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
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Production Planning

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

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

Production

Inventory System
# #

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

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

Demand Raw Material Vendor 30 Factory Factory Warehouse 4 1 Company System Under Managerial Control Production Planning 10 50 Independent Distributors Distributor Inventory 2 5 500 Independent Retailers Retail Inventory 1 1 Ultimate Customer

35

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Response of inventories
10,000 Retail inventory (units) -4% 7500 +10% +32% Retail sales RRR (units/week) -3% Factory warehouse inventory (units) 2500 2.5 +12% 5 +45% Factory production output (units/week) Distributor inventory (units) 7.5 10

5000

-10% -15%

0 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Production Planning Jan Feb Mar Apr May Jun J

0 8