An Introduction to Operations Planning and Control

Role of planning and control. Why is planning required? What is the difference between planning and control? How does the nature of demand affect planning and control? What are the ways in which organisations can respond to demand? Typical OPC decisions/activities.
MGT606: Operations Management-II Introduction.1

The input-transformation-output model of operation (recall from MGT605)

Input transformed resources
Material Information Customers Environment

INPUT
Facilities Staff

The transformation process

Environment

Output Goods

OUTPUT
Output Services

Input transforming resources

MGT606: Operations Management-II

Introduction.2

A general model of operations management and operations strategy (recall from MGT605)
ENVIRONMENT
INPUT TRANSFORMED RESOURCES MATERIALS INFROMATION CUSTOMERS

The operations strategic objectives Operations strategy (MGT6xx) Improvement The operations competitive role & position

Operations strategy

INPUT
FACILITIES STAFF INPUT TRASNFORMING RESOURCES

Design
(MGT605)

Operations Mgt. Planning & control (MGT606) ENVIRONMENT

GOODS OUTPUT AND SERVICES

MGT606: Operations Management-II

Introduction.3

Design Decisions in Operations

(covered in MGT605)

Design of Products/Services Design of Processes

Process Span, Size and Location
Vertical Integration Decision Capacity Planning Location decisions

Process Configuration & Job Design

Process Types Layout and Flow Job Design

Design of Systems (e.g., Quality System)

MGT606: Operations Management-II Introduction.4

Planning and Control in Operations

Design activities in the operation that were discussed in MGT605 determine the form and nature of the system and the resources it contains. Design is not concerned with the day-to-day running of the system. Design sets boundaries and constraints (e.g., capability, capacity/amount of resource, work policies) within which an operation has to run on an ongoing basis. Planning and control are concerned with-managing the ongoing activities of the operation so as to satisfy customer demand in effective and efficient ways.
MGT606: Operations Management-II Introduction.5

Planning and Control in operations

(refer to input-output model)

Supply of Products or Services in terms of Quantity, Quality, Time of delivery

Planning and Control can be viewed as All activities that reconcile supply and demand

Demand for those Products or Services

The Operations Resources

The Operations customers

MGT606: Operations Management-II

Introduction.6

Constraints on Planning and Control Task

In any operation the supply of resources is limited. Some constraints within which Planning and Control takes place are : Cost constraint: within an identified cost Capacity constraint: within the designed capacity of operation Timing constraint: within the time when they still have value for the customer Quality constraint: to the designed tolerance limits of product Planning and Control must optimize (within chosen constraints) the capabilities of an existing organisation. And/Or Adapt the capacities and resources of an organisation (e.g., new machinery, people, skills, finance etc.) to meet changing patterns of demand.

MGT606: Operations Management-II

Introduction.7

Why bother with planning? [e.g., why cannot we just react to the demand as it happens]
Things dont just happen on their own! To satisfy customer demand, ensure the availability of resources, such as
1) Material; 2) Capacity

Demand

Resources

MGT606: Operations Management-II

Introduction.8

Planning versus Control

Planning
Relates to future activities Can be carried out in isolation from the plant/materials etc. to which it relates Based on a theoretical set of assumptions - about Events that may never happen

Control
Involves the implementation of a plan in practice Adopts/adjusts elements of the plan to meet unplanned circumstances Control activities are always required whenever a plan is implemented

MGT606: Operations Management-II

Introduction.9

The balance of Planning and Control over time

Significance of planning & control
Long (Months/ years)

Different levels in Planning & Control (P & C) Long-term or strategic P & C

Uses aggregated information (e.g., demand forecast, resource) Typically for resource acquisition purpose

Planning

Time Horizon

Medium-term or tactical P & C

Control
Short (Hrs/ days)
MGT606: Operations Management-II

Uses partially disaggregated information (e.g., demand forecast, resource) Typically for resource deployment purpose Totally disaggregated information Makes interventions to resources to correct deviation from plans
Introduction.10

Short-term or operational P & C

Alternate Strategies of Responding to Demand

Different stages in the transformation process Purchase Make parts Assemble Deliver Order Time (D) Make to Stock (MTS) Assemble to Order (ATO) Make to Order (MTO) Resource to Order

Purchase

Make parts Assemble Deliver Order time (D) Make parts Assemble Order time (D) Make parts Assemble Order Time (D) Deliver

Purchase

Purchase

Deliver

Total Production (transformation) Lead Time (P) Order Raw Mate Manufacture part Despatch to customer Order time (D) means the time customer is willing to wait from the time
MGT606: Operations Management-II Introduction.11

Customer order Decoupling Points in Different Environments

Inventory Location Customer order decoupling point Suppliers Raw Material WIP parts & Components Finished Goods

Environm ent

Engineer to order (ETO)

Make to order (MTO)

Assemble to order (ATO)

Make to stock (MTS)

MGT606: Operations Management-II

Introduction.12

Nature of Supply and Demand

Planning and control is reconciliation of supply and demand. Nature of both affect the planning and control. There may exist. Uncertainty in Demand Demand can be fairly predictable for some operations. In other operations, demand can be unpredictable even in short term. The greater the uncertainty, the more difficult it is to plan and greater emphasis must be placed on control. Uncertainty in Supply Some operations are reasonably predictable and usually run to plan while others are not so much predictable. Dependable supply requires availability of all transformed and transforming resources.

MGT606: Operations Management-II

Introduction.13

Supply and Demand

The idea of demand uncertainty is linked with the concepts of dependent and independent demand. Also to what strategy (e.g., MTO, MTS.ATO) the organization employs in responding to the demand.

Independent Demand
Demand originates from outside the system. Less predictable because it depends upon the chances of the market or customer behaviour. Requires models of possible demand patterns

Dependent Demand
Demand originates from within the system. Relatively predictable because it is dependent on some known factor.

Most businesses operate with a mixture of both. (I will come back to this topic latter in the course.) Different stages in transformation process (e.g., material purchase, part making, assembly) are exposed to demand uncertainties depending upon organizations strategy of MTS, MTO, ATO etc.
MGT606: Operations Management-II Introduction.14

Planning and control activities

Broad classification of planning and control decisions/activities to be covered in this course

Planning
Relative time horizon Dependent demand items Independent demand items
Sales & Operations Planning

Control
Short

Long

Medium

Master Production scheduling

Material Requirement Planning (mrp)

Production activity control

Inventory management Demand Forecasting

Introduction.15 MGT606: Operations Management-II