Production Planning and Control Methods, Aggregate Planning, Capacity Planing, Scheduling

7/31/2019 Production Planning and Control Methods, Aggregate Planning, Capacity Planing, Scheduling

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PRODUCTION

PLANNING&

CONTROL


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Production system is encompassed by four factors:

Quantity

Quality

Cost

Time

Production Planning and Control

What to produce

When to produce

How much to produce

What resources are needed in production

How to coordinate these resources

How to control the deviation from planned production

ProductionPlanning

ProductionControl


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Objectives of production Planning and Control

1. Coordination among different resources and departments

2. Establishment of targets

3. Ensurance right product at right time in right quantity

4. Minimum overall production cost

5. Forecasting of demand

6. Smooth flow of materials

7. Elimination of bottlenecks

8. Utilization of inventory in the optimal way


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Factors that affect the production system (because ofwhich there is deviation)

Non availability of materialsAbsenteeism of workers

Plant, equipment and machine breakdown

Change in demand and orders

Lack of coordination and communication b/w various dept.

Difference between Production Planning and

Production Control

Production Planning Production Control

1. pre- production activity In action when production activitybegins

2. collection, maintenance andanalysis of data

Producing reports like outputreports, productivity, etc.

3. sees that all the necessary

resources are available to producea product in time

Keeps track of all activities and

sees whether everything is going asper schedule or not.


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Main Functions of Production Planning and ControlDepartment

Production planning Productioncontrolling

1. Estimating

1. Routing

1. Scheduling

1. Loading

1. Dispatching

1. Expediting/Follow-up

1. Inspection

1. Evaluating &Corrective action


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Hierarchical Nature ofPlanning

Items

Product lines orfamilies

Individualproducts

Components

Manufacturingoperations

Resource

Level

Plants

Individualmachines

Criticalwork

centers

Production

Planning

Capacity

Planning

Resourcerequirements

plan

Rough-cutcapacity

plan

Capacityrequirements plan

Input/outputcontrol

Aggregateproduction

plan

Masterproduction

schedule

Materialrequirements

plan

Shop floorschedule

All workcenters


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Aggregate planning involves translating

long-term forecasted demand into specificproduction rates and the corresponding laborrequirements for the intermediate term.

AggregateplanningLong-

term

demand

Production rates

Laborrequirements


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Aggregate Production Planning

Goal: Specify the optimal combination of

production rate (units/time)

workforce level (how many workers?)

inventory on hand (unsold product fromprevious runs)**the three items above are the basiccontrollable variables for production

planning Product group or broad category (Aggregation)

Medium-Range: 6-18 months

Aggregate Production Planning is done in an organisation to match thedemand with the supply on a period-by-period basis in a cost effective

manner


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The decisions involve

Amount of resources (productive capacity and labourhours) to be committed

Rate at which goods and services needs to beproduced during a period

Inventory to be carried forward from one period to thenext

An example from Garment Manufacturing

Produce at the rate of 9000 metres of cloth everydayduring the months of January to March

Increase it to 11,000 metres during April to August

Change the production rate to 10,000 metres duringSeptember to December

Carry 10% of monthly production as inventory duringthe first 9 months of production.

Work on a one-shift basis throughout the year with20% over time during July to October


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Approaches to Aggregate Planning

Two types of approaches

a. Top- down approachb. Bottom up approach.

Top down approach:

1. Working at highest level of consolidationof product

2. Plan disaggregated to the productfamilies.

3. Relay on proper amount of total capacity


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Bottom Up Approach:

Also called as Resource Requirement

Planning(RRP) or Rough cut capacity planning.

1. They are done with Master ProductionSchedule

2. Ensures no over load occurs for anydepartment.

3. Quick and in-expensive way to find andcorrect the raw materials available andrequired for MPS.


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Copyright 2006 John Wiley & Sons, Inc.

Quantitative Techniques For

APP Pure Strategies

Mixed Strategies Linear Programming

Transportation

Method Other Quantitative

Techniques


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Pure Strategies

Hiring cost = $100 per workerFiring cost = $500 per worker

Regular production cost per pound = $2.00Inventory carrying cost= $0.50 poundper quarter

Production per employee= 1,000 poundsper quarter

Beginning work force= 100 workers

QUARTER SALES FORECAST (LB)

Spring 80,000

Summer 50,000

Fall 120,000

Winter 150,000

Example:


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Level Production Strategy

Level production

= 100,000 pounds(50,000 + 120,000 + 150,000 + 80,000)

4

Spring 80,000 100,000 20,000Summer 50,000 100,000 70,000Fall 120,000 100,000 50,000

Winter 150,000 100,000 0400,000 140,000

Cost of Level Production Strategy(400,000 X $2.00) + (140,00 X $.50) = $870,000

SALES PRODUCTIONQUARTER FORECAST PLAN INVENTORY


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Chase Demand Strategy

Spring 80,000 80,000 80 0 20

Summer 50,000 50,000 50 0 30Fall 120,000 120,000 120 70 0Winter 150,000 150,000 150 30 0

100 50

SALES PRODUCTION WORKERS WORKERSWORKERSQUARTER FORECAST PLAN NEEDED HIRED FIRED

Cost of Chase Demand Strategy(400,000 X $2.00) + (100 x $100) + (50 x $500) =$835,000


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Level Production

Demand

Units

Time

Production


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Chase Demand

Demand

Units

Time

Production


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Strategies for AdjustingProduction Planning

Level production

Producing at a constantrate and using inventory

to absorb fluctuations indemand

Chase demand

Hiring and firing workersto match demand

Peak demand Maintaining resources for

high-demand levels

Overtime and under-time

Increasing or decreasing

working hours Subcontracting

Let outside companiescomplete the work

Part-time workers Hiring part time workers

to complete the work

Backordering

Providing the service orproduct at a later time

eriod


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Steps in Aggregate ProductionPlanning Prepare sales forecast for each product over the

planning horizon (6 to 18 months) Sum up the individual products forecast into one

aggregate demand for the factory

Transform the aggregate demand for each time

period into labour, materials, machines and otherelements of production capacity required tosatisfy aggregate demand.

Select the capacity plan from among thealternatives considered that satisfy aggregatedemand and best meets the objectives of theorganization.

Approach to Aggregate Production Planning Bottom up Approach

n ro uc on a s ne


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n ro uc on : a s nebalancing?

What is Linebalancing?

Everyone is doing thesame amount of work

Doing the same amount of workto customer requirement

No oneoverburdened

No onewaiting

Everyone working togetherin a BALANCED fashion

Variation issmoothed


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Introduction : What is line balancing?


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Introduction : What is line balancing?


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Line Balancing

Apportionment of sequential workactivities into work stations in order to

gain a high utilization of labour and

equipment and therefore minimize idle

time

In other words, arranging the production line so

that there is even flow of production from one

work station to next i.e. so that there are no


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Line Balance : SimpleExample

1 2 3 4

25mins

5mins

15mins

10mins

ConstraintOverburden

This operatormust WAITfor operator

2

Overproduction whichcauses the other 6 wastes

Waiting

Over-processing

InventoryRework

TransportationMotion

This operatormust WAITfor operator

3

5

10

15

20

2

5

1 2 3 4

mins


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Line Balance : SimpleExample

5

10

15

20

2

5

Redistribute thework

1 2 3 4

15mins

15mins

15mins

10mins

Promotesone-pieceFLOW

Avoidsoverburden

Minimises the7 wastesReducesVariation


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Goal of Assembly Line Balancing

Minimize number of work stations

Minimize work load variance

Minimize idle time

Maximize line efficiency

Assembly Line Balancing is the procedure to assign tasks to workstations so that:

Precedence relationship is complied with

No workstation takes more than the cycle time to complete

Operational idle time is minimized


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How to Balance A Line

Specify the task relationship and their order of precedenceDraw and label a precedence diagram

Calculate desired cycle time/takt time

Calculate the theoretical minimum number of workstations

Group elements into work stations recognizing cycle time

and procedure

Evaluate the efficiency of line

Repeat until desired line efficiency is reached

Example


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Task Task Time(sec)

PrecedingTask

A 13 -

B 11 A

C 15 A

D 20 B

E 12 B

F 13 C

G 13 CH 18 D, E

I 17 F, G

J 15 H, I

K 9 J

Total Time: 156

Example

The table shows the tasks performed in a production line. Our goal is tocombine them into workstations. The assembly line operates 8 hours perday and the expected customer demand is 1000 units per day. Balancethe line and calculate the efficiency and theoretical minimum number ofworkstations.

SOLUTION


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SOLUTION

Step 1: Draw a precedence diagram according to the given sequentialrelationship


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Step 2: Determine Takt time or Workstation Cycle Time

C=Production time per day / Customer demand (oroutput per day)

C= 28800 sec (8 hours) / 1000 units = 28.8

Step 3: Determine the theoretical number ofworkstations required

N= Total Task Time or total operation time / Takt time

N= 156 / 28.8 = 5.42 (~6 workstations)

S f


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Step 4: Define your assignment rules. For this example ourprimary rule will be number of following tasks and thesecondary rule will be longest operation time

Step 5: Assign tasks to workstations following the assignmentrules and meeting precedence and cycle time requirements

To form Workstation 1:


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Forming Workstation 2:


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Following the same criteria we achieve our balancing with 7workstations

Workstation Task Task Time

Remaining

Unassigned

Time

Feasible

Remaining

Tasks

Task with

most

followers

Task wit

LOT

A 13 15.8 B, C B, C C

C 15 0.8 -

B 11 17.8 E, F, G E, F, G F, G

F 13 4.8 -

3 D 20 8.8 -

G 13 15.8 E

E 12 3.8 -5 H 18 10.8 -

6 I 17 11.8 -

J 15 13.8 K

K 9 4.8 -

1

2

4

7


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Step 6: Calculate Efficiency

Efficiency= Total Task Time / (Actual numberof workstations * Takt Time)

Efficiency= 156 / (7*28.8) = 77%


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Capacity Planning

In the context of capacity planning, "capacity" is the maximumamount of work or production that an organization is capable ofcompleting in a given period of time.

Capacity planning is the process of determining and adjusting

the production capacity needed by an organization to meetchanging demands for its products.

It is concerned with defining the long term and short term capacity

needs of a firm and determining how these needs will be met.

Measurement of Capacity:


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Measurement of Capacity:By terms of input or output of firm.Example:

Organisation Measure of Capacity

Automobile factory Number of vehicles

Steel Mill Tones of Steel

Power Plant Mega watt of electricitygenerated

Job shop Labour hours worked.Airline Number of seats

Hospitals Number of beds

University Number of students

Types of Capacity


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Types of CapacityFixed Capacity capital assets the company have at particular

time; they cannot be easily changed

Adjustable Capacity size of workforce, no. of hours per week they

work, no. of shifts and extent of sub-contracting\

Design Capacity max. planned output that can be achieved under

the full scale operations.

System Capacity max. output of a specific product or product mix

that the system of workers and machines is capable of producing.

Potential Capacity Capacity which can be made available within

the decision horizon of top management


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Immediate Capacity - Capacity which can be made available within

the current budgeted period

Effective Capacity - Capacity which is used within the current

budgeted period. Also known as practical capacity or operating

capacity i.e.

Practical Capacity = Theoretical Capacity lost capacity due to

inefficiency and scrap

factor

Normal Capacity Estimated quantity of output that should be

usually achieved. Also known as Average Capacity

Actual Capacity Actual output achieved during a particular period.


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System Efficiency = (Actual output / System capacity)

Types of Capacity Planning

1. Long-term planning

2. Short-term planning

3. Finite planning

4. Infinite planning

Based on timehorizon

Based on amount of resourcesemployed


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The broad classes of capacity planning

1. Lead strategy

2. Lag strategy

3. Match strategy

Lead strategy is adding capacity in anticipation of anincrease in demand. Lead strategy is an aggressive strategy

with the goal of luring customers away from the company'scompetitors. The possible disadvantage to this strategy is thatit often results in excess inventory, which is costly and oftenwasteful.


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Lag strategy refers to adding capacity only after theorganization is running at full capacity or beyond due to increasein demand. This is a more conservative strategy. It decreases therisk of waste, but it may result in the loss of possible customers.

Match strategy is adding capacity in small amounts inresponse to changing demand in the market. This is a moremoderate strategy.

Factors affecting Capacity decision


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Factors affecting Capacity decision

1. Market demand for a product/service

2. The amount of capital that can be invested

3. Degree of automation desired

4. Level of integration (i.e., vertical integration)

5. Type of technology selected

6. Dynamic nature of all factors affectingdetermination of plant capacity, viz., changesin the product design, process technology,

market conditions' and product life cycle, etc.

Diffi lt i f ti f t d d d


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7. Difficulty in forecasting future demand andfuture technology.

8. Obsolescence of product and technology overa period of time.

9. Present demand and future demand both over

short-range, intermediate-range and long-range time horizons.

10. Flexibility for capacity additions.


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Master Production scheduling (MPS)

1. Master schedule Quantity of each end itemto be completed in each time period( shortrange horizon)

2. MPS is developed to review market forecast,customer order, inventory levels etc..

Objectives


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Objectives1. To schedule end items to be completed

promptly and when promised to customers.2. To avoid overloading or under-loading the

production facility, so that, productioncapacity is efficiently utilized and lowproduction costs result.

Functions(a) Translating aggregate plans into specificend items(b) Evaluating alternative schedules

(c) Generating material requirements(d) Generating capacity requirements(e) Facilitating information processing(f)Maintaining valid priorities

(g) Utilizing capacity effectively

Time Fences in MPS


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MPS is divided into 4 section based on timecalled time fence

1. Frozen 1st section MPS cannot be changedexcept on extraordinary situation

After getting authorization from higherlevels

Because costly2. Firm Change occur but exceptional situation3.

Full All products are allocated to orders,Change makesproduction cost to be affected in less

amount

4. Open Not all production capacity has been

Procedure for


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developing MPS


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Guidelines to Master Scheduling1. Work from an aggregate production plan.2. Schedule common modules when possible.3. Load facilities realistically.4. Release orders on a timely basis.5. Monitor inventory levels closely.6. Reschedule as required.

Updating MPS


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Updating MPSv Updated weekly

MPS in Produce to stock & Produce to orderfirm

The element of MPS are affected by,a) Demand Managementb) Lot Sizingc) No. of products to be scheduled.

In produce to Stockv Order come from warehouse within

companyv Order based on future demandv Forecast play important role in demand

management.

In Product to order


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In Product to order

1. Demand management is customer.

2. Lot size is also depending on customer order.

Symptoms of poorly designed MPS

1. Overloaded facilities2. Under-loaded facilities.3. Excessive inventory levels on some end

items and frequent stock-outs on others.4. Unrealistic schedules that production

personnel do not follow.5. Unreliable delivery promises to customers.6. Excessive expediting or follow-up.

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Production Planning and Control Methods, Aggregate Planning, Capacity Planing, Scheduling

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