Chapter 6 Flashcards
What is Resource Planning?
The process of determining the production capacity required to meet demand.
What problems can be caused due to capacity?
A missed due date or stock-out may cascade downstream, magnifying the bullwhip effect.
What are the two types of operations planning?
Material Plans
Capacity Plans
What is used for long-term planning?
Aggregate Production Plan (APP) (Greater than one-year planning horizon)
What is used for Intermediate-range planning?
Master Production Schedule (MPS)(Six to eighteen months )
What is used for Short-range planning?
Material Requirement Planning (MRP)(One day to less than six months)
What is Hierarchical planning?
The process that translates annual business plans & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility leading to the Aggregate Production Plan (APP).
What are the goals of Aggregate Planning?
- Meet demand
- Use capacity efficiently
- Meet inventory policy
- Minimize cost
–Labor
–Inventory
–Plant & equipment
–Subcontract
What is Chase Strategy?
Matching production to customer order rate by hiring and laying off employees.
What is Level Strategy?
A stable workforce with constant output, inventory, and backlogs absorb fluctuations in demand.
What costs are relevant to aggregate planning?
Direct and indirect labor costs and overtime
Inventory Holding Costs
Backordering Costs
What are some advantages of chase strategy?
- Minimum inventory (ok with small warehouses)
2. Varied production to meet sales requirements
What are some disadvantages of chase strategy?
- Costs of hiring, training, overtime, and extra shifts
- Costs of layoffs and impact on employee morale
- Possible unavailability of needed work skills
- Maximum capacity needed
What are some advantages of level strategy?
- Smooth, level production avoids labor costs of demand matching
- Retain employees and talent
- Maintain quality
What are some disadvantages of level strategy?
- Buildup of inventory
2. Backorders can lead to negative consequences
What is a combination strategy?
- Produces at or close to full capacity for some part of the cycle
- Produces at a lower rate (or does not produce) during the rest of the cycle
- Makes use of available capacity, yet limits inventory buildup and inventory carrying costs
What are the required external Inputs to the Production Planning System?
Competitors’ behavior Raw material availability Market demand Economic conditions External capacity
What are the required internal Inputs to the Production Planning System?
Current physical capacity
Current workforce
Inventory levels
Activities required for production
What are costs associated with changing the production rate?
Hiring, training, layoffs, temps
What are the costs associated with inventory holding costs?
Costs of capital, storage, insurance, taxes, spoilage, obsolescence
What are the costs associated with Backordering costs?
Expediting, loss of goodwill, lost sales due to stocking out
What costs are more associated with chase strategy?
- Hiring and firing costs (chase)
- Training costs (chase)
- Subcontracting and Part-time labor costs (chase)
What costs are more associated with level strategy?
- Inventory-carrying costs (level)
- Cost of stockout or back order (level)
- Overtime and undertime costs (level)
What is the master production strategy?
A detailed disaggregation of the aggregate production plan, listing the exact end items to be produced by a specific period.
In MPS, Quantities represent__________, not what can be produced
what needs to be produced
APP vs MSP
APP(Product Groups)
MPS(Specific End Items)
What is the time-phased plan?
Specifying how many and when the firm plans to build each end item
What is system nervousness?
Small changes in the upper-level-production plan cause major changes in the lower-level production plan
Firms use a time fence to deal with nervousness by separating the planning horizon into:
- Firmed Segment(AKA demand time fence), from current period to several weeks into future. Can only be altered by senior management
- Tentative segment (AKA planning time fence), from end of firmed segment to several weeks into the future
What is Material Requirements Planning?
Is the logic for determining the number of parts, components, and materials needed to produce a product.
