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MODULE 3 > 3 - Aggregate Planning > Flashcards

3 - Aggregate Planning Flashcards

1
Q

AGGREGATE PLANNING (black box) ?

A
  • Inputs:
  • Accounting data (costs)
  • Demand (orders + demand forecasts)
  • Machine, manpower availability
  • Supplier, subcontractor availability
  • FInished product availability
  • Output:
    Master Prodcution Scheduling (MPS)
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2
Q

What does the Master Production Scheduling (MPS) consist ?

A

It defines how many units of finished products are going to be manufactured in the medium-long term

Considerations in the MPS:

  • Only finished products are considered (not materials)
  • Only the most critical production resources (bottlenecks *) are considered
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3
Q

What does the AGGREGATE PLANNING determine?

A

Determines the necessary resource capacity that a company will need in order to meet its expected demand.

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4
Q

What about the results of the Aggregate Planning phase?

A

The results of the aggregate planning phase are on of the “first” inputs to the Production Planning process

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5
Q

Draw the hierarchical diagram with the processes(from high to low risk) and their time horizon.

A
  1. Business Planning (5 -10 years)
  2. Aggregate Planning (1 years )
  3. Master Scheduling (3-12 months)
  4. Materials Requirement (1-6 months)
  5. Capacity Requirements Planning (1-3 months)
  6. Operations Scheduling (1 week)
  7. Production Activity Control (hours - days)
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6
Q

Which are the objectives of Aggregate Planning ?

A

NOTE: The aim of AGGREGATE PRODUCTION PLANNING is the formulation of an “optimal” production plan able to fulfill the customer demand, while minimizing the cost associated with its implementation and compliance with all the constraints

  • Business objectives
  • Production objectives
  • Financial objectives
  • Human resources objectives
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7
Q

Describe the “business objectives” of Aggregate Planning?

A
  • Always have (or quickly) a wide range of products
  • ability to do things
  • high level of customer service.
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8
Q

Describe the “production objectives” of Aggregate Planning

A
  • production rate constant
  • large lots
  • no changes
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9
Q

Describe the “Financial objectives” of Aggregate Planning

A
  • Limited financial exposure (purchasing, WIP, sales)
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10
Q

Describe the “Human resources objectives” of Aggregate Planning

A
  • contant level of workforce use
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11
Q

Which are the constraints of the Aggregate Planning?

A
  • Production capacity available in normal hours
  • Production capacity available in overtime
  • Constraints on warehouse stocks: Stock limits, obsolescence
  • Restrictions on subcontracting:
  • Limited quantities (upper/lower)
  • Delivery time
  • Quality
  • Suppliers availability
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12
Q

What about the Nature of the Planning problem?

A

The demand pattern may be cyclical in nature (it may change based on seasons)

So company capacity may be:
*sufficient to meet peak demand, thus management accepts that capacity will be idle at times ( this will increase production costs);

  • only sufficient to meet the base demand, therefore overtime, sub-contracting, temporary operators may be used to meet the peak demand (e.g. drinks industry brings in temporary operators and sub-contracts to meet Christmas demand);
  • sufficient to meet the average demand, thus stock holding will be used to balance between supply and demand.
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13
Q

More details about the AGGREGATE PLANNING?

A
  • Aggregate planning phase is connected to the annual budget setting process.
  • Aggregate plans are a rough analysis useful for high level planning, but contain insufficient detail to manage production in practice (e.g. to control equipment and operators).

*The Master Production Schedule (MPS) is the schedule of what “final products” are needed and in what quantity:
e.g. one particular entry in the MPS could specify the
need to produce 300 CF-ECO-800 washing machines
in the month of May.

*The MPS is generated by the aggregate plans and uses sales forecast and booked orders to determine specific quantities of products to be produced on particular dates.

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14
Q

What else does the Master Production Schedule (MPS) include?

A

Orders and Sales Forecasts

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15
Q

AGGREGATE PLANNING determination:

How to develop an Aggregate Plan?

A
  • Develop alternative plans and calculate the cost for each of them.
  • Therefore, choose the best overall plan based on company objectives
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16
Q

What does it entail if the Capacity and Demand are nearly equal?

A

The emphasis should be placed on meeting the Demand as efficiently as possible.

17
Q

What does it entail if the Capacity is greater than Demand?

A
  • Production capacity will not reach its saturation point
  • The company should implement advertising in order to increase the customer’s demand.
  • Excess of production capacity might be used for other purposes like subcontracted work, development of new product types.
18
Q

What does it entail if the Capacity is lower than Demand?

A
  • The company should decide whether subcontrating a portion of the workload or implement overtime
  • If the phenomenon is systematic, the firm might consider to buy further capacity (new employees, new machines)
19
Q

Which are the two Production Planning strategies ?

A
  • Level
  • Chase

NOTE: What is the best plan?:
Level and Chase production represent the trade-off between the Stock Holding costs and Setup costs

20
Q

What does the “Level” strategy for Production planning consist?

A

In mantaining a constant output rate along the planning horizon

NOTE: By means of inventories, delayed deliveries.

21
Q

What does the “Chase” strategy for Production planning consist?

A

In matching the production rate to the order rate along the planning horizon.

NOTE: The production may also vary by means of hire and fire, subcontracts, overtime.

22
Q

In Aggregate Planning, to which categories do the Overall costs belong?

A
  • Inventory holding
  • Setup
  • Efficiency …
  • Production rate
  • Subcontracting
  • Workforce size
  • Production level
  • Shortage
23
Q

Planning Strategies: “Mixed strategy” is feasible..

What about the graph (Cumulative units vs time) with the plans within the zones B,C and A?

A
  • Plans within Zone A: They are not feasible since the demand is not met.
  • Plans within the zone B: They are ineffective since they are dominated by the Level plan strategy.
  • Plans within the zone C: They represent real-life plans. They are feasible and represent a trade-off b/w Level and Chase plans.
24
Q

How is it possible to convert an ‘infeasible plan’ into a ‘feasible plan’?

A

Through “left-wise shifts or lots” at expenses of both Stock holding and Setup costs.

25
Q

Comparison b/w LEVEL and CHASE?

A

*Chase:
- It could not be feasible for industries requiring highly skilled workers
+ It could be effective during periods of highly unemployment
- It could have negative motivational impacts (when workload is low, employees may feel compelled to slow down)

*Level:
- It could not be feasible for products which can become obsolete
+ Employees benefit from stable work hours
+ In case of unforeseen demand fluctuation, it is less risky than the Chasestrategy

26
Q

Which are the AGGREGATE PLANNING techniques?

A
  • Trial and Error: Costing out the production alternatives and choosing the one with the lowest cost.
  • Linear programming
  • Heuristic methods like: Wargner-Whithin, Karni-Roll, Aucamp, etc
27
Q

What are the implications in terms of costs of increasing or decreasing the Production rate?

A
  • If Production rate increases: Leads to Overtime cost

* If Production rate decreases: Leads to idle time cost.

28
Q

What does Subcontracting entail?

A
  • Administration costs
  • Usually production of subcontractors is a more costly production method
  • Cost increase depends on supplier’s profit margin
29
Q

What are the implications of increasing or decreasing the Workforce size?

A
  • Increasing the workforce leads to:
  • advertising
  • interviewing
  • training costs
  • Decreasing workforce leads to:
  • redundancy costs
  • affects company image
30
Q

What does Inventory entail?

A

Inventory -holding costs

31
Q

What do Shortages (“escasez”) entail?

A
  • Backlogs
  • Back orders
  • Stok-out
  • Lost sales
32
Q

What does Production level entail?

A

Shift overheads (“cambio de gastos generales”): security, supervision, canteen

33
Q

Multi-product planning

A
  • The plan must be defined in terms of bottleneck hours (not units!)
  • Once necessary bottleneck capacity is determined, it must be split among the products of the family in order to define the MPS:
  • The more the plan approaches the present, the more it is detailed; therefore it can drive the production and purchase orders
34
Q

what about Product variety and MPS feasibility ?

A
  • The MPS is a key coordinating element, but problems occur when there is a high variety of final products (e.g. cars);
  • Hence, when there is a high number of product variants, it is convenient to:
  • Make forecast for groups of products (e.g. 20% red, 20% brown, etc.)
  • or produce MPS at point of minimum variety:
35
Q

What is it convenient to do when there is a high number of product variants?

A
  • Make forecast for groups of products (e.g. 20% red, 20% brown, etc.)
  • or produce MPS at point of minimum variety:
36
Q

Name the decision variables in Aggregate Production Planning.

A

Decisions are to be taken to “match” DEMAND with CAPACITY, by using:

*Inventory management
*Outsourcing of resources
*Sub-contracting
*Investment to gain elasticity of the production system
*Shifts and Labor force organization
*Use of overtime
*Negotiation with customers
*Production shifts organization and use
…..

MODULE 3 (6 decks)

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