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Production Planning

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Chapter 9 of Gaither Combined s edited by Sheri 12/19/95 ... Production Planning Supplemental Slides Overview Production-Planning Hierarchy Aggregate Planning ... – PowerPoint PPT presentation

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Title: Production Planning


1
Chapter 13
  • Production Planning
  • Supplemental Slides

2
Overview
  • Production-Planning Hierarchy
  • Aggregate Planning
  • Master Production Scheduling
  • Types of Production-Planning and Control Systems
  • Wrap-Up What World-Class Companies Do

3
Chapter 13 Homework Not for Submission
  • Problem 13.7
  • Use average inventory to calculate inventory
    holding cost.

4
Production Planning Horizons
  • Long-range planning
  • Greater than one year
  • Usually with yearly increments
  • Intermediate-range planning
  • Six to eighteen months
  • Usually with monthly or quarterly increments
  • Short-range planning
  • Less than six months
  • Usually with weekly increments

5
Matching Demand Strategy
Demand
Units
Production
Time
6
Level Capacity Strategy
Demand
Production
Units
Time
7
Aggregate Planning Using Pure StrategiesAn
Example
Quarter Sales Forecast (lb) Spring 80,000 Summer
50,000 Fall 120,000 Winter 150,000
  • Hiring cost 100 per worker
  • Firing cost 500 per worker
  • Inventory carrying cost 0.50 per pound per
    quarter
  • Production per employee 1,000 pounds per
    quarter
  • Beginning work force 100 workers

8
Inventory Carrying Cost
  • Inventory carrying cost 0.50/unit/period

1.00
0.50
0
t
t1
t2
Time
9
Level Capacity Strategy
  • Sales Production Inventory
  • Quarter Forecast Plan On-Hand, Ending
  • Spring 80,000 100,000 20,000
  • Summer 50,000 100,000 70,000
  • Fall 120,000 100,000 50,000
  • Winter 150,000 100,000 0
  • 400,000
    140,000
  • Relevant Cost 140,000 pounds x 0.50 per pound
    70,000

10
Matching Demand Strategy
  • Sales Production Workers Workers
    Workers
  • Quarter Forecast Plan Needed Hired Fired
  • Spring 80,000 80,000 80 - 20
  • Summer 50,000 50,000 50 - 30
  • Fall 120,000 120,000 120 70 -
  • Winter 150,000 150,000 150 30 -
  • 100 50
  • Relevant Cost (100 workers hired x 100) (50
    workers fired x 500)
  • 10,000 25,000 35,000

11
Aggregate Planning Using the Transportation
Method of Linear Programming
12
Aggregate Planning by the Transportation Method
of Linear Programming Example
  • Expected Regular Overtime Subcontract
  • Quarter Demand Capacity Capacity Capacity
  • 1 900 1000 100 500
  • 2 1500 1200 150 500
  • 3 1600 1300 200 500
  • 4 3000 1300 200 500
  • Regular production cost per unit 20
  • Overtime production cost per unit 25
  • Subcontracting cost per unit 28
  • Inventory carrying cost per unit per period 3
  • Beginning inventory 300 units
  • Desired ending inventory 100 units

13
Aggregate Planning Using the Transportation
Method of Linear Programming
  • Sources (supply points) Beginning inventory
    production periods.
  • Destinations (demand points) Sales periods
    ending inventory.
  • Objective To determine production rates (on
    regular time and overtime, and by subcontract)
    that would minimize relevant production and
    inventory carrying costs, subject to capacity and
    demand constraints.

14
Inventory Balance Equations
Ending Inventory Beginning Inventory
Production Level - Deliveries
EIt EIt-1 (Rt OtSt) - Dt
EIt Ending Inventory for Period t
Rt Regular Time Production in Period t
Ot Overtime Production in Period t
St Subcontracted Production in Period t
Dt Deliveries/Sales in Period t
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