Production Planning and Control Techniques

PRODUCTION
PLANNING AND
CONTROL
(MEFB 433)
Dr. Weria Khaksar
Email: weria@uniten.edu.my
Room No.: BN-03-08
9- PRODUCTION
PLANNING
9.1. AGGREGATE PLANNING
9- Production Planning
9.1. Aggregate Planning:
Aggregate planning is essentially a big-picture
approach to planning.
Does not focus on each individual product. They
aggregate all models together unless there were
only a single product.
Examples:
McDonalds, Burger King or Television Production.
It begins with a forecast of aggregate demand
for the intermediate range and followed by a
general plan to meet demand requirements by
setting output, employment and final product
inventory levels or service capacities.
Basic Aggregate Planning strategies
1. Proactive (Demand Options)
Pricing
Promotion
Back orders
New demand
2. Reactive (Capacity Options)

Hiring and firing
Overtime/slack time
Part time workers
Inventories
Subcontracting
3. Mixed (Demand and Capacity)
Basic Strategies for Meeting Uneven
Demand
1. Maintain a level workforce.
2. Maintain a steady output rate.
3. Match demand period by period.
4. Use a combination of decision
variables.
Techniques for Aggregate Planning
Basic Steps in aggregate planning:
1. Determine demand for each period
2. Determine capacities for each period
3. Identify company or departmental policies that are
relevant.
4. Determine unit costs for regular time, overtime,
subcontracting, holding inventories, back orders,
layoffs and other costs.
5. Develop alternative plans and compute the cost
for each.
6. If satisfactory plans emerge, select the best one.
Otherwise return to step 5.
Techniques for Aggregate Planning
- Trial-and-Error Techniques Using
Graphs and Spreadsheets
- Mathematical Techniques
Techniques for Aggregate Planning:
Trial-and-Error Techniques Using Graphs
and
NumberSpreadsheets
Number of
Number of
Number of laidof
= workers at
workers
end of
in a
previous
period
period
Inventory
Inventory
at the
=
at end of
end of a
the previous
period
period
+ new workers
at start of the
period
Production
+
in the
current
period
off workers at
start of the
period
Amount used to
satisfy demand in
the current period
The average inventory for a period

Cost
for
a
Output cost
Hire/Lay+
(Reg+OT+Subcont
off
ract)
cost
Invento
+
ry
cost
Backorder
cost
and Spreadsheets
Type of cost
Output
Regular
....
Overtime
.
Subcontract
..
Hire/Lay-off
Hire
..
Lay off
.
How to calculate
Regular cost per unit Quantity of regular
output
Overtime cost per unit Overtime quantity
Subcontract cost per unit Subcontract
quantity
Cost per hire Number hired
Cost per lay off Number laid off
Carrying cost per unit Average inventory
Back-order cost per unit Number of backorder units
and Spreadsheets
Example:
Planners of a company that makes several models of
skateboard are about to prepare the aggregate plan that will
cover six periods. They have assembled the following
Perio
1
2
3
4
5
6
Tota
informations:
d
l
Foreca
st
Costs
200 200 300 400 500 200
Output
Regular
time
Overtime
Subcontract
Inventory
1,80
0
= $2 per skateboard
= $3 per skateboard
= $6 per skateboard
= $1 per skateboard per period on average
inventory
= $5 per skateboard per period
Techniques for Aggregate Planning: Trial-andError Techniques Using Graphs and
Spreadsheets
Example:
They now want to evaluate a plan that calls for a steady rate of
regular-time output, mainly using inventory to absorb the
uneven demand but allowing some backlog. Overtime and
subcontracting are not used because they want steady output.
They intend to start with zero inventory on hand in the first
period.
Prepare an aggregate plan and determine its cost using the
preceding information.
Assume a level output rate of 300 units (skateboards) per
period with regular time (i.e., 1,800/6=300). Note that the
planned ending inventory is zero. There are 15 workers and
each can produce 20 skateboards per period.
Period
1
2
3
4
5
6
Total
and Spreadsheets
Forecast
200
200
300
400
500
200 1,800
Example: Output
Regular
Overtime
Subcontract
Output
Forecast
Inventory
Beginning
Ending
Average
Backlog
Costs
Output
Regular
Overtime
Subcontract
Hire/Lay off
Inventory
Back orders
Total
300
--------100
300
--------100
300
--------0
0
100
50
0
100
200
150
0
200
200
200
0
$60
0
------------$ 50
$ 0
600
------------150
0
600
------------200
0
$65
0
750
800
300
--------(100
)
200
100
150
0
300
--------(200
)
100
0
50
100
600
------------150
0
600
------------50
500
750
1,15
0
300
--------100
0
0
0
0
600
------------0
0
600
1,800
600
100
$3,60
0
$ 600
$ 500
$4,70
0
Techniques for Aggregate Planning: Trialand-Error Techniques Using Graphs and
Spreadsheets
Example:
After reviewing the plan developed before, planners have
decided to develop an alternative plan. They understand
that one person is about to retire from the company.
Rather than replace the person, they would like to stay
with the smaller workforce and use overtime to make up
for the lost output. The reduced regular-time output is
280 units per period. The maximum mount of overtime
output per period is 40 units.
Develop a plan and compare it to the previous one.
Period
1
2
3
4
5
6
Total
and Spreadsheets
Forecast
200
200
300
400
500
200 1,800
Output
Example: Regular
280
280
280
280
280
280 1,680
Overtime
Subcontract
Output
Forecast
Inventory
Beginning
Ending
Average
Backlog
Costs
Output
Regular
Overtime
Subcontract
Hire/Lay off
Inventory
Back orders
Total
--------80
--------80
40
----20
40
----(80)
0
80
40
0
80
160
120
0
160
180
170
0
180
100
140
0
$56
0
0
--------$ 40
$ 0
560
0
--------120
0
560
120
--------170
0
560
120
--------140
0
$60
0
680
850
820
40
----(180
)
100
0
50
80
560
120
--------50
400
1,13
0
--------80
0
0
0
0
120
600
100
560
0
--------0
0
$3,36
0
$ 360
560
$4,64
0
$ 520
$ 400
Aggregate planning in services:
Takes into account projected customer
demands, equipment capacities and labor
capacities.
The resulting plan is a time-phased
projection of service staff requirements.
Examples:
- Hospitals
- Airlines
- Restaurants
9.2. MASTER PRODUCTION

SCHEDULING (MPS)
9.2. Master Production Schedule (MPS)
Disaggregating the aggregate plan:
Disaggregation means breaking
down the aggregate plan into
specific product requirements in
order
to
determine
labor
requirements (Skills, size of
workforce),
materials
and
inventory requirements.
The result of disaggregating the
aggregate plan is a master
schedule showing the quantity
and timing of specific end items
for a scheduled horizon, normally
six to eight weeks ahead.
Master Scheduling:
MPS is the heart of production planning and control.
it interfaces with marketing, capacity planning,
production planning and distribution planning.
General duties of a master scheduler:

1. Evaluating the impact of new orders.
2. Providing delivery dates for orders.
3. Dealing with problems:
a.
b.
c.
Evaluating the impact of production delays or late

deliveries of purchased goods.
Revising the master schedule when necessary.
Bringing instances of insufficient capacity to the
attention of production and marketing personnel.
MPS:
Time Fences divide a scheduling time horizon
into three sections or phases, sometime referred
to as Frozen, Slushy and Liquid.
Frozen is the near-term phase and delivery of
new goods would be impossible or very costly.
Slushy is usually a few periods beyond the frozen
phase. Order entry is less costly or disruptive.
Liquid is the farthest out on the time horizon.
New orders and cancellations can be entered with
ease.
MPS:
Inputs The master schedule has three inputs:
- The beginning inventory
- Forecasts for each period of the schedule
- Customer orders which are already committed
to customers.
Outputs
- Projected inventory
- Production requirements
- Resulting uncommitted inventory (Available
to promise (ATP) inventory)
MPS:
Example:
A company that makes industrial pumps wants to
prepare a master production schedule for June and
July. Marketing has forecasted demand of 120 pumps
for June and 160 pumps for July (30 per week for
June and 40 per week June
for July).
July
1
Foreca
st
.
.
.
30 30 30 30 40 40 40 40
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
MPS:
Example:
Now suppose that there are currently 64 pumps in
inventory (beginning inventory), and there are
customer orders that have been committed (booked)
and must be filled.
Beginning
Inventory:
64
June
Forecast
30 30 30 30 40 40 40 40
Customer orders
(committed)
33 20 10
.
.
.
.
.
.
.
.
July
.
.
.
.
.
.
.
.
.
.
MPS:
Example:
Now we have the three inputs of the master scheduling and
we should determine three outputs including: the projected
on-hand inventory, the MPS and the uncommitted (ATP)
inventory.
Projected onInventory
Current
=
hand
from
weeks
Inventory
requiremenare the
Where
the currentprevious
weeks requirements
week and
ts
larger
of
forecast
customer
orders
(committed).
MPS:
Example:
Beginning
Inventory:
64
June
1
Forecast
30
30
30
30
40 40 40 40
Customer orders
(committed)
33
20
10
Projected on-hand
inventory
31
29
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Customer orders are
July
Forecast is larger than
.
.
.
.
.
.
.
.
.
Forecast is larger than
MPS:
Example:
Inventor
Net
y
Inventor
When projected
on-hand
inventory becomes
From
y
(70)
Projected
negative,
theRequirement
productionBefore
is needed
refill
Week Previous
MPS to
Inventory
Week
s
MPS
inventory.
64
31
31
If 1 the lot
size 33is 70, then
the negative
2
31 on-hand
30
1
projected
inventory
requires 1 29
3
1
30
+ 70
41
units
and
leaves
41 -29
pumps
for= future
4
41 71-29=41
30
11
11
demand:
5
11
40
-29
+ 70 inventory
=
41
Every
time
projected
on-hand
6
41 negative,
40 another
1 production lot
1 of
becomes
1 is added
40 to the -39
+ 70 =
31
707 pumps
schedule.
8
31
40
-9
+ 70
61
MPS:
Example:
Beginning
Inventory:
64
June
1
Forecast
30
30
30
30
40 40 40 40
Customer orders
(committed)
33
20
10
Projected on-hand
inventory
31
41
11
41
MPS
July
70
.
.
.
.
.
.
.
.
.
.
.
.
70
.
.
.
.
.
.
31 61
70 70
.
.
.
.
.
.
.
.
.
MPS:
Example:
Now it is possible to determine the amount of
inventory that is uncommitted and, available to
promise using a look-ahead procedure:
Sum booked customer orders week by week until
(but not included) a week with an MPS.
Available-toBeginnin
Sum of the
=
+ MP _
Promise
g
customer
S
This inventory isinventory
uncommitted andorders
it cansodelivered
in
inventory
far
corresponding weeks. (Weeks 1 and 2 for the first

ATP inventory).
MPS:
Example:
Beginning
Inventory:
64
June
1
Forecast
30
30
30
30
40 40 40 40
Customer orders
(committed)
33
20
10
Projected on-hand
inventory
31
41
11
41
MPS
Available-to-promise
inventory
(uncommitted)
11
July
2
31 61
70
70
70 70
56
68
70 70

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PRODUCTION

9.1. AGGREGATE PLANNING

2. Reactive (Capacity Options)

3. Mixed (Demand and Capacity)

The average inventory for a period

200 200 300 400 500 200

9.2. MASTER PRODUCTION

General duties of a master scheduler:

Evaluating the impact of production delays or late

Forecast is larger than

Forecast is larger than

corresponding weeks. (Weeks 1 and 2 for the first

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