CHAPTER FOUR
OPERATIONS PLANNING & CONTROL
4.1. Aggregate production planning
Aggregate plan: is a statement of a company’s
production rates, workforce levels, and inventory holding
based estimates of customer requirements and capacity
limitations.
• Aggregate planning is the process of developing an
approximate schedule that details how an organization
will operate over a particular period, typically ranging
from 3 to 18 months.
• It allows an organization to approach inventory and
staffing with clear eyes, assess and minimize risks,
and build more efficient systems
• It is an intermediate term planning decision. (3 months
to one year).
• It is the process of planning the quantity and timing of
output over the intermediate time horizon and
physical facilities are assumed to be fixed for the
planning period.
• It is also translating annual and quarterly business
plan into labor and production output plans for the
intermediate term.
• It seeks the best combination to minimize costs.
Production plan: is a manufacturing firm’s aggregate
plan, which generally focuses on production rate and
inventory holdings. It determines the quantity and
timing of production for the immediate future.
Aggregate planning decisions and policies should be
made concerning over time, hiring, layoff,
subcontracting, and inventory levels.
APP is the process of planning the quantity and timing of
production over an intermediate range by adjusting
production rate, improvement and inventory.
Main purpose of aggregate planning
• It facilitates fully loaded facilities and minimizes
overloading and under loading.
• It provides adequate production capacity
• It facilitates the orderly and systematic transition
of production capacity
• In times of scarce production resources, it
enhances the probability of getting the most output
for the amount of resources available.
The objective of APP
•To bring optimal combination of production rate,
work force level, and inventory on hand.
•To get over all output levels in the near to medium
future in the face fluctuating or uncertain demand
•To set ground for decisions and policies should be
made concerning over time, hiring, layoff,
subcontracting, and inventory levels.
•To maintain families to the supply side and on the
demand side by groups of customers.
• To minimize the cost of resources required to meet
demand over that period.
Aggregate production planning strategies
• Managers often combine reactive (workforce
adjustment, anticipation of inventory, workforce
utilization, vacation schedules, subcontractors and
backlog, backorder and stocks)
and aggressive (complementary products, and
creative pricing) alternatives in various ways to
bring an acceptable aggregate plan.
[Link] strategy: a strategy that matches demand during
the planning horizon by varying either the workforce
level or the output rate.
First method, varying the workforce level to match
demand, it relies on just one reactive alternative-workforce
variation.
• Advantage of no inventory investment, overtime, or
under time.
•Drawback, including the expense of continually adjusting
workforce levels, hostility of the workforce, and the loss of
productivity and quality b/c of constant change in the
workforce
•The second methods, varying the output rate to match
demand, opens up additional reactive alternatives
beyond changing the workforce level.
• Sometimes called the utilization strategy.
• it is changed through overtime, under- time and
vacation are taken.
•Subcontracting, including temporary help during the
peak season
2. Level strategy: a strategy that maintains a constant
workforce level or constant output rate during the planning
horizon.
• The First method, maintain a constant workforce level,
might consist of not hiring or laying off workers (except at
the beginning of the planning horizon).
• using under-time in slack periods and overtime up to
contracted limits for peak periods.
• The second method, maintaining a constant output rate,
allows hiring and layoffs in addition to other alternatives of
first level strategy.
3. Mixed strategy: Strategies that consider and
implements a full range of receive alternatives
and goes beyond a “Pure” chase or level strategy.
• it used as per organizations environment and
planning objectives.
Proper Strategy is selected based on:
1. How much of each production resource is
available
2. How much capacity is provided by each type of
resource?
3. At what step in production we determine capacity
/labour hour available, or machine hour available
4. How much does it cost to scale capacity up or
down cost of hiring, laying off, recalling/
The Aggregate Production Process
1. Determining demand requirements
2. Identifying alternatives, constraints, and costs
• Constraints represent the physical limitations or
managerial policies associated with the aggregate plan.
• The planner usually considers several types of costs
when preparing aggregate plans: Regular time costs ,
Overtime costs, Hiring and layoff costs, Inventory
holding costs and Backorder and stock out costs.
3. Preparing an acceptable plan
• It is necessary to design alternative plan which pass
through further revision and adjustment.
• The plan must then be checked against constraints and
evaluated in terms of strategic objectives.
•Acceptance of the plan does not necessarily mean that
everyone is in total agreement, but it does imply that
everyone will work to achieve it.
4. Implementing and updating the plan
• It requires the comment of manager in all functional
areas.
•The planning committee may recommend changes in the
plan during implementation or updating to balance
conflicting objectives better.
MATERIALS REQUIREMENTS PLANNING (MRP)
“Getting the right materials to the right place at the right
time.”
• It is a means for determining the number & time
schedule of parts, components, and materials needed to
produce a product.
• The basic purposes are to control inventory levels,
assign operating priorities for items, and plan capacity
to load the production system.
BASIC MRP CONCEPTS
Independent demand: It exists when a demand for a
particular item is unrelated to a demand for other item
or when it is not a function of demand of other
inventory item.
• Independent demands are not derivable or calculable
from the demand of something else hence they must be
forecast.
BASIC MRP CONCEPTS
Dependent demand: It is defined as dependent if the
demand of an item is directly related to, or derived from
the demand of another item or product.
• In dependent demand, the need for any one item is a
direct result of the need for some other item, usually a
higher level item of which it is part.
• Needed quantities, dependent demand items are simply
computed based on the number needed each higher level
item in which it is used. MRP is the appropriate
technique for determining quantities of dependent
demand item.
Inputs to MRP
MRP system has three major inputs:-
1. Master Production Schedule (MPS)
• It is a list of what, how many and when end products are
to be produced and be ready for shipment. is the
determinant of future load, inventory investment,
production, and delivery service. The MPS is derived from
the aggregate schedule.
Lead time: In purchasing systems, lead time is the time
between recognition of need for an order and receiving
it. In production systems, it is the order, wait, move,
queue, setup and runtimes for each component produced.
Cumulative lead time: The sum of the lead times that
sequential phases of a process require from ordering of
parts or raw materials to completion of final assembly.
2. Bill of materials (BOM)
• It is file which lists all assemblies together.
• product structure is specified by the bill of materials,
which is a structured list of all the component parts,
assemblies and subassemblies that make up each product.
• The other information contained in it are: the part
number, child parent numbers, the date each child is to
become effective or to be removed from use in the bill,
dropout and yield percentages.
• Product structure tree is a visual depiction of the
requirement in a BOM, where all components are listed
by levels.
3. Inventory records File (IRF) /Item Master File/
• It contains data such as the number of units on hand and on order.
Material requirement planning process
1. Gross requirement (GR) it is the total amount required for a
particular item. These requirements can be from external customer
demand and also from demand calculated due to manufacturing
requirements.
• GR is the projected needs for raw materials, components,
subassemblies, or finished goods by the end of the period shown.
• Gross requirement comes from the master schedule (for end items)
or from the combined needs of other items. But in MRP it is the
quantity of item that will have to be disbursed, i.e. issued to
support a parent order (or orders), rather than the total quantity of
the end product:
2. Scheduled receipts (SR): represents the orders that have already
been released and that are scheduled to arrive as of the beginning
of the period. Once the paper work on an order has been released,
what was prior to that event a planned order now becomes a
scheduled receipt.
3. Projected available balance (PAB): it is the amount of inventory
that is expected as of the beginning of a period.
This can be calculated as follows:
PABt = PABt-1 - GR t-1 + SR t-1 + POR t-1 – safety Stock
4. On hand or available: the expected amount of inventory that will
be on hand at the beginning of each time period.
5. Net requirements: is the amount needed when the projected
available balance plus the schedule receipts in a period are not
sufficient to cover the gross requirements.
6. Planned order receipt (POR) is the amount of an order that is
required to meet a net requirement in the period.
• It is the quantity expected to be received by the beginning of the
period in which it is shown under lot-for-lot (lot4lot) ordering, this
quantity will equal net requirements. That is, under lot4lot
ordering one can ask his supplier the exact quantity of the item
needed for a particular time. Hence, the order size may vary
depending on the requirement.
7. Planned order release is the planned order receipt offset by the
lead time. This amount generates GR at the next level in the assembly
or production chain.
• Generally, the MRP processing takes the end item requirements
specified by the MPS and “explodes” them into time phased
requirements for parts, assemblies, components, and raw materials
using the BOM and IRF offset by lead time
4.2 OPERATIONS SCHEDULING
• Scheduling is the determination of when labor, equipment and
facilities are needed to produce a product or provide a service.
• it specifies the timing and sequence of production.
Characteristics Operation Scheduling
• Schedule must be realistic: being achieved within the capacity
limitations of the manufacturing facilities.
• Scheduling should be clearly.
• it design for tasks that has sequential or loading nature.
Objectives of scheduling
To meet the due date,
To minimize job lateness
To minimize the lead time or setup time,
To minimize wok-in-process inventory
To maximize resource utilization
Scheduling system
1. Finite loading: refers to loading activities with regard to
capacity. Tasks are never loaded beyond capacity.
• If an operation is delayed due to a part or parts shortage, the
order will sit in queue and wait until the part is available from a
preceding operation.
2. Infinite loading:
• work is assigned to a work center simply based on what is
needed over time. No consideration tangible capacity, resources
required to complete the work.
3. Backward loading
The purpose of back ward loading is to calculate the capacity
required in each work centre for each time period.
4. Forward loading begins with the present date and loads jobs
forwards in time.
Scheduling in manufacturing
• Scheduling in manufacturing is the process of assigning priorities
to manufacturing orders and allocating workloads to a specific
work centers. Scheduling is challenging if the task variety is
high.
Job shop scheduling
• Here decision can be quite complex because of the nature of variety
of jobs (customer orders) that are processed, each with distinctive
routing & processing requirement.
Priority rules for allocating jobs to machine - sequencing
• Priority rules are the criteria by which the sequence of jobs is
determined.
• The process of determine which job is started first on a particular
machine or work center is known as priority sequencing rules.
•Some of the most common priority rules for sequencing
jobs are:
1. First come, first served (FCFS: the oldest first rule.
2. Shortest processing time (SPT): shortest operating
time first.
3. Earliest due date first (due date): a job that is due
tomorrow has a higher priority than the job that is due
next week or next month.
4. Critical ratio (CR): CR= due date – today’s date = time remaining
Total shop time remaining lead time remaining
• In the CR rule, jobs are sequenced from lowest CR to
highest CR. CR < 1 considered behind schedule and need
to be first schedule.
• The following describes the most common performance measure
used in operation schedule:
A. Job flow time
Flow time = waiting time + processing time (set up, delays
resulting from machine breakdowns, component unavailability)
Average flow time = (sum of total flow time) (no of job
processed)
B. Make span time
Make span time: It is the total amount of time required to complete
a group of job.
Make span time =processing time of each job
C. Tardiness (past due): refers to the amount by which
completion time exceeds the due date of a job.
D. Utilization = total processing time total flow time
Scheduling in services
Important distinction between manufacturing and
services that affects scheduling are:
• service operations cannot create inventories to
buffer demand uncertainties.
• service operations demand often is less
predictable.
Scheduling customer demand
Scheduling the worker