Part 5- Aggregate planning and scheduling Flashcards
Time horizons for planning capacity
1) long range (1-3+ years) → decisions about facilities and equipment with long lead time
2) medium range (3-12 months) → aggregate planning/ sales and operations planning- decisions about adding equipment, personnel and working shifts, outsource production, building or using inventory
3) short time (up to 2-3 months) → production planning → difficult to adjust in the short run- decisions about production and people
Aggregate planning
- determine resource capacity to meet demand (3-12 months) by adjusting production or managing demand
- medium range capacity of production
- the capacity and production plan should match our customers demand
- also need to consider the capacity level of the company- are there any capacity limitations? Do we need another machine? Can we afford one etc
- Called aggregate because it is at family of production level
- disaggregate to sku level- create a MPS
Example: bike example in the slides
MPS- Master production schedule
The capacity plan for the next 2-3 months at SKU level
- a detailed plan- not only total number of bikes but which types and how many produced each week
BOM- Bill of materials
A recipe of ingredients for dependent demand products (raw materials + components) that go into the final product
Different levels- it has a defined structure
Level 0 → the finished good (the parent, the independent demand item)
Level 1, 2, 3 ++ → the dependent demand items (the children)
MRP- Material requirements planning
- Breaking down the MPS and create a BOM
- once we have the MPS (master production schedule) → we create the BOM (bill of materials) to determine raw materials + components requirements
MRP = MPS + BOM + inventory balances + lead time + scheduled receipts (purchase orders and production work orders
–> once MPR is done and material availability is confirmed a short term production schedule is created
The aggregate planning process- 5 steps
1) Data gathering- know the demand at the aggregate level to know what resources will be needed (raw materials, components, employers, machines ++)
2) Demand planning- the companies arrange cross functional meetings involving all the different apartments in the company (manufacturing, distribution, sales, logistics ++)
3) Supply planning- cross functional meeting- demand is adjusted with inventory levels to create production/purchasing plans
4) Pre-meeting - with the department managers
5) Executive meeting- outcome presented to executive management
An aggregate plan:
An aggregate plan specifies what materials and other resources are need and when they should be produced to minimize costs. The ideal outcome of aggregate planning is to maximize a facility’s productivity at the lowest possible cost to the manufacturer.
Aggregate plan needs input such as:
- resources and facilities available
- demand forecasting including time horizon
- cost of several options and resources
- company´s organizational resources
Demand options to adjust:
- influence demand → advertising, pricing, promotions, discounts etc
- influence demand with backorders- wait for an order to be produced- if the costumer can’t wait it will be a lost sale
- new or counter seasonal demand- to balance demand by season. Example: A company that sells lawn mowers starts producing snow blowers.
Supply options to adjust:
- hire and lay of employees as demand hits peaks and valleys
- overtime/idle time- move employers to other jobs/departments
- Example: if demand is low move workers to do maintenance of machines, the warehouse etc
part-time or temporary workers
subcontracting manufacturing →or outsourcing, however it is usually more expensive - part time or temporary workers
- subcontracting manufacturing- outsourcing is normally more expensive
- try to change inventory levels
Example: if we know the demand will be high during christmas season we will make sure the products are ready for that time
Aggregate planning strategies
Level plans strategy:
- constant workforce and production
adapt to the level of demand through changes in inventories and with backorders
Chase plans strategy:
- adjusting production and workforce to demand
- able to minimize their inventories levels and then also the inventory costs
Mixed strategy:
- using both level plans and chase plans
Production strategies
- MTS- Make to stock (push processes)
- MTO- Make to order (pull processes)
- ATO- Assemble to order- they have the different parts of the product and assemble it once they receive the order
- ETO- Engineer to order- normally for projects- the company use the customers precise specifications that require unique engineering decide- tailor made products
MRP mechanics
- Understand the process
- Left part of the slide: the production part → the MPS at SKU level
- Right part of the slide: purchasing orders
- Planned receipts- do not take into the lead time (!!) different from planned orders (important for the exam)
- understand the connection between production and purchasing
More elements companies should take into account regarding MRP mechanics:
- normally safety stocks are added and taken into account- important to take into the minimum quantities required by suppliers
- quantity required is rounded up taken into account the economic order quantity and other quantities
- slow moving items- an order per year/ 6 months etc to be as efficient as possible (planned orders grouped)- minimize costs
- planned orders for both independent and dependent demand are used to create production work orders (left part in example slide) and purchase order (right part)
Types of scheduling:
1) Forward scheduling- scheduling of production → used when the production is calculated to be started from the date resources become available
2) Backward scheduling- plans tasks from the due date to determine the start date- when do we have to start to make sure they are ready on time?
3) Sequencing- take into account priority rules and the real job time
