Lecture 3 - Aggregate Planning Flashcards
what is aggregate planning
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
benefits of aggregate planning
- minimise costs
- improve effectiveness of resource allocation
what does an aggregate plan consider
- constraints on resources/facilities
- firms strategic objectives
- based on forecast demand, capacity and inventory
- company usually aggregates similar products together
define sales and operations planning
๐ฎ ๐ฝ๐ฟ๐ผ๐ฐ๐ฒ๐๐ ๐๐ต๐ฎ๐ ๐๐ฟ๐ฎ๐ป๐๐น๐ฎ๐๐ฒ๐ ๐ฏ๐๐๐ถ๐ป๐ฒ๐๐ ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ ๐ถ๐ป๐๐ผ ๐ฟ๐ฒ๐ฎ๐น๐ถ๐๐๐ถ๐ฐ ๐ผ๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐ฝ๐น๐ฎ๐ป๐
โ> ensures the communication and agreement/balance between different interest groups on the inputs that MPS receives
REVISION QUESTION: what does sales and operations planning do
โ> balances forecasted demand with supply capabilities (capacity and inventory)
โ> therefore informs the MPS
โ> identifies risk in supply chain (e.g. demand fluctuations)
โ> considers resource constraints and allocation, to improve decision making
โ> increases cohesion and collaboration as regular meetings
typical key functions involved in sales and operations planning
- sales and marketing
- operations and supply chain management
- purchasing/materials management
*engineering - HR & accounting
Key features of sales and operations forecasting
- 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
REVISION QUESTION: How does Sales and Operations Planning differ from aggregate planning
- 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
Define independent demand in materials planning
give examples
which approaches does it involve
๐ฑ๐ฒ๐บ๐ฎ๐ป๐ฑ ๐ณ๐ผ๐ฟ ๐ฎ ๐ณ๐ถ๐ป๐ถ๐๐ต๐ฒ๐ฑ ๐ด๐ผ๐ผ๐ฑ ๐ผ๐ฟ ๐๐ฝ๐ฎ๐ฟ๐ฒ๐ ๐๐ต๐ฎ๐ ๐ถ๐ ๐ป๐ผ๐ ๐ฑ๐ถ๐ฟ๐ฒ๐ฐ๐๐น๐ ๐ถ๐ป๐ณ๐น๐๐ฒ๐ป๐ฐ๐ฒ๐ฑ ๐ฏ๐ ๐๐ต๐ฒ ๐ฑ๐ฒ๐บ๐ฎ๐ป๐ฑ ๐ณ๐ผ๐ฟ ๐ผ๐๐ต๐ฒ๐ฟ ๐ฝ๐ฟ๐ผ๐ฑ๐๐ฐ๐๐.
finished goods sold to customers (e.g. printers)
spare parts sold to consumers (e.g. printer cartridges)
APPROACHES
โ> forecasting
โ> inventory management
define dependent demand in materials planning
examples
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
โ> MRP
โ> production plans
What does MRP stand for,
and what are the inputs to the MRP process
MRP = Materials Requirements Planning
1* Bill of Materials (BOM)
2* Master Production Schedule (MPS)
3*Inventory Records File
Define MRP
how often is it typically done
๐๐๐๐๐ฒ๐บ ๐ณ๐ผ๐ฟ ๐ฝ๐น๐ฎ๐ป๐ป๐ถ๐ป๐ด ๐ฎ๐ป๐ฑ ๐ฐ๐ผ๐ป๐๐ฟ๐ผ๐น๐น๐ถ๐ป๐ด ๐๐ต๐ฒ ๐บ๐ฎ๐๐ฒ๐ฟ๐ถ๐ฎ๐น๐/๐ฐ๐ผ๐บ๐ฝ๐ผ๐ป๐ฒ๐ป๐๐ ๐๐ต๐ฎ๐ ๐ฎ๐ฟ๐ฒ ๐ป๐ฒ๐ฒ๐ฑ๐ฒ๐ฑ ๐๐ผ ๐ฝ๐ฟ๐ผ๐ฑ๐๐ฐ๐ฒ ๐ณ๐ถ๐ป๐ถ๐๐ต๐ฒ๐ฑ ๐ด๐ผ๐ผ๐ฑ๐
(converts independent demand -finished goods- into dependent demand -raw materials & components)
โ> ensures you have right materials at right time to meet production demand
โ> founded upon accurate databases
*typically done monthly
describe the BOM
what is is aka
- Bill of Materials (aka Parts master File)
- ๐๐๐ฟ๐๐ฐ๐๐๐ฟ๐ฒ๐ฑ ๐น๐ถ๐๐ ๐๐ต๐ฎ๐ ๐ฏ๐ฟ๐ฒ๐ฎ๐ธ๐ ๐ฑ๐ผ๐๐ป ๐ผ๐ป๐ฒ ๐ณ๐ถ๐ป๐ถ๐๐ต๐ฒ๐ฑ ๐ฝ๐ฟ๐ผ๐ฑ๐๐ฐ๐ ๐ถ๐ป๐๐ผ ๐๐ต๐ฒ ๐พ๐๐ฎ๐ป๐๐ถ๐๐ ๐ผ๐ณ ๐ถ๐๐ ๐ฐ๐ผ๐ป๐๐๐ถ๐๐๐ฒ๐ป๐ ๐ฝ๐ฎ๐ฟ๐๐
- 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)
What information does the Parts Master File provide for each part
Provides information on:
- description
- lead time
- storage info
- cost info
- make or buy part
ALSO
- considers common parts
describe the Inventory Records File
- ๐ฐ๐ผ๐ป๐๐ฎ๐ถ๐ป๐ ๐ฟ๐ฒ๐ฎ๐น ๐๐ถ๐บ๐ฒ ๐ฑ๐ฎ๐๐ฎ ๐ผ๐ป ๐พ๐๐ฎ๐ป๐๐ถ๐๐ ๐ฎ๐ป๐ฑ ๐ฎ๐๐ฎ๐ถ๐น๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ ๐ผ๐ณ ๐ฒ๐ฎ๐ฐ๐ต ๐บ๐ฎ๐๐ฒ๐ฟ๐ถ๐ฎ๐น, ๐ฐ๐ผ๐บ๐ฝ๐ผ๐ป๐ฒ๐ป๐ ๐ฎ๐ป๐ฑ ๐๐๐ฏ-๐ฎ๐๐๐ฒ๐บ๐ฏ๐น๐ ๐ถ๐ป ๐๐๐ผ๐ฐ๐ธ, ๐ฎ๐ป๐ฑ ๐ถ๐ป๐ฐ๐น๐๐ฑ๐ฒ๐ ๐๐ฐ๐ต๐ฒ๐ฑ๐๐น๐ฒ ๐ฟ๐ฒ๐ฐ๐ฒ๐ถ๐ฝ๐๐
- identifies what needs to be purchased by considering available inventory and current schedule receipts
Describe the MPS, what does it stand for
Master Production Schedule
- details the production plan for each finished good
โ> outlining the specific quantities of finished products (the independent demand level) to be produced in a specific timeframe
What does the MPS consider
๐ถ๐ ๐ฐ๐ผ๐บ๐ฏ๐ถ๐ป๐ฒ๐ ๐ฎ๐ฐ๐๐๐ฎ๐น ๐ผ๐ฟ๐ฑ๐ฒ๐ฟ๐, ๐ณ๐ผ๐ฟ๐ฒ๐ฐ๐ฎ๐๐๐ฒ๐ฑ ๐ผ๐ฟ๐ฑ๐ฒ๐ฟ๐ ๐ฎ๐ป๐ฑ ๐ฒ๐๐๐ถ๐บ๐ฎ๐๐ฒ๐
also considers:
- lead times
- production capacity
โ> it is informed by the aggregate plan
Why is the MPS important
- ๐๐ซ๐ข๐ฏ๐ข๐ง๐ ๐๐จ๐ซ๐๐ ๐๐จ๐ซ ๐๐๐, because it tells it what goods need to be produced and when
REVISION QUESTIONS: What are the outputs of the MRP report?
The MRP reports
- purchasing
- materials control
- production
How does the MRP engine do the calculations to meet the finished product requirements
converts product requirements into component requirements through ๐ญ๐ข๐ฆ๐ ๐ฉ๐ก๐๐ฌ๐๐ ๐ฉ๐๐ซ๐ญ๐ฌ ๐๐ฑ๐ฉ๐ฅ๐จ๐ฌ๐ข๐จ๐ง
What is MRP II
MRP II = MRP + capacity planning
expands on MRP by co-ordinating capacity aswel
What is a CRP
*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
Main requirement for MRP II
- all based on databases, that must be accurate:
examples of different types of data needed
- inventory info
- supplier info
- bills of materials (BOM)
what is the next development of MRP II
ERP
enterprise resource planning
โ> moving to cloud-based ERP services like SaaS
REVISION QUESTION: What is enterprise resource planning
- a single comprehensive software system that provides firms with everything needed to plan, operate and manage all business operations
give examples of how ERP manages different business functions
*sales and marketing
โ> forecasting
โ> aggregate planning
- procurement/supply chain management
โ> inventory management
โ> supplier logistic - production and materials planning
โ> production schedule
โ> quality checks
*order management
- finances and accounting
- HR
REVISION QUESTIONS: Why is ERP moving to the cloud?
- improved efficiency through streamlined processes and integration of data
- reduced costs as optimised processes and resource allocation
โ> less upfront cost on hardware infrastructure - facilitates increased collaboration and communication between departments
- increased accessibility and flexibility
โ> can access anywhere and any time - cheap and quick to update and scale up
- automatic updates and security
