Inventory

MGT

PRESENTED BY:
Lara Wynona Silvera
Kathrine Ann Valenzuela
After reading this chapter you should be
able to do the following:

AIMS OF THIS CHAPTER

• discuss the different levels of planning in an
organization and their effect on stocks;
• appreciate the importance of capacity and use a
standard approach to capacity planning;
• understand the role of tactical plans, including
aggregate plans and master schedules;
• outline methods for designing aggregate plans;
• extend these methods to designing master
schedules;
• discuss the role and design of short-term
schedules;
• use simulation to describe stock systems.

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 HIERARCHY OF DECISIONS
THAT EXIST IN EVERY
ORGANIZATION
STRATEGIC DECISIONS TACTICAL DECISIONS
have effects over the implement the
long term, involve many strategies over the
resources and are the medium term; they look
most risky. at more detail, involve
fewer resources and
some risk.
OPERATIONAL DECISIONS
implement the tactics over the
short term; they are the most
detailed, involve few
resources and little risk

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Each strategy and focus
has a direct effect on
stocks. A strategy of low
costs will lead to strategic
decisions about stock that
aim at minimizing long-
term costs. But these
strategic decisions lead to
more detailed tactical
plans for the organization In turn, the tactical
– and more detailed decisions lead to detailed
tactical decisions about operational decisions for
stocks. the organization – and
operational decisions
about stock. The message
is that decisions about
stock occur at all levels
and are directly linked to
other decisions within the
organization.
 RATE at which
CAPACITY OF materials can be
STORAGE moved into stock
the space available, floor including sorting, checking,
area, investment, number break-bulk, unpacking,
of items, number of bins, moving from delivery bays,
length of racking, etc. finding right storage area,
handling, etc.

RATE at which
materials can be
removed from stock
including locating stock,
checking, picking,
records, stocktaking, issuing
consolidating orders,
moving to departure bays,
packing, etc.
INFORMATION A useful place to start looking
HANDLING at planning is with capacity. This
including processing of sets the maximum amount that
orders, updating stock
can be produced in a given
delivery notes, answering period.
queries and any other
adminis- tration

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 SUMMARY
• Planning within an organization is done at
different levels, which we described as strategic,
tactical and operational.
• Decisions about stock are made at all levels and
they are linked to other decisions within an
organization at all levels. We saw this effect in
capacity planning, where there must be enough
capacity for stocks to meet forecast demand, and
they should not form a bottleneck that
constrains other operations.
• There is a general procedure for capacity
planning, which finds the mismatch between
supply and demand, devises plans to overcome
this, and implements the best.

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 Inventory
TACTICAL PLANS MGT
When strategic plans have been finalized, the
next stage is to expand these into tactical plans.
There is some disagreement about the terms
used to describe these, but we will use the most
common:
 Inventory
• Aggregate plans take the strategic plans,
particularly the capacity plans, and add details
MGT
to give a set of production plans for each
family of products, for each of the next few
months. Aggregate plans are only concerned
with families of products and do not look at
individual items.

• The aim of aggregate planning is designing

medium- term schedules for making families
of products that meet all forecast demand,
keep within the constraints of the capacity, use
available resources efficiently, keep production
relatively stable, and meet any other specific
objectives and constraints.
 Inventory
• A key question concerns the way that the
aggregate plan deals with varying demand.
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There are basically four alternatives:
1. adjust the supply (by work- ing overtime,
etc.),
2. adjust the demand (by changing prices,
using incentives, etc.),
3. alter the lead time to customers, and
4. use stocks

• Stocks are important for aggregate planning as

they separate operations and mean that
production in any period need not exactly
match demand in the period.
 METHODS OF DESIGNING AGGREGATE
PLANS
ADJUST OTHER MATHEMATICAL GRAPHICAL
NEGOTIATIONS PREVIOUS PLANS INTUITIVE METHODS MODELS MODELS

Planning is so The best operations These include a The methods we Planners often find it
complicated, with are relatively stable, range of methods have listed so far easier to work with
many subjective so a useful approach that use the skills, rely, at least to some graphs or diagrams.
factors and people to planning has an knowledge and extent, on the skills The most popular
affected, that the experienced planner experience of of a planner. format uses a graph
best approach is reviewing previous planners, who will of cumulative
often to negotiate a plans and updating typically use a demand over some
solution. This may them to allow for any series of heuristic time period, and the
not give the best changing rules that have corresponding line
technical answer, but circumstances. been successful in of cumulative supply.
it has the support of the past.
everyone concerned.
METHODS OF DESIGNING AGGREGATE
PLANS

EXPERT OTHER SPREADSHEET

SIMULATION SYSTEMS CALCULATIONS

These specialized programs try to Concentrating on
One of the most flexible make computers duplicate the the graphs might
approaches to solving thinking of a skilled scheduler. The show the overall
problems. It gives a dynamic basic skills, expertise, decisions patterns, but it
view by imitating real and rules used by experts are
operations over a typical might lose some of
collected in a knowledge base. the details.
period.

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INITIAL AGGREGATE PLAN FOR WORKED
EXAMPLE
MODIFIED AGGREGATE PLAN FOR
WORKED EXAMPLE
The overall objective of the master schedule is to
devise a detailed timetable for individual products
that allows the aggregate plan to be achieved as
efficiently as possible.

The master schedule ‘disaggregates’

the aggregate plan and shows the
number of individual products to be
made, typically, each week. This
detailed timetable of planned
production shows the due dates or
completion times of individual
products.

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SHORT-TERM SCHEDULING
The most common approach to short-term scheduling
uses simple scheduling rules. These are guidelines or
rules of thumb that seem to give reasonable results. We
can illustrate the approach for processing batches of
different items on a piece of equipment. Then the object
of scheduling is to design a timetable that allows the
batches to move as efficiently as possible through the
equipment
In this context, we can think of
efficiency in several different ways,
perhaps minimizing the waiting time
of batches, minimizing the total
processing time, keeping stocks low,
reducing the maximum lateness,
achieving high utilization of
equipment, or some other specific
measure.

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 SOME COMMON RULES FOR
DESIGNING SCHEDULES
FIRST-COME- MOST SHORTEST EARLIEST DUE CRITICAL
FIRST-SERVED URGENT FIRST JOB FIRST DATE FIRST RATIO

The most obvious Assigns an Minimizes the Takes batches in the The critical ratio is
scheduling rule and importance, or average time order that they are the time remaining
simply schedules urgency, to each spent in the needed for until a batch is
batches in the order batch and they are system, where this customers. This has needed divided by
they arrive. It processed in order of time is defined as the benefit of the time needed to
assumes no priority, decreasing urgency. processing time minimizing the complete the batch.
no urgency, or any plus waiting time. maximum lateness of If this ratio is low, the
A hospital
other measure of A batch that can batches, but again batch becomes
emergency
relative importance. be finished quickly some batches may urgent: if the ratio is
department, for
is processed and have to wait a long high, there is plenty
example, will
moved on time. of time remaining
schedule patients in
through the and the batch is less
this order.
system, while urgent.
longer jobs are
left until later.
CONTROL OF SCHEDULES
There are often unforeseen factors that
prevent the plans actually happening, such
as equipment developing faults, people
being ill, suppliers not sending the right
materials, late deliveries, and so on.

TWO MAIN PARTS:

• The first part checks the progress of jobs
and gives information back to managers
• The second part starts working when
circumstances change, or something
goes wrong.

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PURPOSE OF CONTROL
SYSTEM
• monitor operations and report on their
performance
• make sure jobs are scheduled according to
plans;
• warn of problems with resources, delivery
dates, etc.;
• check progress as jobs move through the
process;
• make small adjustments as necessary to
plans;
• allow rescheduling if there is a major
disruption to plans;
• give information on current activities
monitor operations and report on their
performance;

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 Inventory
MGT

PRESENTED BY:

LARA WYNONA B. SILVERA

KATHRINE ANN VALENZUELA

AM11