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Aggregate Planningand Resource Planning
Chapters 13 and 14
Management 326
Operationsand
OperationsStrategy
Designing
anOperation
sSystem
Managingan
OperationsSystem
Improvingan
OperationsSystem
(Just-in-Time)
Inventory Managementfor Independent Demand
Supply Chain Management
Aggregate Planning
Resource Planning
Presentation Outline
Planning for Operations What is Aggregate Planning, and why is it
important 3 Levels of planning for manufacturing
Master Production Schedule and Rough Cut Capacity Plan
Aggregate Planning options Work force and capacity management Demand management
Presentation Outline (2)
Resource Planning: Material Requirement Planning (MRP) Objective and definition Terminology MRP process and databases
Enterprise resource planning (ERP) ERP systems ERP II systems
Aggregate Operations Planningfor Services
Input: demand forecast by product line by month by facility
Output: Labor requirements by month by facility
Aggregate Plan in Manufacturing
Objective: Match supply and demand so that the sales plan can be met.
Input: sales forecast by product line by month for 6-18 months
Information in the plan, by product line by month Supply: production and outsourcing (buying
from another firm) by product line by month Labor force by product line by month Ending inventory level by month
Why is Aggregate Planning Important?
Operations and supply chain management To ensure that Operations is prepared to
meet customer needs Should make-buy decisions be changed? Contracts for raw materials and parts Labor requirements Inventory levels
Why is Aggregate Planning Important? (2)
Marketing To ensure that the company's capacity
will be used in the most profitable way, considering market constraints
If there is not enough capacity, which products or customers will have priority?
If there is more capacity than needed, how can the firm sell more?
The Aggregate Operations Plan and the Sales Plan must be consistent.
Why is Aggregate Planning Important?(3)
Accounting and Finance To have an accurate budget for operations To ensure adequate cash flow for operations Year-end inventory levels affect earnings
forecasts Human resources management
If more workers will be needed, plan for hiring and training
If fewer workers are needed, plan for layoffs
3 Levels of Planning for Manufacturing
Master Production Schedule (MPS)and Rough Cut Capacity Plan
Master Production Schedule (MPS): shows planned production by item, by day or week, for 2 – 6 months Is revised as sales forecast changes
Rough Cut Capacity Plan: a calculation to ensure that there is enough capacity to make the items in the Master Production Schedule
Aggregate Production Planand Master Production Schedule (MPS)
Master Production Schedule
Aggregate Planning OptionsWork Force and Capacity
Management
Hiring Layoffs Increase or decrease working hours
(overtime or undertime) Increase or decrease use of part-time
or temporary workers Contract production to another firm Use contract service workers (service
or administrative departments)
Aggregate Planning OptionsDemand Management
To increase demand, reduce prices and offer special promotions
Service firms often use appointment systems to match supply and demand
Ch 13 - 2© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e
Material Requirement Planning (MRP)
Objective: To ensure that customer demand will be met in a cost-effective way
MRP is a computerized inventory control and production planning system for dependent demand
Schedules component items and subassemblies when they are needed - no earlier and no later Specifies planned orders for internal
production and external purchase
Ch 13 - 17© 1998 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e
MRP Terminology
Lot size: amount of an item to order. Lead time (LT): elapsed time from order
placement to order receipt. LT is assumed to be fixed and known.
Planning periods may be days, weeks or months. Must be consistent. Current period = period 1.
MRP Terminology (2)
Planned order receipt: order quantity which must be received on a specific date. May be a work order or a purchase order.
Planned order release: order quantity which will be released on a specific date.
Available to promise: amount of inventory and planned production which is available to fill new customer orders.
Step Stool Assembly
Step Stool Assembly (2)
MRP Process
MRP requires data accuracy in all files.
(Planned order report)
Databases Used in MRP Calculation
Bill of material file: list of parts, raw materials, and subassemblies for each finished good
Quantity required for each item Order of assembly (how product is put together)
Inventory records file: amount of each finished good, part, raw material, and subassembly in inventory, plus amounts already ordered and expected dates of receipt
First Generation ERP System
A management information system that uses a common database (data warehouse) and integrates information from all functional areas of business In manufacturing, MRP is one part of the
ERP system
Enterprise Resource Planning
Why Enterprise Resource Planning (ERP)
was Needed
Marketing, Operations, Accounting and Finance, and Human Resources Management need to share a common database
Companies need to communicate rapidly with suppliers and
customers share selected data with suppliers and
customers
ERP II Systems
Include first-generation ERP system functions, plus links with suppliers and customers
Used to implement supply chain management
Anatomy of an ERP II System
ERP II System Advantages
Lower operating costs Shorter cycle times for manufacturing and
delivery faster customer service Better product availability
Faster replenishment of popular items Fewer unwanted items
PC-based systems are affordable for mid-size firms