It is comprehensive term used to describe all manufacturing or service operations planning.

This includes all operations management planning activities, from creation or sale of a product or service to its delivery.

Its purpose is to provide an organization with a feasible production plan that will satisfy market demand and minimize costs.

It is also essential to identify and correct imbalances between product demand and production capacity.

Without this planning, organization will find it difficult to determine the following:1. Adequate production capacity to meet forecast demand levels.2. Wether to use subcontracting or overtime to achieve production goals.3. Wether to change company policies on such items as inventory levels or backordering (accepting an order but not producing it until a later date)4.The number of employees to hire (or fire) for the next year’s, month’s, or week’s production.

Advantages of having a production planning:1. Minimize the inventory cost of providing goods and services to its customers2. Avoid underutilization or overutilization (or both) of human resources and plant facilities.3. Establish a master production schedule that details required work activities.

RELATIONSHIP BETWEEN THE TYPE AND NATURE OF PRODUCTION PLANS

Aggregate Plan: A statement of a company’s production rates, workforce levels, and inventory holding based on estimates of customer requirements and capacity limitations

Aggregate Plan: A statement of a company’s production rates, workforce levels, and inventory holding based on estimates of customer requirements and capacity limitations

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Service Industry Staffing Plan Regarding staffs and

labor related factors

Service Industry Staffing Plan Regarding staffs and

labor related factors

Manufacturing Industry Production Plan Regarding production

rates and inventory

Manufacturing Industry Production Plan Regarding production

rates and inventory

Determines resource capacity to meet demand

For intermediate time horizon, 2-12 months Plans are developed for product line or

family Plans are developed for resource capacity (labor or machine hours) Adjusting capacity OR managing demand

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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

Establish game plan for allocating resources

Smooth out imbalance between demand and production output

Develop economic strategy for meeting demand

Units of “aggregate” product

Time1 yr

Demand forecast

Regular or normal capacitylimit

shortage

0verage

Workforce force size Hire or layoff full-time workers Hire or layoff part-time workers Hire or layoff contract workers

Production rates or capacities Overtime Idle time (undertime) Reduce hours worked

Inventory level Finished goods inventory Backorders/lost sales

yes

yes

n0

no

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Chase Strategies Match demand during the planning horizon by

either Vary workforce or vary output rate

Level Strategies Maintain a constant workforce level or constant

output rate during the planning horizon Constant workforce or constant output rate

Mixed Strategies Combined several strategies

PURE STRATEGIES

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Level Production

Production

Demand

Uni

ts

Time

Chase Demand

Production

Demand

Uni

ts

Time

CAPACITY - Is the output rate at which work is completed or withdrawn from a system given an existing level of production resources.

*The capacity of an operations management system can be controlled by either its input or output rate.

*If input rate exceeds the output rate – capacity is controlled by the output rate.

* If input rate is lesser than the output rate, then the input rate deteremines the system’s capacity.

Measuring capacity – involves collecting historical output data(e.g. units produced in a day or week).- determining the maximum output of the system or averaging output over a period of time.

QUESTION: what is the weekly measured capacity of a department whose production during the last 3 weeks generated 250, 267, and 260 standard hours of work force (that is, a predetermined amount of time allowed for labor or work force setup of equipment and producing one unit of a product?

ANSWER:*The weekly measured capacity can be the

max. output of 267 hrs.*or the average of the three weeks, 259 hrs. [(250+267+260)/3]

Calculating Capacity – involves the relationship below:Capacity = Available time X Utilization X Efficiencywhere:Available time - total production time available for production purposes.Utilization - is the proportion that measures how intensely a resource is being used.Efficiency - is the proportion that measures how closely predetermined standards such as productivity index are achieved.

Capacity = Available time X Utilization X Efficiency

Capacity Planning – includes the management activities of establishing, measuring, and adjusting limits and levels of human and physical production capacity.

Resource Requirement Planning (RRP) - a long-range capacity planning module, checks whether aggregate resources are capable of satisfying the aggregate production. Resources considered include gross labor hours & machine hours.

Medium-range capacity planning, or rough-cut capacity planning (RCCP) - used to check feasibility of MPS. Converts MPS from production needed to capacity required, then compares it to capacity available.

Capacity requirements planning (CRP) - a short-range capacity planning technique that is used to check the feasibility of the material requirements plan.

Input / Output control- is actually a capacity control process used to control the input and output at a workstation.

Operation Sequencing techniques- are techniques used for planning job orders through operations management workstations. The techniques can consider the capacity requirements planning and existing human and machine resources to advise a job sequencing plan.

OVERVIEW OF CAPACITY PLANNING TECHNIQUES

Graphic Methods – this involve the use of graphs to clearly depict the differences between the forecast market demand behavior and the effect of various production planning strategies on an organization’s future operation.

Worksheet Methods- are tabular planning methods that can be used in most areas of production planning.

Management Science-based production planning methods – these use complex mathematical representations.

Linear programming (LP)- is an optimization technique, ideal for handling the multiple variables that exist in aggregate planning. This technique uses a series of mathematical expressions to model constrained resources such as resource limitations on labor hours, machine hours and raw materials, etc.

The Transportation method– is a special type of LP, that is used chiefly as a modeling technique for deriving an optimal allocation of goods or services from multiple sources of supply to multiple destinations.

Linear decision rule- is mathematical procedure where three basic aggregate planning variables are combined to form a non linear equation that defines the production cost for a given period of time.

Computer search (heuristic) method– a heuristic method is a set of decision rules that search, by trial and error for the best combination of values for the aggregate planning variables.

Expert systems – closely related to heuristic system. Are computer-based systems that are designed to mimic human or expert decision-making efforts. Are embedded with decision support methodology including artificial intelligence systems, rule-based logic system, etc.

Goal programming (GP)– is a mathematical programming procedure similar with LP. Its primary advantages over LP are that the GP model permits multiple conflicting objectives and allows the objectives to be prioritized.

Integrating Management resources: Using Management Information Systems (MIS) to integrate production planning and control the focus of this computer system is to integrate the planning and control activities required for implementing production activities from the master schedule to the completion of the product.

Bread-making on two lines

Figure 1. Process flow diagram and cycle times for bread-making with 2 parallel lines

Bread-making on two lines

Figure 2. Cycle times for each bread-making line

Bread-making on two lines

Figure 3. Cycle time for the bakery