Professional Documents
Culture Documents
Chapter Five
Five
Operations Planning
and
Control
By : Gemechu A. & Wubshet M.
Managerial
Managerial Issues
Issues
• Translating long-range strategic plans into daily work schedules for the
shop floor.
• Using aggregate planning to develop intermediate-range plans that link
the long-range strategic plan and the short-range operational plan.
• Developing aggregate plans that match the demand for products with the
firm’s ability to supply the products at minimum cost.
• Coordinating marketing management and operations to develop an
aggregate plan that is both effective and efficient.
Overview
Overview of
of Operational
Operational Planning
Planning Activities
Activities
• Long-Range Planning
– Focuses on strategic issues relation to capacity, process
selection, and plant location.
• Intermediate-Range Planning
– Focuses on tactical issues pertaining to aggregate workforce and
material requirements for the coming year.
• Short-Range Planning
– Addresses day-to-day issues of scheduling workers on jobs at
assigned work stations.
Planning
Planning Horizons
Horizons
Short-range plans Responsible:
Job assignments Operations
Ordering managers
Intermediate-range plans
Job scheduling Responsible:
o Sales planning
Dispatching Top executives
o Production planning and
Responsible: budgeting Long-range plans
Operations o Setting employment, inventory, R&D
managers,
subcontracting levels New product plans
supervisors,
o Analyzing operating plans Capital expenses
foremen
Facility location, expansion
• Meet demand
• Use capacity efficiently
• Meet inventory policy
• Minimize cost
– Labor
– Inventory
– Plant & equipment
– Subcontract
Overview
Overviewofof
Manufacturing
Manufacturing
Planning
PlanningActivities
Activities
Aggregate
Aggregate Production
Production Planning
Planning
• Production Rate
–The capacity of output per unit of time (such as
units per day or units per week.
• Workforce Level
–Number of workers required to provide a
specified level of production.
Cont’d
Cont’d …
…
• Inventory on Hand
–The surplus of units that results when
production exceeds demand in a given time
period.
• Backlog (or Stock out)
–The deficit in units that results when demand
exceeds the number of units produced in a
given time period.
Cont’d
Cont’d …
…
• Relevant Costs
– Basic production costs (fixed and variable).
– Costs associated with changes in the
production rate (e.g., labor costs).
– Inventory holding costs.
– Backlog (stock out) costs.
Required
Required Inputs
Inputs to
to the
the Production
Production Planning
Planning System
System
Production
Production Planning
Planning Strategies
Strategies
• Chase Strategy
– Matching the production rate to exactly meet the order rate by
hiring and laying off workers as the order rate varies.
– Works well for make-to-order firms.
• Stable Workforce — Variable Work Hours
– Varying output by varying the number of hours worked through
flexible schedules or overtime.
• Level Strategy
– Maintain a stable workforce working at constant output rate;
absorb demand variations with inventory, backlogs, or lost sales.
– Works well for make-to-stock manufacturing firms.
Pure
Pure Chase
Chase and
and Pure
Pure Level
Level Strategies
Strategies
Demand/Capacity
Demand/Capacity Options
Options or
or Proactive
Proactive
Approaches
Approaches to
to Aggregate
Aggregate Planning
Planning
• Demand Options;
• Influencing demand variation so that it aligns to available
production capacity:
– Pricing
– advertising
Capacity Options;
• Hiring and firing
• Overtime work
• Par-time work
• Inventories
• Subcontracting
Master
Master Production
Production Scheduling
Scheduling
18
Operations
Operations Scheduling-
Scheduling- Key
Key Concepts
Concepts
• Scheduling: a time table for performing activities, utilizing
resources and allocating facilities.
• process of establishing the timing of the use of equipment,
human resources and facilities.
• It lies at the heart of the process because it is related to
workflow which is related to cash flow.
• Effective scheduling can yield:
–cost savings.
–increase productivity.
–jobs completed on time
–Company competitive advantage in terms of customer
services.
Key
Key Concepts…
Concepts…
7-8= -1
It shows job completed
before due date
B 4 7+4= 11 3 8 =11-3
C 5 11+5=16 9 7
D 2 16+2=18 7 11
E 6 18+6=24 6 18
Total 24 76 44
Cont…
Cont…
• Total flow time = 76 days
• Average flow time = 76 days/5 = 15.2 days
• Average job lateness = 44days/5 = 8.8 days
• Average number of jobs at work centre =
76days/24days = 3.2 jobs
Solution
Solution using
using SPT
SPT
• Johnson’s rule
–Managers use to minimize the make span for a group
of jobs to be processed on two machines (work
centers)
–It also minimize the total idle time at the work centre
Steps
Steps
• Determination of the optimum sequence involves
these steps.
I. List the jobs at each work center.
II. Select the job with the shortest processing time – if the
shortest time is at the first work center schedule that
job first; if the time is at the second work center
schedule the time last.
III. Eliminate the job and its time from further
consideration.
IV. Repeat step 2 and 3.
Example
Example
D 0 2 2 2 7 9 2
E 2 6 8 9 8 17 -
C 8 8 16 17 9 26 -
F 16 12 28 28 15 43 2
A 28 5 33 43 5 48 -
B 33 4 37 48 3 51 -
Cont’d
Cont’d …
…
• Thus, the group of jobs will take 51 hours. Machine
2 will wait two hours for its first job and also two
hours after finishing job C. machine one will finish in
37 hours
• Minimum flow time = 51 hours
• Through put time = 47 hours
• Idle time for work centre 2 is 4 hours
Materials Requirement Planning
(MRP) and Enterprise Resource
Planning (ERP)
Material
Material Requirement
Requirement Planning
Planning (MRP)
(MRP)
A Dependent Demand
B(4) C(2)
Changes
Order releases
Master
schedule Planned-order
schedules
Primary
reports Exception reports
Bill of Planning reports
materials MRP computer Secondary
Performance-
programs reports control
reports
Inventory
records Inventory
transaction
Master
Master Schedule
Schedule
Level Chair
0
1 Leg Back
Assembly Assembly
Seat
3
Inventory
Inventory Records
Records
• Net requirements
–Actual amount needed in each time period
• Planned-order receipts
–Quantity expected to received at the beginning of the
period.
• Planned-order releases
–Planned amount to order in each time period
MRP
MRP Outputs
Outputs
• Integrity of data
Manufacturing
Manufacturing Resource
Resource Planning
Planning (MRP
(MRP
II)
II)
• Expanded MRP with emphasis placed on
integration wit functional activities.
– Financial planning
– Marketing
– Engineering
– Purchasing
– Manufacturing
MRP
MRP II
II
Market Master
Finance Manufacturing production schedule
Demand
Rough-cut Capacity
capacity planning planning
Adjust
production plan
Yes No Requirements No Yes
Problems? schedules Problems?
Enterprise
Enterprise resource
resource planning
planning (ERP)
(ERP)
ERP:
– Next step in an evolution that began with MRP and evolved into
MRPII
– Integration of financial, manufacturing, and human resources
etc. on a single computer system. Or
• The functions include:
Sales Marketing Purchasing
Operations Logistics Finance
Inventory control Accounting
Human resources etc.
• ERP runs as a client-server system - users access the system through
their PCs
• ERP operates company-wide, not just plant-based.
ERP
ERP Strategy
Strategy Considerations
Considerations
Thank You!