Production Planning and Control

1
Production Planning and Control
Chapter 7 Production Planning
Professor JIANG Zhibin Department of Industrial
Engineering Management Shanghai Jiao Tong
University
2
Chapter 7 Production Planning

• Contents
• Introduction
• Master Production Scheduling (MPS)
• Material Requirement Planning (MRP)
• Capacity Planning
• Improvement in MRP

3
Overview of Production Planning Activities

• Production Planning Given specific process
  planning, process technologies, and production
  conditions, production planning predetermine
  varieties, quantities, quality, and schedules of
  products to be produced according to market
  demand of products

Figure 4.1 Framework of Production Planning
Activities
4
Overview of Production Planning Activities

• Time Dimensions
• Long-range planning is done annually and focus on
  a planning horizon greater than one year
• Medium-range planning usually covers a period
  from 6 months to 18 months, with monthly or
  sometimes quarterly time increments
• Short-range planning covers a period from one day
  or less to six months, with weekly time increment
  usually.

Figure 4.1 Framework of Production Planning
Activities
5
Overview of Production Planning Activities

• Process Planning determines the specific
  technologies and procedures required to produce a
  product a service.
• Strategic capacity planning determines long-term
  capabilities (e. g. size and scope)
• Aggregate planning concerns with setting up
  production rate by product family or other
  categories for intermediate term (6-18 months).

Figure 4.1 Framework of Production Planning
Activities
6
Overview of Production Planning Activities

• Master production scheduling generates the
  amounts and dates of specific items required by
  orders.
• The inputs into MPS are arrived orders and AP
  results.
• Rough-cut capacity planning is used to verify
  that the production and warehouse facilities,
  equipment, and labor are available , and the key
  suppliers have allocated sufficient capacity to
  provide materials when needed.

Figure 4.1 Framework of Production Planning
Activities
7
Overview of Production Planning Activities

• Material requirement planning takes the end
  product requirements from MPS and breaks them
  down into their components and subassemblies to
  create a material plan (production orders and
  purchase order).
• Capacity requirement planning (CAP) allocate
  production resources to each production order.
• Operations scheduling allocates jobs to specific
  machines, production lines or work centers.

Figure 4.1 Framework of Production Planning
Activities
8
Overview of Production Planning Activities

• Operation scheduling

Figure 4.1 Framework of Production Planning
Activities
9
Chapter 4 Production Planning

• Contents
• Introduction
• Master Production Scheduling (MPS)
• Material Requirement Planning (MRP)
• Capacity Planning
• Improvement in MRP

10
Mater Production Scheduling (1)
Aggregate production plan for mattress
MPS for mattress models

• Aggregate production plan for mattress specifies
  the total number of mattress planned per month,
  without regard of mattress types
• MPS specifies the exact types of mattress and
  quantities planned for production by week

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Mater Production Scheduling (2)

• Aggregate planning specifies product groups,
  rather than exact items
• As the next level down in the planning process,
  MPS is time phased plan that specifies how many
  and when a firm to build each end item.
• In the case of the furniture company
• Its AP may specify the total volume of mattress
  it plan to produce over next month, e. g. 900
  for the next 1 month
• Its MPS identifies period by period ( usually
  weekly)
• which mattress styles and how many of these
  mattress styles are needed, 200 Model 200 for Wk
  1, 100 Model 538 for both Wks 2 and 3
  respectively, and 100 Model 749 for Wk 3.

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Mater Production Scheduling (3)

• Could a MPS be changed?-Flexibility of MPS

• The flexibility with a MPS depends on the
  following factors
• Production lead time
• Commitment of parts and components to a specified
  end items
• Relationship between the customer and vender,
• Amount of access capacity and
• Reluctance and willing of management to make
  changes

• Time Fences are defined as periods of time having
  some specified level of opportunity for customer
  to make change
• Time fences are introduced to maintain a
  reasonable controlled flow through the production
  system.

13
Mater Production Scheduling (4)

• Each company may have its own time fences and
  operating rules
• Frozen absolutely no change could be made in a
  firm, or the most minor changes may be allowed in
  another.
• Moderately firm some changes to specific
  products within a products group so long as parts
  are available
• Flexible almost an variations in products are
  allowable, providing that capacity remains about
  the same and that there are no long lead time
  items involved.

Figure 4.2 MPS Time Fences
14
Chapter 4 Production Planning

• Contents
• Introduction
• Master Production Scheduling (MRP)
• Material Requirement Planning (MPS)
• Capacity Planning
• Improvement in MRP

15
MRP-Overview

• MRP create schedules identifying
• the specific parts and materials required to
  produce end items planned by MPS
• The exact numbers needed and
• The date when orders for these materials should
  be released and be received or completed within
  the production cycle.

• The main purpose of MRP are to control inventory
  levels, assign operating priorities for items,
  and plan capacity to load the production system.
• Inventory-Order the right part in right quantity
  at the right time
• Priorities-Order with right due date keep the
  due date valid
• Capacity-Plan for a complete load, an accurate
  load, or for an adequate time to view future load.

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MRP-Overview

• Philosophy MRP Materials should be expedited
  (hurried) when their lack would delay the overall
  production schedule.

• The main advantages of MRP
• Ability to price more competitively
• Reduced inventory
• Reduced price
• Better customer service
• Better response to market demand
• Ability to change master schedule
• Reduced setup and tear-down costs
• Reduced idle time

17
MRP-Principle

• Master production specifies the number of items
  (end products or subassemblies or parts as
  independent requirements, usually as repair
  parts) to be produced during specific time
  periods
• BOM identifies the specific materials used to
  make each item and correct quantities of each
• The inventory records file supplies data such as
  the number of units on hand and on order
• MRP explosion calculus implements the calculation
  of MRP

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MRP-Inputs (BOM)

• BOM contains complete description, listing not
  only the materials, parts, and components but
  also the sequence in which the product is
  created
• BOM, along with MPS and inventory record are the
  three inputs
• BOM is often called product structure file or
  product tree because it show how all the
  materials, parts, components, and subassemblies
  are put together to form a product.

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MRP-Inputs (BOM)

• Deferent representations of BOM
• Indented part list
• Single level part list

20
MRP-Inputs (BOM)

• Low-level Coding

Although Cs appear at both Level 1 and 2, they
should be listed at the lowest level they appear,
so that computation may become easier.
21
MRP-the Explosion Calculus

• Example 7.1 the Harmon Music Company, model 85C
  trumpet
• Minimize the amount of money tired with
  inventory, and production level should be set to
  match the predicted demand as closed as possible.

22
MRP-the Explosion Calculus
Indented BOM
23
MRP-the Explosion Calculus

• The lead time for producing a trumpet is 7
  weeks-the company should begin the production now
  on trumpet to be shipped in 7 weeks.
• Only consider forecasts for demand that are at
  least 7 weeks into the future. (if the current
  week is labeled as week 1, then requires
  forecasts for the sales for week 8 and later)

The predicated demand for week 8 through 17
24
MRP-the Explosion Calculus

• Harmon periodically receive returned trumpet
  which are defective for some reason or damaged in
  shipping. After necessary repair, they are
  returned into pool of those ready for shipping.
  The receipts are 12, 6, 9 in weeks 8, 10 and 11
  respectively.
• These are scheduled receipts which are not on
  hand, but could be used to fill the order in due
  periods.

25
MRP-the Explosion Calculus

• The on-hand inventory at the end of week 7 is 23
• Netting out on-hand inventory and scheduled
  receipts obtain MPS for trumpet

The predicated demand for week 8 through 17
The net predicated demand
42
42
32
12
26 112 45 14 76 38
26
MRP-the Explosion Calculus

• Translates MRP for the end product into a
  production schedule for the components at the
  next level of the product structure (bell
  assembly and valve casting assembly).
• Gross requirement-on hand inventory-scheduled
  receipts
• Net requirement
• Net requirement is shifted by LTTime-phased
  requirement
• Time-phased requirement is treated by lot-sizing
  algorithm planned order release

MRP for the bell assembly (LT2 weeks)
LFT-Order as actually required.
27
MRP-the Explosion Calculus
MRP for the valve casting assembly (LT4 weeks)

• MRP for the valves
• On-hand inventory at the end of week 3186
• Receive 96 at the end of week 4 from outside
  supplier
• LT3 weeks

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MRP- Alternative Lot-sizing Schemes

• Lot for lot LFL the number of units scheduled
  for production each period is the same as the net
  requirement.
• LFL is only for convenience and ease of use,
  rather than optimal
• The problem of finding the best or near optimal
  production plan is described as
• Having known the time-varying demand and costs of
  setup and holding, what production quantities
  will minimize the total holding and setup cost
  over planning horizon?
• Neither the methods of Chapter 4 nor those of
  Chapter 5 may be appropriate.

• EOQ Lot Sizing
• Three parameters are required the average demand
  ?, the holding cost h, and setup cost K
• Consider the valve casting assembly K132 the
  holding cost is 0.6 per unit per week

29
MRP- Alternative Lot-sizing Schemes

• EOQ Lot Sizing (Cont.)
• The planned order release resulting from a LFL
  policies requires production in each week
• If the holding cost is charged against the
  inventory each week, the total holding cost
  incurred from week 6 through 15 is 0
• Since there is one setup each week, the total
  setup cost incurred over 10 weeks planning
  horizon is 10?1321,320
• The cost can be reduced largely by producing
  larger amounts less often
• As the first cut, EOQ formula is used to
  determine an alternative production policy
• The total of the time-phased requirements over
  week 8 through 17 is 439, the average is
  43.9/week
• Using ?43.9, h0.6, and K132,

30
MRP- Alternative Lot-sizing Schemes

• If we schedule the production in lot size 139,
  while ensuring that the net requirements are
  satisfied, then resulting MRP is as follows

139 0 0 0 139 0 139 0
0 139
Ending Inv.Beginning Inv.(Ending Inv. In the
last period) Planned deliveries-Net requirement

• Cost of Using Sizing
• During week 8-17, there are 4 setups, the total
  setup cost is 528
• The cumulative ending inventories are
  9755653, the total holding cost is
  653?0.6391.80
• The total cost is 391.80653919.80lt1,320 for
  LFL.

31
MRP- Alternative Lot-sizing Schemes

• The Silver-Meal Heuristic (Named for Harlan Meal
  and Edward Meal)
• A forward method that requires determining the
  average cost per period as a function of the
  number of periods the current order to span, and
  stopping the computation when this function first
  increase.
• Define C(T) as the average holding cost and setup
  cost per period if the current order spans the
  next T periods

32
MRP- Alternative Lot-sizing Schemes

• Let (r1, r2, , rn) be the requirements over the
  n-period horizon
• Consider period 1.
• If we produce just enough in period 1 to meet the
  demand in period 1, then only the order cost K is
  incurred. Hence,
• C(1)K/1
• If we produce just enough in period 1 to meet the
  demand in both periods 1 and 2, then r2 is held
  for one period. Hence, C(2)(Khr2)/2
• Similarly, C(3)(Khr22hr3)/3
• In general, C(j)((Khr22hr3(j-1) hrj)/j
• Once C(j)gtC(j-1), stop and set y1r1r2rj-1
  and start the process at period j.

33
MRP- Alternative Lot-sizing Schemes

• Let (r1, r2, , rn) be the requirements over the
  n-period horizon
• Consider period 1.
• If we produce just enough in period 1 to meet the
  demand in period 1, then only the order cost K is
  incurred. Hence,
• C(1)K/1
• If we produce just enough in period 1 to meet the
  demand in both periods 1 and 2, then r2 is held
  for one period. Hence, C(2)(Khr2)/2
• Similarly, C(3)(Khr22hr3)/3
• In general, C(j)((Khr22hr3(j-1) hrj)/j
• Once C(j)gtC(j-1), stop and set y1r1r2rj-1
  and start the process at period j.

34
MRP- Alternative Lot-sizing Schemes

• Example 7.2

r(18, 30, 42, 5, 20 ) h2 K80

• Starting in period1

C(1)K/180
C(2) (Khr2)/2 (80(2)(30))/270
C(3)(Khr22hr3)/3(80(2)(30)(2)(2)(42))/3102.
67
Stop at period 2, y1r1r2183048

• Starting in period 3

C(1)K/180
C(2) (Khr4)/2 (80(2)(5))/245
C(3)(Khr42hr5)/3(80(2)(5)(2)(2)(20))/356.67

Stop at period 4, y3r3r442547
35
MRP- Alternative Lot-sizing Schemes

• Example 7.2 (Cont.)

y5r520
y(48, 0, 47, 0, 20)
Hint Streamline the computation by
C(j1)(j/(j1))(C(j)hrj1)

• Example 7.3

r(10,40,30) h1 K50
y(50,0,30)
Notes Silver-Meal heuristic does not always
result in optimal solution.
36
MRP- Alternative Lot-sizing Schemes

• Least Unit Cost (LUC)
• LUC heuristics is similar to Silver-Meal
  Heuristic method except that instead of dividing
  the cost over j periods by the the periods, j,
  but by the total number of units demanded from 1
  through j period, r1r2rj
• C(1)K/r1
• C(2)(Khr2)/(r1r2)
• .
• .
• .
• C(j) (Khr22hr3(j-1)hrj)/(r1r2rj)

37
MRP- Alternative Lot-sizing Schemes

• Example 7.4

r(18,30,42,5,20 ) h2 K80

• Starting in period1

C(1) K/r1 80/184.44
C(2) (Khr2)/(r1r2) (80(2)(30))/(1830)2.92
C(3)(Khr22hr3)/(r1r2 r3)(80(2)(30)(2)(2)(4
2))/ (183042) 3.42
Stop at period 2 y1r1r2183048

• Starting in period3

C(1) K/r3 80/421.90
C(2) (Khr4)/(r3r4) (80(2)(5))/(425)1.92
Stop at period 3 y3r342
38
MRP- Alternative Lot-sizing Schemes

• Example 7.4

r(18, 30, 42, 5, 20 ) h2 K80

• Starting in period4

C(1) K/r4 80/516
C(2) (Khr5)/(r4r5) (80(2)(20))/(520)4.8
y4r4r552025
y(48, 0, 42, 25, 0)
39
MRP- Alternative Lot-sizing Schemes

• Part Period Balancing
• More popular in practice
• Set the order horizon equal to the number of
  periods that mostly matches the total holding
  cost with the setup cost over that period.
• The exact matching is rare in an integer number.

Example 7.5
r(18,30,42,5,20 ) h2 K80
228 exceeds the setup cost of 80. 80 is closer to
60 than to 228

• Starting in period1

y1r1r2183048
1 0
2 60
3 228
40
MRP- Alternative Lot-sizing Schemes
Example 7.5
r(18, 30, 42, 5, 20 ) h2 K80

• Starting in period3

90 is close to 80 than is 10
y3r3r4 r5 4252067
1 0
2 10
3 90
41
MRP- Alternative Lot-sizing Schemes

• Given
• Requirements ( r1, r2, , rn)
• Capacity (c1, c2, , cn)
• The objective is to find optimal production
  quantities (y1, y2, , yn) subject to yi?ci,
  i1n.
• Feasibility condition

If the above feasibility cannot be satisfied, no
solution is available.
42
MRP-Lot Sizing with Capacity Constraints

• Even feasibility is OK, however, requirements in
  some period may exceeds corresponding capacities.
  
• Lot-shifting Technology for obtaining initial
  feasible solution, such that ri?ci, i1n.

• Method
• Back-shift demand from periods in which demand
  exceeds capacity to earlier periods in which
  there is free capacity
• Repeat the process for the period in which demand
  exceeds capacity until ri?ci, i1n, that is,
  feasible for lot-for-lot.

43
120
r 100 79 230 105 3
10 99 126 40 c 120 200
200 400 300 50 120 50 30
200
109
50
50
18
30
28
Extra holding cost(2)(158) 316lt450
y 100 109 200 105 28
50 120 50 30
Extra holding cost(2)(30)(4)240lt450
Extra holding cost(2)(50)(3)300lt 450
Extra holding cost(2)(50)(1)100lt 450
Excess capacity 20 91 0 295
272 0 0 0 0
44
MRP-Lot Sizing with Capacity Constraints
y (100, 109, 200, 263, 0,
0, 120, 0, 0 ) r (100,
79, 230, 105, 3, 10, 99, 126,
40) Ending inv.( 0, 30, 0, 158, 155,
145, 166, 40, 0)

• The total cost5( 450)2(694)225013883638.

45
Chapter 4 Production Planning

• Contents
• Introduction
• Master Production Scheduling (MPS)
• Material Requirement Planning (MPS)
• Capacity Planning
• Improvement in MRP

46
Capacity Planning -Framework

• Long range Strategic capacity planning
• Medium range Rough-cut capacity planning and
  capacity requirement planning
• Short-range Finite loading and Input/output
  analysis

Finite loading
Input/output analysis
47
Capacity Planning Rough-cut planning

• Strategic capacity planning or resources planning
• Directly linked to aggregate production planning
• The most highly aggregated and longest range
  capacity planning decision
• Typically revolves converting monthly, quarterly,
  or even annual data from aggregate production
  planning into aggregate resources such as gross
  labor-hours, floor space, and machine-hours
• Involves new capital expansion, bricks and
  mortar, machine tools, warehouse space, and so
  on, which requires a time horizon of months or
  years.

48
Capacity Planning - Framework

• Rough-cut capacity planning
• MPS is the primary information sources
• Several techniques Capacity planning using
  overall planning factors (CPOF) Capacity bill
  or Resource profiles
• These techniques provide information for
  modifying the resource levels or material plan to
  ensure execution of MPS
• Capacity requirement planning (CRP)
• Time-phased material plan supplied by MRP is the
  basis for calculating time-phased capacity
  requirements
• Date used by CRP techniques include WIP, routing,
  scheduled receipts, and planned order
• Information provided by CRP can be used to
  determine capacity needs for both key machine
  centers and labor skills, typically covering a
  planning horizon of several weeks to a year .

49
Capacity Planning - Framework

• Finite loading technique
• Also relates to a firms that use time-phased
  detailed material plan
• Can be better viewed as a shop floor scheduling
  technique
• Clarifies the relationship between scheduling and
  availability
• Is a method for scheduling work center or
  resource group.
• Input/output analysis
• Provides a method of monitoring the actual
  consumption of capacity during execution of
  detailed material plans obtained by MRP
• Can indicate the need to update capacity plans as
  actual shop performance deviates from the current
  plan, and the need to modify planning factors
  used in capacity planning techniques.

50
Capacity Planning Techniques (CPOF)

• CPOF is relatively simple approach to rough-cut
  capacity planning
• CPOF plans are usually stated in terms of weekly
  or monthly time periods and accordingly are
  revised as the firm changes the MPS.

Standard or historical data of end product
Planning factor (e.g. direct labor time/end
product unite)
Historical data on shop load
Cap. Req. on individual work center
Cap. req. on overall labor or machine-hr
MPS
The procedure for COPF
51
Capacity Planning Techniques (CPOF)
Example Problem data
Estimated CPOF in standard direct labors
52
Capacity Planning Techniques (Capacity Bills)

• Capacity bill is a rough-cut method, providing
  more direct linkage between individual end
  product in MPS and the capacity required for each
  work centers
• considers any shifts in product mix
• requires more data than CPOF not only BOM and
  routing date are, but also direct labor-hour or
  machine-hour data.
• Calculation procedures
• First calculate bill of capacity of end product,
  that is total time/unit for each end product on
  each resource, based on BOM, routing data, direct
  labor-hour or machine-hour
• Then, apply bill of capacity to MPS to obtain
  capacity requirements of each resources in each
  period

53
Capacity Planning Techniques (Capacity Bills)
Routing and standard time data of an example
54
Capacity Planning Techniques (Capacity Bills)
Routing and standard time data of an example
55
Capacity Planning Techniques (Capacity Bills)
Having obtained bill of capacity for end
products, capacity requirements for each work
center in each period could be calculated by
applying capacity bills of end products to MPS
For example, capacity requirements for work
center 100 in period 1 is as follows 330.05171
.323.75
56
Capacity Planning Techniques (CRP)

• CRP is to calculate capacity requirements placed
  on a work center or resource group by using the
  output of MRP, that is, the time-phased material
  plan information generated by MRP.
• The information include actual lot sizes and lead
  time for both open shop orders (scheduled
  receipts) and orders planned for future release
  (planned orders).
• By calculating capacity requirements both for
  open shop orders (scheduled receipts) and orders
  planned for future release (planned orders) in
  the MRP data base, CRP accounts for the capacity
  already stored in the form of finished and WIP
  inventories.

57
Capacity Planning Techniques (CRP)
Product A MPS
Component C Lot size40 Lead time2 On hand
inv.37
Gross Req.
Scheduled Receipts
Inventory balance
Planned deliveries
Planned order release
58
Capacity Planning Techniques (CRP)
Worker center 300 capacity requirements using CRP
Hrs of capacity
Total88

• The time to fabricate a component C in machine
  center 300 is 0.2 hrs
• The 8 hrs of capacity is derived from the
  scheduled receipt and planned order quantities of
  40 units multiplied by 0.2

59
Chapter 4 Production Planning

• Contents
• Introduction
• Aggregate Planning
• Master Production Planning (MRP)
• Material Requirement Planning (MPS)
• Capacity Planning
• Improvement in MRP

60
Improvement for MRPClosed-Loop MRP

• When MRP system has information feedback from its
  module output, this is termed closed loop MRP
• The closed-loop is realized by checking whether
  sufficient capacity is available. If not, the
  schedule should be modified.
• The modification may be made either by changing
  MPS or by regulating the planned order release.

61
Improvement for MRPMRP-II

• Manufacturing Resource Planning (MRP-II) was
  first proposed by Ollie Wright 1977
• As a complex planning computer system, MRP-II was
  to plan and monitor all the resources of a
  manufacturing firm through a closed-loop system.
• The manufacturing resource include theses for
  manufacturing, marketing, finance, and
  engineering.
• MRP-II help a firm cope with complex balancing
  problem among production, purchasing, and sales
  to shorten lead time for manufacturing and
  purchasing, and reduce production cost, enhance
  adaptability, and increase economic efficiency.

62
Improvement for MRPMRP-II

• Additional common functions for MRP-II
• Purchasing management
• Production costing
• Shop floor management
• Inventory management
• Accounting

63

• The End !