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

Production Planning
APP.xls 3
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 4
 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 6
 Production – Inventory System
Information Flow
Material Flow
# Days for transit time
# Days to process or to
handle and issue orders

25 Day De- 5 Day Delay 25 Day Delay 13 Day Delay

lay to sense to sense for Review for Review
needs, place needs, place and and
and transmit and transmit Transmission Transmission
orders M.O.s of orders of orders

Demand

Raw Factory Factory Distributor Retail Ultimate

Material Warehouse Inventory Inventory Customer
Vendor
35 4 2 1
30 1 10 5 1
50 Independent 500 Independent
Company System Under Distributors Retailers

Managerial Control
Production Planning
Dynamo.xls 7
 Response of inventories
10,000 10
Retail inventory (units)

-4%

+45% Factory production output (units/week)

7500 7.5
Distributor inventory (units)
+10%
+32% +12%

Retail sales RRR

5000 5
-10% (units/week)
-15% -3%

Factory warehouse inventory

(units)
2500 2.5

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

Production Planning 8