Lecture 3 - Aggregate Planning

Question 1

what is aggregate planning

Answer 1

a process used by companies to determine the optimal levels of workforce, volume and mix of production, and inventory to match productive capacity with overall customer demand

Question 2

benefits of aggregate planning

Answer 2

• minimise costs
• improve effectiveness of resource allocation

Question 3

what does an aggregate plan consider

Answer 3

• constraints on resources/facilities
• firms strategic objectives
• based on forecast demand, capacity and inventory
• company usually aggregates similar products together

Question 4

define sales and operations planning

Answer 4

𝗮 𝗽𝗿𝗼𝗰𝗲𝘀𝘀 𝘁𝗵𝗮𝘁 𝘁𝗿𝗮𝗻𝘀𝗹𝗮𝘁𝗲𝘀 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗶𝗻𝘁𝗼 𝗿𝗲𝗮𝗹𝗶𝘀𝘁𝗶𝗰 𝗼𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗽𝗹𝗮𝗻𝘀

–> ensures the communication and agreement/balance between different interest groups on the inputs that MPS receives

Question 5

REVISION QUESTION: what does sales and operations planning do

Answer 5

–> balances forecasted demand with supply capabilities (capacity and inventory)
–> therefore informs the MPS

–> identifies risk in supply chain (e.g. demand fluctuations)

–> considers resource constraints and allocation, to improve decision making

–> increases cohesion and collaboration as regular meetings

Question 6

typical key functions involved in sales and operations planning

Answer 6

• sales and marketing
• operations and supply chain management
• purchasing/materials management
  *engineering
• HR & accounting

Question 7

Key features of sales and operations forecasting

Answer 7

• agreed workable plans
• focus on communication and trade offs
• reviews of how well plan execution is progressing
• planning horizon is sufficiently long to allow for problems to be resolved
• regular, well-regulated meetings

Question 8

REVISION QUESTION: How does Sales and Operations Planning differ from aggregate planning

Answer 8

• S&OP scope is business wide, aggregate planning is narrower (focus on production)
• therefore, aggregate planning is more detailed
• focus for S&OP is to align the business in operations strategy whereas aggregate plan focus is on resource allocation for production

Question 9

Define independent demand in materials planning

give examples

which approaches does it involve

Answer 9

𝗱𝗲𝗺𝗮𝗻𝗱 𝗳𝗼𝗿 𝗮 𝗳𝗶𝗻𝗶𝘀𝗵𝗲𝗱 𝗴𝗼𝗼𝗱 𝗼𝗿 𝘀𝗽𝗮𝗿𝗲𝘀 𝘁𝗵𝗮𝘁 𝗶𝘀 𝗻𝗼𝘁 𝗱𝗶𝗿𝗲𝗰𝘁𝗹𝘆 𝗶𝗻𝗳𝗹𝘂𝗲𝗻𝗰𝗲𝗱 𝗯𝘆 𝘁𝗵𝗲 𝗱𝗲𝗺𝗮𝗻𝗱 𝗳𝗼𝗿 𝗼𝘁𝗵𝗲𝗿 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀.

finished goods sold to customers (e.g. printers)
spare parts sold to consumers (e.g. printer cartridges)

APPROACHES
–> forecasting
–> inventory management

Question 10

define dependent demand in materials planning

examples

Answer 10

demand for materials or components that is directly derived from demand for a finished product

• raw materials (wood, metal
• component parts (bricks, buttons, tires)
• sub assemblies (e.g. batteries/engines for cars)

APPROACHES
–> MRP
–> production plans

Question 11

What does MRP stand for,
and what are the inputs to the MRP process

Answer 11

MRP = Materials Requirements Planning

1* Bill of Materials (BOM)

2* Master Production Schedule (MPS)

3*Inventory Records File

Question 12

Define MRP

how often is it typically done

Answer 12

𝘀𝘆𝘀𝘁𝗲𝗺 𝗳𝗼𝗿 𝗽𝗹𝗮𝗻𝗻𝗶𝗻𝗴 𝗮𝗻𝗱 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝗹𝗶𝗻𝗴 𝘁𝗵𝗲 𝗺𝗮𝘁𝗲𝗿𝗶𝗮𝗹𝘀/𝗰𝗼𝗺𝗽𝗼𝗻𝗲𝗻𝘁𝘀 𝘁𝗵𝗮𝘁 𝗮𝗿𝗲 𝗻𝗲𝗲𝗱𝗲𝗱 𝘁𝗼 𝗽𝗿𝗼𝗱𝘂𝗰𝗲 𝗳𝗶𝗻𝗶𝘀𝗵𝗲𝗱 𝗴𝗼𝗼𝗱𝘀

(converts independent demand -finished goods- into dependent demand -raw materials & components)

–> ensures you have right materials at right time to meet production demand

–> founded upon accurate databases

*typically done monthly

Question 13

describe the BOM

what is is aka

Answer 13

• Bill of Materials (aka Parts master File)
• 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝗱 𝗹𝗶𝘀𝘁 𝘁𝗵𝗮𝘁 𝗯𝗿𝗲𝗮𝗸𝘀 𝗱𝗼𝘄𝗻 𝗼𝗻𝗲 𝗳𝗶𝗻𝗶𝘀𝗵𝗲𝗱 𝗽𝗿𝗼𝗱𝘂𝗰𝘁 𝗶𝗻𝘁𝗼 𝘁𝗵𝗲 𝗾𝘂𝗮𝗻𝘁𝗶𝘁𝘆 𝗼𝗳 𝗶𝘁𝘀 𝗰𝗼𝗻𝘀𝘁𝗶𝘁𝘂𝗲𝗻𝘁 𝗽𝗮𝗿𝘁𝘀
• relate the dependent items to the independent items

e.g
> quantities of materials per build
> the components level in build (how specific they are for this product)

Question 14

What information does the Parts Master File provide for each part

Answer 14

Provides information on:
- description
- lead time
- storage info
- cost info
- make or buy part

ALSO
- considers common parts

Question 15

describe the Inventory Records File

Answer 15

• 𝗰𝗼𝗻𝘁𝗮𝗶𝗻𝘀 𝗿𝗲𝗮𝗹 𝘁𝗶𝗺𝗲 𝗱𝗮𝘁𝗮 𝗼𝗻 𝗾𝘂𝗮𝗻𝘁𝗶𝘁𝘆 𝗮𝗻𝗱 𝗮𝘃𝗮𝗶𝗹𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝗲𝗮𝗰𝗵 𝗺𝗮𝘁𝗲𝗿𝗶𝗮𝗹, 𝗰𝗼𝗺𝗽𝗼𝗻𝗲𝗻𝘁 𝗮𝗻𝗱 𝘀𝘂𝗯-𝗮𝘀𝘀𝗲𝗺𝗯𝗹𝘆 𝗶𝗻 𝘀𝘁𝗼𝗰𝗸, 𝗮𝗻𝗱 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝘀 𝘀𝗰𝗵𝗲𝗱𝘂𝗹𝗲 𝗿𝗲𝗰𝗲𝗶𝗽𝘁𝘀
• identifies what needs to be purchased by considering available inventory and current schedule receipts

Question 16

Describe the MPS, what does it stand for

Answer 16

Master Production Schedule

• details the production plan for each finished good

–> outlining the specific quantities of finished products (the independent demand level) to be produced in a specific timeframe

Question 17

What does the MPS consider

Answer 17

𝗶𝘁 𝗰𝗼𝗺𝗯𝗶𝗻𝗲𝘀 𝗮𝗰𝘁𝘂𝗮𝗹 𝗼𝗿𝗱𝗲𝗿𝘀, 𝗳𝗼𝗿𝗲𝗰𝗮𝘀𝘁𝗲𝗱 𝗼𝗿𝗱𝗲𝗿𝘀 𝗮𝗻𝗱 𝗲𝘀𝘁𝗶𝗺𝗮𝘁𝗲𝘀

also considers:
- lead times
- production capacity

–> it is informed by the aggregate plan

Question 18

Why is the MPS important

Answer 18

• 𝐝𝐫𝐢𝐯𝐢𝐧𝐠 𝐟𝐨𝐫𝐜𝐞 𝐟𝐨𝐫 𝐌𝐑𝐏, because it tells it what goods need to be produced and when

Question 19

REVISION QUESTIONS: What are the outputs of the MRP report?

Answer 19

The MRP reports
- purchasing
- materials control
- production

Question 20

How does the MRP engine do the calculations to meet the finished product requirements

Answer 20

converts product requirements into component requirements through 𝐭𝐢𝐦𝐞 𝐩𝐡𝐚𝐬𝐞𝐝 𝐩𝐚𝐫𝐭𝐬 𝐞𝐱𝐩𝐥𝐨𝐬𝐢𝐨𝐧

Question 21

What is MRP II

Answer 21

MRP II = MRP + capacity planning

expands on MRP by co-ordinating capacity aswel

Question 22

What is a CRP

Answer 22

*Capacity Requirements Plan

• additional report in an MRP II system
• assesses and manages the production capacity required to fulfil production schedule

considers
- machine capacity
- labor requirements
- lead times

Question 23

Main requirement for MRP II

Answer 23

• all based on databases, that must be accurate:

Question 24

examples of different types of data needed

Answer 24

• inventory info
• supplier info
• bills of materials (BOM)

Question 25

what is the next development of MRP II

Answer 25

ERP

enterprise resource planning
–> moving to cloud-based ERP services like SaaS

Question 26

REVISION QUESTION: What is enterprise resource planning

Answer 26

• a single comprehensive software system that provides firms with everything needed to plan, operate and manage all business operations

Question 27

give examples of how ERP manages different business functions

Answer 27

*sales and marketing
–> forecasting
–> aggregate planning

• procurement/supply chain management
  –> inventory management
  –> supplier logistic
• production and materials planning
  –> production schedule
  –> quality checks

*order management

• finances and accounting
• HR

Question 28

REVISION QUESTIONS: Why is ERP moving to the cloud?

Answer 28

• improved efficiency through streamlined processes and integration of data
• reduced costs as optimised processes and resource allocation
  –> less upfront cost on hardware infrastructure
• facilitates increased collaboration and communication between departments
• increased accessibility and flexibility
  –> can access anywhere and any time
• cheap and quick to update and scale up
• automatic updates and security