Production Planning
Dr. Everette S. Gardner, Jr.
Aggregate planning
• Definition
Choosing production rates, work force levels, and
inventory levels
• Horizon
6-18 months into future
• Prerequisites
• Forecasting
• Company policies on
Max./min. inventories
Hiring/firing
Overtime
Production Planning
2
Policy considerations in aggregate
planning
• Flexibility
Are work force and inventories maintained at a
level sufficient to meet unexpected demand?
• Work force stability
Improves quality, productivity, union relations
• Production rate stability
Makes materials planning easier, reduces
uncertainty in physical distribution
Production Planning
APP.xls
3
Policy considerations in aggregate
planning (cont.)
• Production capacity
Will overtime reduce quality? When will physical
capacity (space, machinery, equipment) become
inadequate?
• Customer service
Have lead time and stock availability goals been
met?
Production Planning
4
Aggregate planning in services
• Definition
Balancing service capacity with demand
• Tactics
• Change operating hours
• Change staffing
Nbr. of workers
Full vs. part-time
• Modify type of service
• Influence demand
Advertising
Pricing
• Build more service outlets
Production Planning
5
Aggregate planning in services (cont.)
• Evaluation
• Waiting time
• Throughput
• Service time
• Nbr. of lost customers
Production Planning
6
Production – Inventory System
#
#
25 Day Delay to sense
needs, place
and transmit
orders
5 Day Delay
to sense
needs, place
and transmit
M.O.s
25 Day Delay
for Review
and
Transmission
of orders
Information Flow
Material Flow
Days for transit time
Days to process or to
handle and issue orders
13 Day Delay
for Review
and
Transmission
of orders
Demand
Raw
Material
Vendor
Factory
Factory
Warehouse
35
30
Distributor
Inventory
4
1
Company System Under
Retail
Inventory
2
10
1
5
50 Independent
Distributors
Managerial Control
Production Planning
Ultimate
Customer
1
500 Independent
Retailers
Dynamo.xls
7
Response of inventories
10
10,000
Retail inventory (units)
-4%
Factory production output (units/week)
+45%
7500
7.5
Distributor inventory (units)
+10%
+32%
5000
-10%
+12%
Retail sales RRR
(units/week)
5
-3%
-15%
Factory warehouse inventory
(units)
2.5
2500
0
Jan Feb
Mar Apr May Jun
July Aug Sept Oct Nov Dec
Production Planning
Jan Feb
Mar Apr May Jun
0
J
8