Objective:

Objective: Outline
Outline the
the
strategies
strategies used
used in
in various
various
dimensions
dimensions of
of production
production
planning
planning
 Strategies for Production
Planning
• Forecasting Techniques
• Product Design Planning
• Layout of Business
• Scheduling
 Forecasting Techniques
• Sales force composite
• Delphi method
• Consumer surveys
• Jury of experts
• Moving averages
• Least squares regression
 Forecasting
• Forecasting is the art and science of
predicting future events.
• There are two approaches to
forecasting, namely:
- Qualitative and
- Quantitative approaches
 Qualitative Forecasting
Techniques
• Jury of Executive Opinion (Jury of
Experts)
• Sales Force Composite
• Delphi Method
• Consumer Market Surveys (consumer
surveys)
 Jury of Experts
• Under this method, the opinions of a
group of high-level managers, often
in combination with statistical
models, are pooled to arrive at a
group estimate of demand
 Sales Force Composite
• In this approach, each salesperson
estimates what sales will be in his or
her region.
• These forecasts are then reviewed
to ensure they are realistic and then
combined at the district and national
levels to reach an overall forecast.
 Delphi Method
• There are three different types of participants in the Delphi
Method:
- decision makers
- Staff personnel and
- Respondents
• The decision makers usually consist of a group of 5 to 10 experts
who will be making the actual forecast.
• The staff personnel assist the decision makers by preparing,
distributing, collecting and summarizing a series of questionnaires
and survey results.
• The respondents are a group of people, often located in different
places, whose judgments are valued and are being sought.
• This group provides inputs to the decision makers before the
forecast is made. See example
The State of Alaska used
the Delphi Method
Alaska’s economy is dominated by oil. An amazing 90%
of the state’s budget is derived from 1.5 million barrels
of oil pumped daily through a pipeline at Prudhoe Bay.
To develop a long-range economic forecast, the State
of Alaska turned to the Delphi Method. The large
Delphi panel of experts had to represent all groups and
opinions in the state and all geographic areas. But
Delphi was the perfect forecasting tool because
panelist travel could be avoided. It also meant leading
Alaskans could participate because their schedules
were not impacted by meetings and distances.
Consumer Market Survey
• This method solicits input from
customers or potential customers
regarding their future purchasing plans.
• It can help not only in preparing a
forecast, but also in improving product
design and planning for new products
 Overview of Quantitative
Methods
Quantitative approaches to forecasting include:

• Naïve approach
• Moving averages
• Exponential smoothing
• Trend projection
• Linear-regression causal model
• Least Squares Regression

These models can be further classified into two

categories, namely, time-series models and causal
models.
 Time-series Models
Time-series models predict on the assumption that the
future is a function of the past. In other words, they
look at what has happened over a period of time and use
a series of past data to make a forecast. If we are
predicting weekly sales of lawn mowers, we use the past
weekly sales for lawn mowers in making the forecast.
Examples of time-series models are as follows:
• Naïve approach
• Moving averages
• Exponential smoothing
• Trend projection
 Causal Model
• Causal models, such as linear regression,
incorporate the variables or factors that might
influence the quantity being forecast. For
example, a causal model for lawn-mower sales
might include factors such as new advertising
budget, and competitors’ prices.
• Example of a causal model is the Linear-
regression causal model and Least Square
Regression
 Moving Averages
• A moving average forecast uses a number of recent actual data
values to generate a forecast.
• Moving averages are one of the most popular and easy to use tools
available to the technical analyst. They smooth a data series and
make it easier to spot trends, something that is especially helpful in
volatile markets. They also form the building blocks for many other
technical indicators and overlays.
• A moving average series can be calculated for any time series, but is
most often applied to stock prices, returns or trading volumes.
Moving averages are used to smooth out short-term fluctuations,
thus highlighting longer-term trends or cycles. The threshold
between short-term and long-term depends on the application, and
the parameters of the moving average will be set accordingly.
• Moving average is also useful if we can assume that sales will stay
fairly steady over time. A 4-month moving average is found by simply
summing the demand during the past 4 months and dividing by 4.
• With each passing month, the most recent month’s data are added to
the sum of the previous 3 months’ data, and the earliest is
• dropped. This tends to smooth out short-term irregularities
• in the data series.
Moving Averages
 Simple Moving Average (SMA)

• Again. A simple moving average is formed

by computing the average (mean) price of a
security over a specified number of
periods. While it is possible to create
moving averages from the Open, the High,
and the Low data points, most moving
averages are created using the closing
price. For example: a 5-day simple moving
average is calculated by adding the closing
prices for the last 5 days and dividing the
total by 5.
 EXAMPLE
• The calculation is repeated for each price bar
on the chart. The averages are then joined to
form a smooth curving line - the moving average
line. Continuing our example, if the next closing
price in the average is 15, then this new period
would be added and the oldest day, which is 10,
would be dropped. The new 5-day simple moving
average would be calculated as follows:
• Over the last 2 days, the SMA moved from 12
to 13. As new days are added, the old days will
be subtracted and the moving average will
continue to move over time.
• In the example above, using closing
prices from Eastman Kodak (EK), day 10
is the first day possible to calculate a
10-day simple moving average. As the
calculation continues, the newest day is
added and the oldest day is subtracted.
The 10-day SMA for day 11 is calculated
by adding the prices of day 2 through
day 11 and dividing by 10. The averaging
process then moves on to the next day
where the 10-day SMA for day 12 is
calculated by adding the prices of day 3
through day 12 and dividing by 10.
Using Least Square Regression
Analysis to Forecast
• We can use mathematical models …….
 Product Design Planning
• Modularization
• Miniaturization
• integration
 Layout of Business
• Process layout
• Production layout
• Fixed position layout
 Layout
• There is no standard method of factory layout
because different products need different
techniques. Also, different companies producing
the same product might choose different
methods. For example, both Bass Charrington and
Brakspears produce beers, but the layouts of
their breweries are very different. Brakspears
uses very traditional brewing techniques. Bass
Charrington uses up more up-to-date methods.
• What are the common types of layout?
 Process layout
 Product layout
 Fixed position layout
 Process layout:
• this system involves performing similar
operations on all products in one area or at
one work station. For example, all of the
steps taken in making Wellington boots is
carried out at each work station. So each
workstation will carry out mixing the raw
materials, moulding, trimming and packing
the boots to make them ready for
distribution.
• This type of layout is often used with
batch or cell production because of its
flexibility. Planning is needed to avoid
machines being overloaded or remaining
• idle. See diagram.
 Batch Production: The example production line (shown below) is that of an
engineering company, manufacturing small steel products such as hinges and locks.
They manufacture batches of five hundred at a time.. As each task is completed the
item being manufactured is passed down the production line to the next worker,
until it is complete.
 Product Layout

• With this method, machinery and tasks are

set out in the order required to make the
product.
• The production ‘flow’ from one machine or
task to another. Flow production
techniques use this method. It is popular
because handling time is reduced and
there is greater control. However, it can
only be used if there is large demand for
the product.
Fixed Production Layout
• This involves performing operations on
the work-in-progress and then returning
it to a fixed location after each process.

• Alternatively, resources are taken to a

site at which production occurs. An
example would be the construction of a
bridge.
 Scheduling
• Critical Path Method (CPM)
• Project Evaluation and Review
Technique
• Preparation and use of decision trees
and simulation