Title: Operations Planning Horizons
1 Operations Planning Horizons
- Long Range Planning - Annual planning with a
time horizon greater than one year - Aggregate Planning - Intermediate planning with
a time horizon of 6 to 18 months with monthly or
quarterly increments - Short Range Planning - Weekly planning with a
time horizon of one day to six months
2Aggregate Planning
- Product group or broad category (Aggregation)
- Medium-Range 6-18 months
- Goal Specify the optimal combination of
- production rate
- workforce level
- inventory on hand
3(No Transcript)
4Balancing Aggregate Demand and Aggregate
Production Capacity
10000
Suppose the figure to the right represents
forecast demand in units
10000
8000
8000
7000
6000
5500
6000
4500
4000
Now suppose this lower figure represents the
aggregate capacity of the company to meet demand
2000
0
Jan
Feb
Mar
Apr
May
Jun
9000
10000
8000
8000
What we want to do is balance out the production
rate workforce levels and inventory to make
these figures match up
6000
6000
4500
4000
4000
4000
2000
0
Jan
Feb
Mar
Apr
May
Jun
5Key Strategies for Meeting Demand
- Chase - Match production rate to order rate by
hiring and laying off employees - Level - Maintain a stable work force working at a
constant output rate shortages and surpluses are
absorbed by fluctuating inventory levels
backlogs and lost sales - Some combination of the two
6Required Inputs to the Production Planning System
External to firm
Planning for production
Internal to firm
7Strategic Capacity Planning
- Capacity can be defined as the ability to hold
receive store or accommodate a measure of an
organizations ability to provide customers with
the demanded services or goods in the amount
requested and in a timely manner - Strategic capacity planning is an approach for
determining the overall capacity level of capital
intensive resources including facilities
equipment and overall labor force size
8Estimating Capacity
- Must differentiate between theoretical capacity
(what can be achieved under ideal conditions in a
short period of time) and achievable capacity
(considering equipment problems maintenance
requirements material problems worker errors) - Must select a yardstick to measure it such as
tons per hour (tph) of steel or number of patient
days in a hospital
9Management Decisions That Affect Capacity in the
Intermediate Term
- Subcontracting or outsourcing production
- Changing the mix of products produced
- Adding people to the production process
- Increasing the motivation of employees
- Increasing the operating rate of a machine
- Improving quality of raw materials processes
etc. - Increasing product yield (quantity of
output/quantity of input or the of useful
output)
10Capacity Utilization
- Where
- Capacity used rate of output actually achieved
and - Best operating level capacity for which the
process was designed
11Example of Capacity Utilization
- During one week of production a plant produced
83 units of a product. Its historic highest or
best utilization recorded was 120 units per week.
What is this plants capacity utilization rate
- Answer
- Capacity utilization rate Capacity used
. - Best operating level
-
- 83/120
- 0.69 or 69
12Economies Diseconomies of Scale
13The Experience Curve
As plants produce more products they gain
experience in the best production methods and
reduce their costs per unit
14Capacity Flexibility
- Flexible plants
- Flexible processes
- Flexible workers
15Capacity Planning Balance
Unbalanced stages of production
Units per month
6000
7000
5000
- Maintaining System Balance Output of one stage
is the exact input requirements for the next
stage
Balanced stages of production
Units per month
6000
6000
6000
16Determining Capacity Requirements
- Forecast sales within each individual product
line - Calculate equipment and labor requirements to
meet the forecasts - Project equipment and labor availability over the
planning horizon - Identify bottlenecks
17Capacity Utilization Service Quality
- The best operating point is between 70 and 90
of capacity over 90 is undesirable - Why do you think that this is so
18Utilization and Time in System
70
19Capacity - Summary
- Capacity decisions should be made carefully as
they can commit significant resources to assets
that cannot be changed easily or economically. - Capacity is affected by management decisions
regarding the number of hours worked product
mix staffing levels machine capabilities level
of quality and product yield. - Watch out for the Bermuda Triangle of
operational complexity where management
difficulty exceeds management ability (management
bottleneck!).
20Enterprise Resource Planning Systems
21Enterprise Resource Planning (ERP) Systems
- Enterprise Resource Planning Systems is a
computer system that integrates application
programs in accounting sales manufacturing and
other functions in the firm - This integration is accomplished through a
database shared by all the application programs
22SAP AGS R/3
- SAP AG A German firm is a world leader in ERP
software.
-Designed to operate in a three-tier
client/server configuration -Applications are
fully integrated so that data are shared between
all applications
23R/3 System Functional Components
R/3 System
Functional Components
24Financial Accounting
- Financials
- Controlling
- Asset management
25Human Resources
- Payroll
- Benefits administration
- Applicant data administration
- Personnel development planning
- Workforce planning
- Schedule shift planning
- Time management
- Travel expense accounting
26Manufacturing Logistics
- Materials management
- Plant maintenance
- Quality management
- Production planning control
- Project management system
27Sales and Distribution
- Prospect customer management
- Sales order management
- Configuration management
- Distribution
- Export controls
- Shipping and transportation management
- Billing invoicing and rebate processing
28Reasons for Implementing SAP R/3
- Desire to standardize and improve processes
- To improve the level of systems integration
- To improve information quality
