Production
and
Norman Gaither
Operations Management Greg Frazier
Slides Prepared by John Loucks
1999 South-Western College Publishing
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Chapter 9 Production-Planning Systems: Aggregate Planning and Master Production Scheduling
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Overview
Production-Planning Hierarchy Aggregate Planning Master Production Scheduling Types of Production-Planning and Control Systems Wrap-Up: What World-Class Producers Do
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Production Planning Hierarchy Long-Range Capacity Planning
Chapter 7
Aggregate Planning Master Production Scheduling
Chapter 9
Production Planning and Control Systems Pond Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks
Chapter 10
Chapter 11
Chapter 14
Chapter 9,12
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Production Planning Horizons Long-Range Capacity Planning
Long-Range (years)
Aggregate Planning
Medium-Range (6-18 months)
Master Production Scheduling
Short-Range (weeks)
Production Planning and Control Systems
Very-Short-Range (hours - days)
Pond Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks 4
Production Planning: Units of Measure Long-Range Capacity Planning
Entire Product Line
Aggregate Planning
Product Family
Master Production Scheduling
Specific Product Model
Production Planning and Control Systems
Labor, Materials, Machines
Pond Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks 5
Aggregate Planning
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Why Aggregate Planning Is Necessary
Fully load facilities and minimize overloading and underloading Make sure enough capacity available to satisfy expected demand Plan for the orderly and systematic change of production capacity to meet the peaks and valleys of expected customer demand Get the most output for the amount of resources available 7
Inputs
A forecast of aggregate demand covering the selected planning horizon (6-18 months) The alternative means available to adjust short- to medium-term capacity, to what extent each alternative could impact capacity and the related costs The current status of the system in terms of workforce level, inventory level and production rate
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Outputs
A production plan: aggregate decisions for each period in the planning horizon about workforce level inventory level production rate Projected costs if the production plan was implemented
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Medium-Term Capacity Adjustments
Workforce level Hire or layoff full-time workers Hire or layoff part-time workers Hire or layoff contract workers Utilization of the work force Overtime Idle time (undertime) Reduce hours worked . . . more
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Medium-Term Capacity Adjustments
Inventory level Finished goods inventory Backorders/lost sales Subcontract
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Approaches
Informal or Trial-and-Error Approach Mathematically Optimal Approaches Linear Programming Linear Decision Rules Computer Search Heuristics
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Pure Strategies for the Informal Approach
Matching Demand Level Capacity Buffering with inventory Buffering with backlog Buffering with overtime or subcontracting
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Matching Demand Strategy
Capacity (Production) in each time period is varied to exactly match the forecasted aggregate demand in that time period Capacity is varied by changing the workforce level Finished-goods inventories are minimal Labor and materials costs tend to be high due to the frequent changes
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Developing and Evaluating the Matching Production Plan
Production rate is dictated by the forecasted aggregate demand Convert the forecasted aggregate demand into the required workforce level using production time information The primary costs of this strategy are the costs of changing workforce levels from period to period, i.e., hirings and layoffs
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Level Capacity Strategy
Capacity (production rate) is held level (constant) over the planning horizon The difference between the constant production rate and the demand rate is made up (buffered) by inventory, backlog, overtime, part-time labor and/or subcontracting
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Developing and Evaluating the Level Production Plan
Assume that the amount produced each period is constant, no hirings or layoffs The gap between the amount planned to be produced and the forecasted demand is filled with either inventory or backorders, i.e., no overtime, no idle time, no subcontracting . . . more
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Developing and Evaluating the Level Production Plan
The primary costs of this strategy are inventory carrying and backlogging costs Period-ending inventories or backlogs are determined using the inventory balance equation:
EIt = EIt-1 + (Pt - Dt )
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Aggregate Plans for Services
For standardized services, aggregate planning may be simpler than in systems that produce products For customized services, there may be difficulty in specifying the nature and extent of services to be performed for each customer customer may be an integral part of the production system Absence of finished-goods inventories as a buffer between system capacity and customer demand
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Preemptive Tactics
There may be ways to manage the extremes of demand: Discount prices during the valleys.... have a sale Peak-load pricing during the highs .... electric utilities, Nucor
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Master Production Scheduling (MPS)
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Objectives of MPS
Determine the quantity and timing of completion of end items over a short-range planning horizon. Schedule end items (finished goods and parts shipped as end items) to be completed promptly and when promised to the customer. Avoid overloading or underloading the production facility so that production capacity is efficiently utilized and low production costs result.
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Time Fences
The rules for scheduling
1-2 weeks
2-4 weeks
4-6 weeks
6+ weeks
+/- 5%
+/- 10%
+/- 20%
Change
Change
Change
No Change
Frozen
Firm Full Open
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Time Fences
The rules for scheduling: Do not change orders in the frozen zone Do not exceed the agreed upon percentage changes when modifying orders in the other zones Try to level load as much as possible Do not exceed the capacity of the system when promising orders. If an order must be pulled in to level load, pull it into the earliest possible week without missing the promise.
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Developing an MPS
Using input information Customer orders (end items quantity, due dates) Forecasts (end items quantity, due dates) Inventory status (balances, planned receipts) Production capacity (output rates, planned downtime) Schedulers place orders in the earliest available open slot of the MPS . . . more
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Developing an MPS
Schedulers must: estimate the total demand for products from all sources assign orders to production slots make delivery promises to customers, and make the detailed calculations for the MPS As orders are slotted in the MPS, the effects on the production work centers are checked Rough cut planning - identify underloading or overloading of capacity
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Demand Management
Review customer orders and promise shipment of orders as close to request date as possible Update MPS at least weekly.... work with Marketing to understand shifts in demand patterns Produce to order..... focus on incoming customer orders Produce to stock ..... focus on maintaining finished goods levels Planning horizon must be as long as the longest lead time item 2 7
Types of Production-Planning and Control Systems
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Types of Production-Planning and Control Systems
Pond-Draining Systems Push Systems Pull Systems Focusing on Bottlenecks
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Pond-Draining Systems [Chapter 10]
Emphasis on holding inventories (reservoirs) of materials to support production Little information passes through the system As the level of inventory is drawn down, orders are placed with the supplying operation to replenish inventory May lead to excessive inventories and is rather inflexible in its ability to respond to customer needs
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Push Systems [Chapter 11]
Use information about customers, suppliers, and production to manage material flows Flows of materials are planned and controlled by a series of production schedules that state when batches of each particular item should come out of each stage of production Can result in great reductions of raw-materials inventories and in greater worker and process utilization than pond-draining systems
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Pull Systems [Chapter 14]
Look only at the next stage of production and determine what is needed there, and produce only that Raw materials and parts are pulled from the back of the system toward the front where they become finished goods Raw-material and in-process inventories approach zero Successful implementation requires much preparation
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Focusing on Bottlenecks
Bottleneck Operations Impede production because they have less capacity than upstream or downstream stages Work arrives faster than it can be completed Binding capacity constraints that control the capacity of the system Optimized Production Technology (OPT) Synchronous Manufacturing
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Synchronous Manufacturing
Operations performance measured by throughput (the rate cash is generated by sales) inventory (money invested in inventory), and operating expenses (money spent in converting inventory into throughput) . . . more
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Synchronous Manufacturing
System of control based on: drum (bottleneck establishes beat or pace for other operations) buffer (inventory kept before a bottleneck so it is never idle), and rope (information sent upstream of the bottleneck to prevent inventory buildup and to synchronize activities)
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Wrap-Up: World-Class Practice
Push systems dominate and can be applied to almost any type of production Pull systems are growing in use. Most often applied in repetitive manufacturing Few companies focusing on bottlenecks to plan and control production.
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End of Chapter 9
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