HAWASSA UNIVERSITY

INSTITUTE OF TECHNOLOGY
Industrial Engineering and Logistics Management
(MSc. Weekend Program)

Preparing Aggregate Production Plan and Master

Production Schedule For Selam Awassa Business
Group Plc.
By:
• Mihretu Yosef
• Tademe Data
• Melese Bunkula
1
 Introduction

• Planning is a function that sets and evaluates the goals and a course for success of a
company. It significantly impacts the success or the failure of a firm. Planning can
address a short-, medium-, and long-range problems of an organization, say a production
firm.
• Long-range planning deals with capacity and strategic issues and is the
responsibility of top management. It encompasses formulation of policy-related
issues, such as facility location and expansion, new product development, research and
development, and investment over a period of several years
• Medium-range planning begins once long-term capacity decisions are made. It is one of
the main functions of operations managers. It addresses the problem of matching
the productivity to fluctuating demand. Medium-range plan needs to be consistent with top
management’s long-range strategy and works within the resource allocated in the earlier
strategic decisions. Medium- (or “intermediate-”) range planning is accomplished by
building an aggregate production plan.

Short-range planning may extend up to a year but is usually less than three months. This plan is
also a responsibility of operations personnel who work with supervisors and foremen
to “disaggregate” the intermediate plan into weekly, daily, and hourly schedules.
Tactics for dealing with short-term planning involve loading,
sequencing, expediting, and
dispatching.

Having said this short brief about long-range, medium-range, and short-term planning,
here, a company called Selam Awassa Business Group PLC is taken as a choice for
the study of how to prepares aggregate production plan and master production
schedule. The study document mainly includes objective, company back ground, and
techniques and steps to follow in preparing aggregate production planning
and master production schedule.
•

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 Introduction …

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 1. Objectives of the study

• To identify how Selam Awassa Business Group PLC. prepares aggregate production plan
and master production plan;
• To identify the techniques of assigning delivery dates and taking new orders.

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 2. Company background

• Selam Awassa Business Group Plc. Was established at the end of 2006
G.C. by Mr. David Roshli, the founder of Selam Addis Ababa and the former
managing director and the group of three youngster Ethiopians who grown up in
Selam Addis Ababa children village (Muse Mohamed, Poulos Temesgen and
Atakilt Girmay).

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 2. Company background…
• Selam Awassa Business Group Plc. is established with the aim of manufacturing and
diversifying appropriate technology that substitute expensive imported technologies with
local resources which are used to increase productivity and meet current
demand of the community. At present pre and post-
harvest machineries and equipment, construction and water lifting device, renewable
energy, solar and wind mill equipment and other related equipment are produced to
meet the demands of individuals, government organizations and non-government
organizations.

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 2. Company background…

• Selam Awassa Business Group Plc. organizational

structure mainly includes the General Manager, Marketing Department (Sales,
Promotion), Administration and Finance Department (Human
Resource Administration, Finance, and Logistics), Manufacturing
Department (Design, Production) and Training Department (Training affairs).

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 3. Aggregate Planning
3.1. Short brief on aggregate planning
• Aggregate planning is the process of developing, analyzing and maintaining a
preliminary, approximate schedule of the overall operations of an organization. The
aggregate plan generally contains targeted sales forecasts, production levels,
inventory levels, and backlogs. This schedule is intended to satisfy the
demand forecast at a minimum cost. Properly done, aggregate planning should
minimize the effects of short sighted, day-to-day scheduling in which small amounts of
materials may be ordered one week, with an accompanying layoff of workers,
following by ordering larger amounts and rehiring workers the next week. This longer-term
perspective on resource use can help minimize short term requirements
changes with a resulting cost savings.

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 3.1. Short brief on aggregate planning …
• In simple terms, aggregate planning is an attempt to balance capacity and demand in
such a way that costs are minimized. The term “aggregate” is used because the planning
at this level includes all resources “in the aggregate;” for example, as product line or
family. Aggregate resources could be total number of workers, hours of machine time,
or tons of raw materials. Aggregate units of output could include gallons, feet, or pounds
of outputs.

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 3.2. Aggregate planning for multi-crop Thresher production in Selam
Awassa Business Group PLC.
Assumptions and information
• The plan covers six periods /months, say from October to April;
• A forecast of expected demand for each period is shown below

Perio 1 2 3 4 5 6 Total
d
Forec 10 18 16 10 10 8 72
ast

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 Assumptions and information…
• Costs
– Output
• Regular time = 10,840 Birr per thresher
• Overtime = 13,550 Birr per thresher
• Subcontract = 18,350 Birr per thresher
• Inventory = 1,200 Birr per thresher per
period on average inventory
• Back orders= 11,200 Birr per thresher per
period

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 Assumptions and information…
• Steady rate of regular output is assumed;
• The uneven demand is assumed to be
absorbed by the inventory;
• Overtime and subcontracting are not assumed
because the output rate is steady.
• Inventory on hand in the first period is 6
threshers.
• 5 workers are involved in the production of a
thresher.
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Formula used

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 Step 1: Computing quantity of the aggregate
planning
Period 1 2 3 4 5 6 Total
Forecast 10 18 16 10 10 8 72
Output

Regular 12 12 12 12 12 12 72

Overtime 18 - - - - - -

Subcontract - - - - - - -

Output-
2 -6 -4 2 2 4 0
Forecast
Inventor
y

Beginning 6 8 0 4 2 0

Ending 8 0 4 2 0 6

Average 7 4 2 3 1 3 20
Backlog 4 2 6
16
 Step 2: Computing cost of the aggregate
planning
Period 1 2 3 4 5 6 Total
Cost
Output

Regular 129,600 129,600 129,600 129,600 129,600 129,600 777,600 Birr

Overtime - - - - - -

Subcontract - - - - - -

Hire/Lay off - - - - - -

Inventory 8,400 4,800 2,400 3,600 1,200 3,600 24,000 Birr

Backlog 0 0 0 44,800 22,400 0 67,200 Birr

Total 138,000 134,400 132,000 178,000 153,200 133,200 868,800 Birr

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 4. Master Production Schedule
4.1. Short brief on Master Production Schedule (MPS)
• A master production schedule (MPS) is aplan for
individual commodities to be produced in each
time period such as production, staffing, inventory,
etc. It is usually linked to manufacturing where the
plan indicates when and how much of each product
will be demanded. This plan quantifies significant
processes, parts, and other resources in order to
optimize production, to identify bottlenecks, and to
anticipate needs and completed goods. Since an
MPS drives much factory activity, its accuracy and
viability dramatically affect profitability.
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Typical master scheduling process

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4.2. Master Production Scheduling for a 20×20
Hollow Block Mold in Selam Awassa Business
Group PLC.
Assumptions and information
• The plan covers eight periods/ weeks;
• A forecast of expected demand for each period is
shown below
• Customer orders (committed) are also shown
below;
• Beginning inventory is 28;
• Whenever there is production, 20 hollow block
molds are to be produced;

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 Input to the master production
schedule
a. Forecast
October November
1 2 3 4 5 6 7 8
Forecast 10 10 10 10 15 15 15 15
21
 b. Input to MPS: Forecast, customer order and
beginning inventory

Beginning October December

Inventory
28 1 2 3 4 5 6 7 8
Forecast 10 10 10 10 15 15 15 15

Customer
orders 16 11 7 5 3 2
(committed)
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 Output of the master production schedule

a. Calculation of projected on-hand inventory

• The forecasted demands of Hollow block
molds for the months October and December
are 40 and 60 respectively, and are evenly
distributed over the four weeks in each
month. Thus projected on-hand inventory
can be calculated based on this information
by using the following formula.

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 a. Calculation of projected on-hand
inventory…

• Note: Projected on-hand inventory equals

beginning inventory minus the larger of forecast
and customer orders. Because customer orders
(16) are larger than the forecast (10), the
customer orders amount is used.

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a. Calculation of projected on-hand
inventory…

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 Projected on-hand inventory calculation
until it becomes negative

The result from the above calculation shows that

production is needed to replenish inventory.
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 b. Preparation of the master production
schedule
• Since, it is assumed that 20 hollow block molds
are to be produced whenever there is
production, 20 hollow block molds are required
in the second week to meet the shortage of 9
hollow block molds and leave 11 (i.e., 20-9=11)
for future demand.
• Calculation for the entire schedule is continued
similarly. That means whenever there is
shortage, 20 hollow block molds are added to
the MPS. The figure below summarizes the MPS
and projected on-hand inventory.
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Determining the MPS and Projected on-
hand inventory
Inventory Net (20)
from *Requirem Projected
Week previous ent inventory inventory
before MPS MPS
week
1 28 16 12 12
2 12 11 1 1

3 1 10 -9 20 11

4 11 10 1 1
5 1 15 -14 20 6
6 6 15 -9 20 11
7 11 15 -4 20 16
8 16 15 1 1
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Projected on-hand inventory and MPS are
added to the master schedule

Beginni October December

ng
Inventor 1 2 3 4 5 6 7 8
y
Forecast 10 10 10 10 15 15 15 15
Customer
orders 16 11 7 5 3 2
(committe
d)
Projected
12 1 11 1 6 11 16 1
on-hand
MPS 20 20 20 20
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c. The uncommitted (ATP: Available-to-
promise) inventory

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Available-to-promise inventory quantities
added to the master schedule

Beginning October December

Inventory
28 1 2 3 4 5 6 7 8
Forecast 10 10 10 10 15 15 15 15
Customer
orders 16 11 7 5 3 2
(committed)
Projected on-
12 1 11 1 6 11 16 1
hand inventory
MPS 20 20 20 20
Available-to-
promise
1 8 17 18 20
inventory
(uncommitted)
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 5. Ways of assigning delivery dates and
taking new orders
• Selam Awassa Business Group PLC. receives
new orders by clearly developed Job order
form. The job order form includes customer
name, job description, quantity needed,
responsible workshop, co-manufacturing
workshops. In the form, there is also delivery
date and drawing number with some possible
remarks. The format is checked and approved
by the responsible personnel after being filled
completely.
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 5. Ways of assigning delivery dates and
taking new orders…
• Having taken the orders, the job is distributed
to the responsible departments /work
sections. Then the production process takes
place in the respective manufacturing
departments. After completing the entire
manufacturing process, the product will be
stored. The customer service department
checks the completion of the product in order
to notify if delay occurs. Finally the customer
receives the product based on the delivery
date.
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Job flow

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 6. Soft wares used in aggregate
planning and MPS
• Selam Awassa Business Group PLC does not
use sophisticated software for developing
aggregate production planning and master
production scheduling. It usually uses excel for
master production scheduling. The excel
format for the scheduling mainly consists of
respective customer names, production
activities, responsible workshops, expected
time for completion and timeline of
production.
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 7. Conclusion
• Production planning is very crucial for the
success of any manufacturing company. As
we have seen in Selam Awassa Business
Group PLC, the company is trying to
develop its production planning activities to
ensure the customer satisfaction.
Furthermore, it is
planning to identify and apply some proper
software for its planning activities. Thus, it is
better to identify and implement proper
software of planning so as to cope up with the
advancement of technologies
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Thank You!

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