5 - aggregate planning and master production schedule

Question 1

what are the objectives of aggregate planning?

Answer 1

• Establish company wide guidelines for allocating resources

- Determine overall quantities of finished products to be completed at each period of the planning horizon

Question 2

what are the aggregate planning strategies?

Answer 2

• chase demand
• level production
• mixed strategy

Question 3

what are the characteristics of the level production strategy?

Answer 3

• Constant rate of production for the whole planning horizon
• This rate corresponds to the average demand per period
• Irregularities of the demand are smoothed out by the accumulation and the usage of stock.
• Does not require any modifications in the level of employment
• More expensive and less flexible

Question 4

why is the level production strategy more expensive than other strategies?

Answer 4

because of high inventory (holding costs) and stock out/back order costs

Question 5

when using lvl production, how to keep production/output stable?

Answer 5

-variation in the workforce by overtime/idle time

Question 6

what are the characteristics of the chase demand strategy?

Answer 6

• Rate of production follows demand (forecast and output are the same)
• Stocks are eliminated (no inventory)
• Many variations in the workforce, use of overtime and / or sub-contracting
• Costly due to implementation difficulties

Question 7

why can chase demand be costly?

Answer 7

-costly due to implementation difficulties: costs of varioations in output lvl: hiring, layoffs, training, etc.

Question 8

what are the advantages of chase demand?

Answer 8

• Advantage: no inventory build up and no stock shortage
• Disadvantage: it is not always easy or even possible to adjust workforce lvls. In cases where workforce is cstnt, it is difficult to use overtime. Space and equipment renting is costly, even if under-utilized during slacking periods

Question 9

how to recognize lvl production in a table?

Answer 9

• the output is constant
• the nb of employees is constant
• inventory varies
• no hires/layoffs
• presence of overtime

Question 10

how to recognize chase demand in a table?

Answer 10

• output varies
• no inventory (0)
• employees vary (hires, layoff, overtime and idle time)

Question 11

what are the characteristics of the mixed strategy?

Answer 11

• Rate of production is more stable than with chase demand
• Inventory levels are more stable than with level production
• most economical solution

Question 12

how to recognize mixed strategy in a table?

Answer 12

• output varies
• inventory varies
• employees vary

Question 13

what are the strategies for adjusting capacity?

Answer 13

• lvl production: production at a constant rate and using inventory to absorb fluctuations
• chase demand: hiring laying off workers to match demand
• mixed strategy: finding the right balance between both strategies

Question 14

what is the objective, the product, the horizon and the time buckets of aggregate plan?

Answer 14

one plan for all products:

• objective: LT capacity decision
• product: product families (EU)
• horizon: 12 to 15 months
• time buckets: 1 month

Question 15

what is the objective, the product, the horizon and the time buckets of master production schedule?

Answer 15

one plan per product

• objective: midterm production planning, order promising
• product: stock keeping unit
• horizon: 3 months
• time bucket: 1 week

Question 16

what is the difference between APP and MPS?

Answer 16

MPS is more precise than APP because it involves determining what qties need to be produced each week in order to satisfy forecast demand while taking into account the available capacity as established in the APP. APP is done 1 yr in advance for all products grouped in EU, MPS is done 3 months prior with a schedule for each product

Question 17

master production schedule is related to what type of products?

Answer 17

finished products and spare parts with independent demand (must be forecasted)

Question 18

material requirements planning concerns what type of products?

Answer 18

dependent demand products (must be calculated): components and raw materials - derived from demand from higher items in the product structure

Question 19

what are the lot sizing techniques?

Answer 19

• Lot-for-lot (LXL): produce or purchase the exact required qty
• Fixed-lot size (X100): produce or purchase in multiples of X
• Minimum order qty: produce or purchase at least the min qty. if more, the exact required qty
• Periodic order qty: qty produced or purchased is a fct of the qty required for the specified nb of periods

Question 20

what is the tradeoff of the lot-for-lot ordering policy?

Answer 20

it reduces inventory costs but does not consider ordering costs

Question 21

why would the min order qty policy be used?

Answer 21

to absorb ordering or set-up costs on a min amount of units

Question 22

why would the periodic order qty policy be used?

Answer 22

To take advantage of the benefits of calculating the EOQ, while taking into account variations in forecast demand. Ordering for multiple periods = avoiding multiple orders while knowing that the units will be used in the near future