Aggregate Planning and MPS

Production Planning Horizons

Long-Range Capacity Planning Aggregate Planning Long-Range (years) Medium-Range (6-18 months) Short-Range (weeks)

Master Production Scheduling

Production Planning and Control Systems Pond Draining Systems Push Systems Pull Systems

Very-Short-Range (hours - days)

Focusing on Bottlenecks
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Planning Horizon
Aggregate Planning: Intermediate-range
capacity planning, usually covering 2 to 12 months.
Long range Intermediate range

Short range Now

2 months

1 Year

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Overview of Planning Levels

Short-range plans (Detailed plans)
Machine loading Job assignments

Intermediate plans (General levels)

Employment Output

Long-range plans
Long term capacity Location / layout
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Aggregate Planning
Begin with forecast of aggregate demand Forecast intermediate range General plan to meet demand by setting Output levels/Employment Finished goods inventory level Production plan is the output of aggregate planning Update plan periodically rolling planning horizon always covers the next 12 18 months

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Aggregate Planning Inputs

Resources
Workforce Facilities

Costs
Inventory carrying Back orders Hiring/firing Overtime Inventory changes Subcontracting

Demand forecast Policies

Subcontracting Overtime Inventory levels Back orders

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Aggregate Planning Outputs

Total cost of a plan Projected levels of inventory
Inventory Output Employment Subcontracting Backordering

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Aggregate Planning Strategies

Proactive
Alter demand to match capacity

Reactive
Alter capacity to match demand

Mixed
Some of each

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Demand Options
Pricing

Promotion
Back orders New demand

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Capacity Options
Hire and layoff workers Overtime/slack time Part-time workers Inventories Subcontracting

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Aggregate Planning Strategies

Maintain a level workforce
Maintain a steady output rate Match demand period by period Use a combination of decision variables

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Basic Strategies
Level capacity strategy:
Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options.

Chase demand strategy:

Matching capacity to demand; the planned output for a period is set at the expected demand for that period.

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Techniques for Aggregate Planning

1. Determine demand for each period

2. Determine capacities for each period

3. Identify policies that are pertinent 4. Determine units costs 5. Develop alternative plans and costs 6. Select the best plan that satisfies objectives. Otherwise return to step 5.
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Mathematical Techniques
Linear programming: Methods for obtaining optimal solutions to problems involving allocation of scarce resources in terms of cost minimization.
Simulation models: Computerized models that can be tested under different scenarios to problems.

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Aggregate Planning in Services

Services occur when they are rendered Demand for service can be difficult to predict Capacity availability can be difficult to predict Labor flexibility can be an advantage in services
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Aggregate Plan to Master Schedule

Aggregate Planning

Disaggregation

Master Schedule

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Disaggregating the Aggregate Plan Master Schedule: The result of disaggregating an aggregate plan; shows quantity and timing of specific end items for a scheduled horizon.

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Master Scheduling
Master schedule
Determines quantities needed to meet demand Interfaces with
Marketing Capacity planning Production planning Distribution planning

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Master Scheduler
Evaluates impact of new orders Provides delivery dates for orders Deals with problems
Production delays Revising master schedule Insufficient capacity

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Master Scheduling Process

Inputs Beginning inventory Forecast Customer orders
Master Scheduling

Outputs Projected inventory Master production schedule Uncommitted inventory

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Time Fences

Time Fences points in time that separate phases of a master schedule planning horizon.

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Time Fences

The rules for scheduling 4-6 weeks

+/- 10%

6+ weeks

1-2 weeks
No Change

2-4 weeks
+/- 5%

+/- 20%

Frozen

Change

Change

Change

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 Do not exceed the capacity of the system when promising orders.

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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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Types of Production-Planning and Control Systems

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Types of Production-Planning and Control Systems

Pond-Draining Systems - Emphasis on holding inventories (reservoirs) of materials to support production. Push Systems - Use information about customers, suppliers, and production to manage material flows. Pull Systems - Look only at the next stage of production and determine what is needed there, and produce only that Focusing on Bottlenecks
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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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