Chapter 10 The Nature of

Planning and Control

WHAT IS PLANNING AND CONTROL?
Planning and control is concerned with the activities that attempt to reconcile the
demand of the market and the ability of the operations resources to deliver. It
provides the systems procedures and decisions which bring different aspects of
supply and demand together. All the activities of scheduling, coordination and
organization are concerned with the planning and control of the organization.

The difference between planning and control

Planning is formalization of what is intended to happen at some time in the future.
But a plan does not guarantee that an event will actually happen. Rather it is a
statement or intention. Although plans are based on expectations, during their
implementation things do not always happen as expected.

Control is the process of coping with these types of change. It may mean that plans
need to be redrawn in the short term. It may also mean that an intervention will
need to be made in the operation to bring it back on track. Control activities make
the adjustments which allow the operation to achieve the objectives that the plan
has set, even when the assumptions on which the plan was based, do not hold true.

Long-, medium- and short-term planning and control

The nature of planning and control activities change over time. In the very long-
term, operations managers make plans concerning what they intend to do, what
resources they need and what objectives they hope to achieve. The emphasis is on
planning rather than control, because there is little to control as such. They will use
forecasts likely demand described in aggregate terms.
Medium-term planning and control is more detailed. It looks ahead to assess the
overall demand which the operation must meet in a partially disaggregated manner.
The organization must distinguish between different types of demand. Different
categories of staff will have to be identified and broad staffing levels in each
category set. Also, contingencies will have been put in place which allow for slight
deviations from the plans, they will act as reserve resources.

In short-term planning and control, many of the resources will have been set and it
will be difficult to make large changes. However, short-term interventions are
possible if things are not going to plan. By this time, demand will be assessed on a
totally disaggregated basis, with all demand treated as individual activities. In
making short-term interventions and changes to plan, operations managers will be
attempting to balance quality, speed, dependability, flexibility and cost on an ad hoc
basis. A general understanding of priorities will form the background to their
decision making.
(see figure 10.2, page 291)

The volume-variety effect on planning and control

The volume and variety characteristics will have an effect on an operations
planning and control activities. Operations which produce a high variety of services
or products in relatively low volume will have customers with different requirements
and use different processes from operations which create standardized services or
products in high volume. High variety processes will have planning on short-term
basis, however the robustness will be very high. High volume processes have a long
planning horizon, however the robustness will be very low. (See table 10.1, page
292)

THE EFFECT OF SUPPLY AND DEMAND ON PLANNING AND CONTROL

If planning and control is the process of reconciling demand with supply, then the
nature of the decisions taken to plan and control an operation will depend on both
the nature of demand and the nature of supply in tat operation.

Uncertainty in supply and demand

Uncertainty is important in planning and control because it makes it more difficult.
Sometimes the supply of inputs to an operation may be uncertain. In other
operations supply is relatively predictable, and the need for control is minimal.
Similarly, demand may be unpredictable or demand may be more predictable. Both
supply and demand uncertainty make planning and control more difficult, but a
combination of supply and demand uncertainty is particularly difficult.

Dependent and independent demand

Dependent demand = some operations can predict demand with relative certainty
because demand for their services or products is dependent upon some other factor
which is known. Planning and control in dependent demand situations is largely
concerned with how the operation should respond when demand has occurred.

Independent demand = operations that need to supply future demand without

knowing exactly what that demand will be; they do not have a forward visibility of
customer orders. It makes best guesses concerning future demand, attempts put
the resources in place which can satisfy this demand, and attempts to respond
quickly if actual demand does not match the forecast.

Responding to demand
It is clear that the nature of planning and control in any operation will depend on
how it responds to demand, which is in turn related to the type of services or
products it produces.
Design, resource, create and deliver to order
Organisations such as an advertising company, will only start the process of
planning and controlling when the customer confirms the contract with the
organisation. It will design something and only after this the resources will be
contracted etc.
Design, create and deliver to order
Other operations might be sufficiently confident of the nature of demand, if not its
exact details, to keep in stock most of the resources it requires to satisfy its
customers. Certainly it would keep its transforming resources, if not its transformed
resources. However, it would still make the actual service or product only when it
receives a firm customer order. (see figure 10.4, page 296)
Create and deliver to order
Some operations offer relatively standard services and products, but do not create
them until the customer has chosen which particular service or product to have.
Partially create and deliver to order
Some operations have services or products that are so predictable that they can
start to create them before specific customer orders arrive
Create to stock
When an operations services or products are standardized, there is the potential to
create them entirely before demand is known
Collect/choose from stock
Some operations require their customers to collect their own services or products
(see figure 10.4, page 296)
P:D ratios
Another way to characterizing the graduation between design, resource, create and
deliver to order and choose/collect from stock planning and control is by using a
P:D ratio. This contrasts the total length of time customers have to wait between
asking for the service or product and receiving it, called the demand, D, and the
total throughput time from start to finish, P.

P and D times depend on the operation

P and D are illustrated for each type of operation in figure 10.4, page 296).
Generally the ratio of P to D gets larger as operations move from design, resource,
create and deliver to order to choose/collect from stock. In other words as one
moves down this spectrum towards the Choose/collect from stock end, the
operation has anticipated customer demand and already created the services and
products, even though it has no guarantee that the anticipated demand will really
happen.

The larger the P:D ratio, the more speculative the operations planning and control
activity. So by reducing the P:D ratio, operations reduce their degree of speculative
activity and also reduce their dependence on forecasting.
But do not assume that when the P:D ratio approach 1, all uncertainty is eliminated.
The volume of demand may be known, but not the time taken to perform each
order.

PLANNING AND CONTROL ACTIVITIES

Planning and control require the reconciliation of supply and demand in terms of
volumes, timing and quality. There are four overlapping activities that plan and
control volume and timing: loading, sequencing, scheduling and monitoring and
control.

Loading
Loading is the amount of work that is allocated to a work center. However, when a
machine is supposed to be available 168 hours a week, this does not necessarily
mean that 168 hours of work can be loaded onto that machine. What erodes this
available time is:
Quality losses
Slow running equipment
Equipment idling
Breakdown failure
 Set-up and changeovers
Not worked (unplanned)
Not worked (planned)
This must be taken into account when putting load on the machine. Or course, many
of these losses should be small or non-existent in a well-managed operation.
However, the valuable operating time available for productive working, even in the
best operations, can be significantly below the maximum time available.

Finite and infinite loading

Finite loading = approach which allocates work to a work center up to a set limit.
This limit is the estimate of capacity for the work center. Work over and above this
limit is not accepted.
Relevant for operations where:
It is possible to limit the load (medical practice, hairdresser)
It is necessary to limit the load (safety reasons passenger on aircraft)
The cost of limiting the load is not prohibitive
Infinite loading = approach to loading work which does not limit accepting work, but
instead tries to cope with it. Capacity constraints have not been used to limit loading
so the work is completed earlier.
Relevant for operations where:
It is not possible to limit the load (emergency department)
It is not necessary to limit the load (fast-food outlet)
The cost of limiting the load is prohibitive

Sequencing
When work arrives, decisions must be taken on the order in which the work will be
tackled. This activity is termed sequencing. The priorities given to work in an
operation are often determined by some predefined set of rules, some of which are
relatively complex.

Physical constraints
The physical nature of the inputs being processes may determine the priority of
work (Paint, from light to dark production). Also, jobs that physically fit together may
be scheduled together to reduce waste (fabric cutting).

Customer priority
Operations will sometimes use customer priority sequencing, which allows an
important or aggrieved customer, or item, to be processed prior to others,
irrespective of the order of arrival of the customer or item. This approach is typically
used by operations whose customer base is skewed, containing a mass of small
customers and a few large, very important customers. However, customer priority
sequencing, although given a high level of service to some customers, may erode
the service of too many others. This may lower the overall performance of the
operation if work flows are disrupted to accommodate important customers.

Due date (DD)

Prioritizing by due date means that work is sequenced according to when it is due
for delivery, irrespective of the size of each job or the importance of each customer.
Due date sequencing usually improves the delivery dependability and average
delivery speed. However, it may not provide optimal productivity, as more efficient
sequencing of work may reduce total costs.

Last in first out (LIFO)

Last in first out is a method of sequencing usually selected for practical reasons, for
example unloading a truck. However, it is not an equitable approach.

First in first out (FIFO)

Some operations serve customers in exactly the same sequence they arrive in. This
is called first in first out sequencing.

Longest operation time (LOT)

Operations may feel obliged to sequence their longest jobs first, called longest
operation time sequencing. This has the advantage of occupying work centers for
long periods. By contrast, relatively small jobs progressing through an operation will
take up time at each work center because of the need to change over from one job
to the next. However, although the longest operation time sequencing keeps
utilization high, this rule does not take into account delivery speed, reliability or
flexibility.

Shortest operation time first (SOT)

Most operations at some stage become cash constrained. In these situations, the
sequencing rule may be adjusted to tackle short jobs first; this is called shortest
operation time sequencing. These jobs can then be invoiced and payment received
to ease cash-flow problems. This has an effect of improving delivery performance, if
the unit of measurement of delivery is jobs. However, it may adversely affect total
productivity and can damage service to larger customers.

Judging sequencing rules

All five performance objectives, or some variant of them, could be used to judge the
effectiveness of sequencing rules. However, the objectives of dependability, speed,
and cost are particularly important. So the following performance objectives are
often used:
Meeting due date promised to customer (dependability)
Minimizing the time the job spends in the process (speed)
Minimizing work-in-progress inventory (element of cost)
Minimizing idle time of work centers (element of cost)
(see worked example, page 305-306)

Scheduling
Having determined the sequence that work is to be tackled in, some operations
require a detailed timetable showing at what time or date jobs should start and
when they should end; scheduling. Some operations where customers arrive in an
unplanned way, cannot schedule the operation in a short-term sense. They can only
respond at the time the demand is placed upon them.

The complexity of scheduling

The scheduling activity is one of the most complex tasks in operations management.
First, schedulers must deal with several different types of resource simultaneously.
Machines will have different capabilities and capacities, staff will have different
skills. More importantly, the number of possible schedules increases rapidly as the
number of activities and processes increases.
For n jobs there are n! different ways of scheduling the jobs through a single
process. A general formula can be devised to calculate the number of possible
schedules in any given situation:

Number of possible schedules = (n!)m

Where n is the number of jobs and m the number of machines

Forward and backward scheduling

Forward scheduling = starting work as soon as it arrives.
Backward scheduling = starting jobs at the last possible moment to prevent them
from being late

The choice of backward or forward scheduling depend largely upon the

circumstances.
(see table 10.4, page 308 for (dis)advantages)

Gantt charts
One crude but simple method of scheduling is by using the Gantt chart. This is a
simple device which represents time as a bar, or channel, on a chart. The start and
finish times for activities can be indicated on the chart and sometimes the actual
progress of the job is also indicated. The advantages of Gantt charts are that they
provide a visual representation of both what should be happening and what is
actually happening. Furthermore, they can be sued to test out alternative
schedules.
(see figure 10.11, page 38)
Scheduling work patterns
Where the dominant resource in an operation is its staff, then the schedule of work
times effectively determines the capacity of the operation itself. The main task of
scheduling, therefore, is to make sure that sufficient number of people are working
at any point in time to provide a capacity appropriate for the level of demand at that
point in time. This is often called staff rostering. Operations with a high visibility
cannot store their outputs in inventories and so must respond directly to customer
demand.

During the day, working hours need to be agreed with individual staff members.
During the week, days off need to be agreed. During the year vacations, training
periods, and other blocks of time where staff are unavailable need to be agreed. All
this has to be scheduled such that:
Capacity matches demand
The length of each shift is neither excessively long, nor too short to be
attractive to staff
Working at unsocial hours is minimized
Days off match agreed staff conditions
Vacation and other time-off blocks are accommodated
Sufficient flexibility is built into the schedule to cover for unexpected changes
in supply and demand
(see figure 10.14, page 311)
In very large organisations, with many types of skill to schedule and uncertain
demand the scheduling problem becomes extremely complex.

Monitoring and controlling the operation

Having created a plan for the operation through loading, sequencing and scheduling,
each part of the organisation has to be monitored to ensure that planned activities
are indeed happening. Any deviation from the plans can then be rectified through
some kind of intervention in the operation, which itself will probably involve some
re-planning.
A simple view of control monitors the output from a work center, and compares this
with the plan which indicates what the work center is supposed to be doing.
Deviations from this plan are taken into account through a re-planning activity and
the necessary interventions made to the work center which will ensure that the new
plan is carried out (see figure 10.15, page 311)

Push and pull control

One element of control is periodic intervention into the activities of the operation. An
important decision is how this intervention takes place. The key distinction is
between intervention signals which push work through the processes within the
operation and those which pull work only when it is required.

Push system of control = activities are scheduled by means of a central system and
completed in line with central instructions. Each work center pushes out work
without considering whether the succeeding work center can make use of it. Work
centers are coordinated by the means of the central operations planning an control
system.

Pull systems of control = the pace and specification of what is done are set by the
customer workstation, which pulls work from the preceding (supplier) workstation.
The customer acts as the only trigger for movement. If a request is not passed back
from the customer to the supplier, the supplier cannot produce anything or move
any materials.

The inventory consequences of push and pull

Pull systems are far less likely to result in inventory build-up and are therefore
favored by lean-operations. Parts cannot naturally flow uphill, so they can only
progress if the next stage along deliberately pulls them forward.

Push systems processes parts at one stage and pushes it down the slope to the next
stage. Any delay or problem at that stage will result in the parts accumulating in
inventory.

Drum, buffer, rope

The drum, buffer, rope concepts comes from the Theory of Constraints (TOC) and a
concept called Optimized Production Technology (OPT) described by Goldratt. it is an
idea that helps to decide exactly where in a process control should occur. Most do
not have the same amount of work loaded onto each separate work center. This
means there is likely to be a part of the process which is acting as a bottleneck on
the work flowing through process. The bottleneck in the process should be the
control point for the whole process. It is called the drum.
Because it does not have a sufficient capacity, a bottleneck is working all the time.
Therefore it is sensible to keep a buffer of inventory in front of it to make sure that it
always has something to work on.
Because it constraints the output of the whole process, any time lost at the
bottleneck will affect the output from the whole process. So it is not worthwhile for
the parts of the process before the bottleneck to work to their full capacity.
Therefore, some communication is needed to make sure that activities before the
bottleneck do not overproduce. This is called the rope.

CONTROLLING OPERATIONS IS NOT ALWAYS ROUTINE

It is not always possible to articulate every aspect of an operations objectives in
detail. Many operations are just too complex for that. Nor does every senior
manager always agree on what the operations objectives should be. Often the lack
of a clear objective is because individual managers have different and conflicting
interests. At other times, objectives are ambiguous because the strategy has to cope
with unpredictable changes in the environment that make the original objectives
redundant.
(READ IN BOOK, NOT CLEAR)

Operational control is relatively straightforward: objectives are unambiguous, the

effects of intervention are known, and activities are repetitive. This type of control
can be one using predetermined conventions and rules. There are, however, still
some challenges to successful routine control. It needs operational discipline to
make sure that control procedures are systematically implemented. The main point
is though that any divergence form the conditions necessary for routine control
implies a different type of control

Expert control
If objectives are unambiguous, yet the effects of interventions relatively well
understood, but the activity is not repetitive control can be delegated to an expert;
someone whom such activities are repetitive because they have built their
knowledge on previous experience elsewhere. To make this successful, such experts
exist and can be acquired by the firm. Also they must take advantage of control
knowledge already present in the firm and combine that with their own knowledge.

Trial-and-error control
If strategic objectives are relatively unambiguous, but effects of interventions not
known, yet the activity is repetitive, the operation can gain knowledge of how to
control successfully through its own failures.

Intuitive control
If objectives are relatively unambiguous, but effects of control interventions are not
known, and nor are they repetitive, learning by trial and error is not possible. In
these circumstances control must be based on the management team using its
intuition to make control decisions.

Negotiated control
The most difficult circumstance for strategic control is when objectives are
ambiguous. This type of control involves reducing ambiguity in some way by making
objectives less uncertain. Sometimes this is done simply by senior managers
pronouncing or arbitrarily deciding what objectives should be irrespective of
opposing views. Negotiation processes will be, to some extent, dependent on power
structures.