Aggregate Operations Planning Master Scheduling

Operation Management

1. Aggregate Operations Planning Master Scheduling

2. Introduction to Aggregate Planning Nature of Aggregate Operations Planning Techniques for Aggregate Production Planning Aggregate Service Planning Disaggregating the Aggregate Production Plan Performing Master Production Planning 2

3. Production Planning Hierarchy 3 Figure 12-2

4. Aggregate Operations Planning Monthly planning for all the products in same family (and facility) for the next 12 months or so Focus on group of similar products or product line For example, planners in an ice cream plant would not concern themselves with flavours and brands of ice cream. Instead, planners would lump all tubs (containers) of the same size together General decisions about intermediate Employment levels Production levels Inventory levels 4

5. Aggregate Planning Inputs 5

6. Aggregate Planning Outputs 6

7. Basic Aggregate Strategies Level output/workforce strategy: Maintain steady rate of output Meeting variations in demand with inventories Only for durable goods Chase demand strategy: Matching capacity to demand Planned output set at forecasted demand Meeting variations in demand with overtime, subcontracting & part-time/temporary workers Use a Combination (mixed) 7

8. Basic Strategies 8 Figure 12-3

9. Techniques for Aggregate Production Planning 9

10. Aggregate Plan to Master Schedule 10 Aggregate Planning Disaggregation Master Schedule Master Production Schedule (MPS): The anticipated build schedule stating which end items are to be produced, when, and in what quantities.

11. Disaggregating the Aggregate Plan Master production schedule (MPS) Result of disaggregating an aggregate plan Shows quantity and timing of specific end items for a scheduled horizon Rough-cut capacity planning (RCCP) Convert MPS into key resource requirements Test the feasibility of a master schedule Linear Programming (LP) finds optimal plan 11

12. Master Production Scheduling Process Inputs Outputs 12

13. Aggregate Planning Relationships To determine ending inventory and back order in any period i , first calculate X: where output = sum of regular, overtime, and part-time production. If X  0, then ending inventory i = X and back order i = 0; If X < 0, then ending inventory i = 0 and back order i = -X. For each period 13 X = Beginning inventory i + (Output - Forecast) I - Back order i - 1 , Avg. inventory = (Beginning inventory + Ending inventory)/2 Beginning inventory i = ending inventory i - 1

14. Projected On-hand Inventory 14

15. MPS - Inputs 15 Figure 12-6

16. MPS – Customer Orders 16 Figure 12-7

17. Example: MPS 17 Figure 12-8

18. Example: MPS 18 Figure 12-10

19. Example: MPS 19 Figure 12-11

20. Sales and operations planning (S&OP) is the process of integrating sales forecasts with operations plans. Done annually but updated monthly. Aggregate operations planning establishes general levels of employment, output, and inventories for the next 12 months or so. Intermediate-term planning/scheduling. Consider overall levels of employment, output, and inventories for a family of products. Planning variables: using overtime, part-time/-temporary workers, subcontracting, and carrying inventory. Planning strategies range from level output/workforce to chase demand. Techniques: informal (trial-and-error) graph/table/worksheet with trade-off analysis, or optimization techniques such as linear programming and transportation model. 20 Summary (1)

21. Services cannot use inventories and thus rely on chase demand strategy. They also usually use the amount of workforce (hours or FTE) as the equivalent unit. The aggregate plan is disaggregated into specific product production plans to create a master production schedule (of planned production quantities and timing). MPS inputs: on-hand inventory, forecasts of demand, committed orders. MPS outputs: planned productions, projected on-hand inventories and uncommitted inventories (available-to-promise). Rough-cut capacity planning determines load on the production process of an MPS, thus checking its feasibility. Time fences are used to reduce last-minute changes to an MPS. The near future is frozen unless an emergency occurs. 21 Summary (2)

22. Explain sales and operations planning and aggregate planning. Identify aggregate planning strategies and variables. Outline the inputs and outputs and major steps in the Sales and Operations Planning Process. Describe & explain: Strategies for Adjusting Capacity Strategies for Managing Demand Quantitative techniques for aggregate planning and MPS Basic understanding of what exists Able to create a simple plan Explain and perform master production scheduling. Understand differences in aggregate planning for services: Yield management Learning Checklist 22