days
3
4
4
6

60
90
90
80
320

#Ot.
Forct.
Day
Demand
s
0
775
0
997
0
797
0
671
3390

Init
Inv
500
175
78
181

Produc
-tion

End
Inv

450
900
900
1200

175
78
181
710

# PL
Setup
3
1
0
2

# PL shutdown
0
0
0
0

2.b. Chase strategy choosing because cost of production both regular and over time over one quarter
is more expensive than setup or shut down of production line.
2.c. Cost of aggregate production planning is composed by cost of production (regular or over rimes),
inventory cost, and setup and shut down of production lines.

Name : key

T
Q-1
Q-2
Q-3
Q-4

NIM : 13400xxx
Reg. Cost
(US$)
396.000
792.000
792.000
1.056.000
3.036.000

OT.Cost
(US$)
-

Inv.Cost
(US$)
30.625
13.650
31.675
124.250
200.200

Sign : 89dakc73jca6

Setup Cost
(US$)
24.000
8.000
16.000
48.000

Shutdown Cost
(US$)
-

Total
(US$)
450.625
813.650
823.675
1.196.250
3.284.200

CASE PROBLEM 2:
Continuing with case problem 1, the production manager of KS is also considering a master
production schedule foe 2014. He has additional data as follows:
Line of
Product
Flat
CRC-1
CRC-2
CRC-3
Long
Bil-8
Bil-10
Bil-17

%
sales
58%
18%
25%
15%
42%
10%
10%
20%

Kij

Inv

Safety
Stock

Forecasted Demand 2014

Q-1
Q-2
Q-3
Q-4

1,4
1,5
1,2

71
66
83

80
120
80

92
120
90

120
156
117

97
126
95

83
108
81

1,1
1,2
1,1

63
50
54

40
40
60

65
60
130

85
78
170

69
63
138

59
54
118

Setup cost of line group for flat family product is 12000 US$/setup and for long family product is
8000 US$/setup. When calculate the upper limit of family production (Ui), the production manager
decide to cover two quarterly demand ahead (n=2).
Question 3 & 4.
Base on your aggregate planning resulted from
3. By percentage approach, determine master production schedule
4. Determine master production schedule by using Bitran & Hax approach. When Bitran & Hax
approach is choosing to make master production schedule?
Answer 3
Here is master production planning calculated by percentage approach. Production

Line of
Product
Flat
CRC-1
CRC-2
CRC-3
Long
Bil-8
Bil-10
Bil-17

Aggregate planning (tons) (P)

%
Safety
sales Inventory Stock
(%s) (tons)
(tons)
58%
18%
71
80
25%
66
120
15%
83
80
42%
10%
63
40
10%
50
40
20%
54
60

900
1200
900
Production (Tons)
Q-3
Q-4
Q-1
Q-2
(%s.P1) (%s.P2) (%s.P3) (%s.P4)
450

57
75
56

115
150
112

115
150
112

154
200
150

40
37
81

81
75
163

81
75
163

109
100
218

Answer 4
Bitran-Hax method is used when setup cost of production line for changing among family products
are relatively expensive.
Aggregate Plan at Q-1 = 450 tons

Name : key

NIM : 13400xxx

Sign : 89dakc73jca6

a. Identify which family should be produced

Famil
y
(i)

Inven
-tory
Iij,0

Deman
d Q1
Dij,t

Conver
-sion
Kij

Safet
y
Stock
Bij

ExpectedQuantity
(Iij,0) - (Dij,0)

Flat

Item
(j)
CRC1
CRC2
CRC3

Long

Bil-8

63

65

1,1

40

-2

Long

Bil-10

50

60

1,2

40

-10

Long

Bil-17

54

130

1,1

60

-76

Flat
Flat

71

92

1,4

80

-21

66

120

1,5

120

-54

83

90

1,2

80

-7

Decisio
n
Producti
on
Producti
on
Producti
on
Producti
on
Producti
on
Producti
on

Due (Expected-Quantity) of all items are less than safety stock, all families should be produced at Q-1
b. Calculation number of lower and upper for family to be produced. See that total of L (762,6) is less
than aggregate amount of Q1 (450). Amount of production of family are calculated by

y *i

x * Li
Li

iz

Family

K ij ( Dij, 1I ij , 0+ Bij )

Item

Flat
Flat
Flat

CRC-1
CRC-2
CRC-3

141,4
261
104,4

Long
Long
Long

Bil-8
Bil-10
Bil-17

46,2
60
149,6
762,6

Li
506,
8

255,
8

c. Item Disaggregate
Formula to calculate E :

Ei K ij
ji

n 1

ij , n

Bij I ij ,t 1 yi*

Formula to estimate Yij

N

yij* Dij ,n Bij I ij ,t 1

n 1

Ei Dij , N

ji

ij

Dij , N

Item Dis-Aggregate for Flat family = 299 tons

ij , 1+ D ij ,2 I ij ,0 + Bij
D
K ij
309,4
495
244,8

Uj
1049,
2

139,7 629,9
153,6
336,6
1679,1

# Family
Production
(tons)
299

150

Name : key

NIM : 13400xxx

E1 = 207,8 ton where N=2

Dij,1
Item
(tons)
CRC-1
92
CRC-2
120
CRC-3
90

Bij
(tons)
80
120
80

Iij,0
(tons)
71
66
83

Item Dis-Aggregate for long family =150 tons

E2 = 105,8 tons for N=2
Dij,1
Bij
Iij,0
Item
(tons)
(tons)
(tons)
Bil-8
65
40
63
Bil-10
60
40
50
Bil-17
130
60
54

Aggregate Plan at Q-2 = 900 ton

a. Identify which family should be produced
Deman
Family
Item
Invt
d Q2
Conversion
(i)
(j)
Iij,1
Dij,2
Kij

Sign : 89dakc73jca6

Kij*Dij
(tons)
128,8
180
108
416,8

Yij
(tons)
56
115
43

Kij*Dij
(tons)
71,5
72
143
286,5

Yij
(tons)
18
28
88

Safety
Stock
Bij

Flat

CRC-1

35

120

1,4

80

Flat

CRC-2

61

156

1,5

120

Flat

CRC-3

36

117

1,2

80

Long

Bil-8

16

85

1,1

40

Long

Bil-10

18

78

1,2

40

Long

Bil-17

12

170

1,1

60

Exp-Quantity
(Iij, 1) - (Dij,2)

Decision

Producti
-85 on
Producti
-95 on
Producti
-81 on
Producti
-69 on
Producti
-60 on
Producti
-158 on

Due (Expected-Quantity) of all items are less than safety stock, all families should be produced at Q-1
b. Calculation number of lower and upper for family to be produced. See that total of L (762,6) is less
than aggregate amount of Q2 (900). Amount of production of family are calculated by

y *i

x * Li
Li

iz

Family

K ij ( D ij, 2I ij,1 + Bij )

Item

Flat

CRC-1

Flat

CRC-2

Flat

CRC-3

Long

Bil-8

231
322,
5
193,
2
119,
9

Li
746,
7

ij , 2+ D ij, 3I ij ,1 + Bij
D
K ij
366,8

Uj
1185,
5

# Family
Production
(tons)
547

511,5
307,2
479,
7

195,8

783

352

Name : key

NIM : 13400xxx

Long

Bil-10

Long

Bil-17

120
239,
8

Sign : 89dakc73jca6

195,6
391,6
1226
,4

1968,
5

c. Item Disaggregate
Item Dis-Aggregate for Flat family = 547 tons
E1 = 199,7 tons where N=2
Dij,2
Bij
Iij,1
Item
(tons)
(tons)
(tons)
CRC-1
120
80
35
CRC-2
156
120
61
CRC-3
117
80
36

Item Dis-Aggregate for long family = 352tons

E2 = 127,7 tons where N=2
Dij,2
Bij
Iij,1
Item
(tons)
(tons)
(tons)
CRC-1
85
40
16
CRC-2
78
40
18
CRC-3
170
60
12

Aggregate Plan at Q-3 = 900 ton

a. Identify which family should be produced
Deman
Family
Item
Invt
d Q3
Conversion
(i)
(j)
Iij,2
Dij,3
Kij

Kij*Dij
(tons)
168
234
140,4
542,4

Yij
(tons)
106
138
103

Kij*Dij
(tons)
93,5
93,6
187
374,1

Yij
(tons)
78
72
156

Safety
Stock
Bij

Flat

CRC-1

21

97

1,4

80

Flat

CRC-2

43

126

1,5

120

Flat

CRC-3

22

95

1,2

80

Long

Bil-8

69

1,1

40

Long

Bil-10

12

63

1,2

40

Long

Bil-17

-2

138

1,1

60

Exp-Quantity
(Iij,2) - (Dij,3)

Decision

Producti
-76 on
Producti
-83 on
Producti
-73 on
Producti
-60 on
Producti
-51 on
Producti
-140 on

Due (Expected-Quantity) of all items are less than safety stock, all families should be produced at Q-3
b. Calculation number of lower and upper for family to be produced. See that total of L (762,6) is less
than aggregate amount of Q3 (900). Amount of production of family are calculated by

x * Li
yi
Li
*

iz

Name : key

Family

NIM : 13400xxx

K ij ( Dij, 3I ij, 2+ Bij )

Item

Flat

CRC-1

Flat

CRC-2

Flat

CRC-3

Long

Bil-8

Long
Long

Bil-10
Bil-17

218,
4
304,
5
183,
6

Li
706,
5

Sign : 89dakc73jca6

ij , 3+ D ij, 4I ij ,2 + Bij
D
K ij
334,6

Uj
1081,
9

# Family
Production
(tons)
518

466,5
280,8
439,
2

110
109,
2
220

174,9

698,7

322

174
349,8
1145
,7

1780,
6

c. Item Disaggregate
Item Dis-Aggregate for Flat family = 518 tons
E1 = 188,5 tons where N=2
Dij,3
Bij
Iij,2
Item
(tons)
(tons)
(tons)
CRC-1
97
80
21
CRC-2
126
120
43
CRC-3
95
80
22

Item Dis-Aggregate for long family = 322 tons

E2 = 117,2 tons where N=2
Dij,3
Bij
Iij,2
Item
(tons)
(tons)
(tons)
CRC-1
69
40
9
CRC-2
63
40
12
CRC-3
138
60
-2

Aggregate Plan at Q-4 = 1200 ton

a. Identify which family should be produced
Deman
Family
Item
Invt
d Q4
Conversion
(i)
(j)
Iij,3
Dij,4
Kij

Kij*Dij
(tons)
135,8
189
114
438,8

Yij
(tons)
108
141
106

Kij*Dij
(tons)
75,9
75,6
151,8
303,3

Yij
(tons)
75
68
150

Safety
Stock
Bij

Exp-Quantity
(Iij,3) - (Dij,4)

Flat

CRC-1

32

83

1,4

80

-51

Flat

CRC-2

58

108

1,5

120

-50

Flat

CRC-3

33

81

1,2

80

-48

Long

Bil-8

15

59

1,1

40

-44

Long

Bil-10

17

54

1,2

40

-37

Long

Bil-17

10

118

1,1

60

-108

Decision
Producti
on
Producti
on
Producti
on
Producti
on
Producti
on
Producti
on

Name : key

NIM : 13400xxx

Sign : 89dakc73jca6

Due (Expected-Quantity) of all items are less than safety stock, all families should be produced at Q-4
b. Calculation number of lower and upper for family to be produced. See that aggregate amount of Q4
(1200) are between L and U. Amount of production of family are calculated by ADF.

S i ( K ij Dij ,t )

iz

ji

Si ( K ij Dij ,t )

ji

(Assume Demand Q-1 2015=Demand Q-4 2014)

Fami
ly
Flat
Flat
Flat
Long
Long
Long

Item
CRC-1
CRC-2
CRC-3
Bil-8
Bil-10
Bil-17

K ij ( D ij, 4I ij ,3 + Bij )

K ij (2. D ij , 4I ij, 0+ B ij )

Li

183,4
255
153,6
92,4
92,4
184,8

Uj

592

299,6
417
250,8

369,6

157,3
157,2
314,6

961,6

967,4

629,1

12000

8000

Dij,4
(tons)
83
108
81

Bij
(tons)
80
120
80

1596,5

Iij,3
(tons)
32
58
33

Item Dis-Aggregate for long family = 485tons

E2 = 144,1 tons where N=2
Dij,4
Bij
Iij,3
Item
(tons)
(tons)
(tons)
CRC-1
59
40
15
CRC-2
54
40
17
CRC-3
118
60
10

Master Production Planning by Bitran-Hax Approcah

Q-1
Q-2
Aggregate (tons)
450
900
Flat
`

Kij*Dij
(tons)
116,2
162
97,2
375,4

Yij
(tons)
173
225
169

Kij*Dij
(tons)
64,9
64,8
129,8
259,5

Yij
(tons)
122
112
243

Q-3
900

116,2
162
97,2
64,9
64,8
129,8

Sqrt(
Si*
KD)
2122,
4

1440,
8

3563,
3

c. Item Disaggregate
Item Dis-Aggregate for Flat family = 714 tons
E1 = 253,4 tons where N=2
Item
CRC-1
CRC-2
CRC-3

K ij Dij

Q-4
1200

#
Famil
y
Produ
ction
(tons
)
714

485

Name : key
CRC-1
CRC-2
CRC-3
Long
Bil-8
Bil-10
Bil-17

NIM : 13400xxx

Sign : 89dakc73jca6

56
115
43

106
138
103

108
141
106

173
225
169

18
28
88

78
72
156

75
68
150

122
112
243