POM 1 Q # 2 Define economic system and explain productivity?

An economic system can be defined as an organized way in which a state or nation allocates its resources and apportions goods and services in the national community. Some common economic systems are: capitalism, communism, market system, mixed economy, and socialism. All economic systems are run differently with different beliefs on what would best help the economy be successful. This includes government regulations, different laws, and the ownership of businesses. Productivity has many definitions, and many people Ive asked explain it in different ways. Perhaps to me, Productivity is that positive constant energy which leads you to take practical steps to achieve one goal after another. It starts with taking a simple step of action, and focusing on your task at hand until you complete it. Productivity comes naturally when youre excited about something, but may be harder to come when youre bored or dont like a task. Therefore, productivity can sometimes be taken as a measure of how passionate youre about the task at hand. Productivity is a measure of the efficiency of production. Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of a total input. These definitions are short but too general and insufficient to make the phenomenon productivity understandable. A more detailed theory of productivity is needed, which explains the phenomenon productivity and makes it comprehensible. Furthermore is needed operationalization of the concept productivity that makes it a measureable quantity. In explaining and operationalizing a set of production models are used. A production model is a numerical expression of the production process that is based on production data, i.e. measured data in the form of prices and quantities of inputs and outputs The benefits of high productivity are manifold. At the national level, productivity growth raises living standards because more real income improves people's ability to purchase goods and services, enjoy leisure, improve housing and education and contribute to social and environmental programs. Productivity growth is important to the firm because it means that the firm can meet its (perhaps growing) obligations to customers, suppliers, workers, shareholders, and governments (taxes and regulation), and still remain competitive or even improve its competitiveness in the market place Q # 3. If units are 775, input used 320 units calculate the productivity?
productivity = input = 320 output = 775 775 320 productivity = 2.42 output > input productivity = output input

B) If output of a production units are 1500 and labor used 200 units, material 320 units, energy 715units capital 500 than find the multi-factor productivity?
output = 1500 labor = 200 material = 320 energy = 715 capital = 500 multi factor.. productivity = ? weknow unit . produced labor + matrial + capital + energy 1500 multi factor productivity = 200 + 320 + 500 + 750 1500 multi factor productivity = 1770 multi factor productivity = 0.847 multi factor productivity =

POM 2 Q # 4. Explain deming 14 points for quality achievement? Dr. Edwards Deming emphasized that the key to quality improvement was in the hands of management. Dr. Deming demonstrated that most problems are the result of the system and not of employees. Deming used statistical quality control techniques to identify special and common cause conditions, in which common cause was the result of systematic variability, while special cause was erratic and unpredictable. Deming described the seven deadly diseases of the workplace and fourteen points for management. Deming made some very good management points that are applicable to what should be done today. However, Deming did not have a management system for implementing his philosophy. After listing Demings 14 points, I will describe a long-lasting 21st century governance system for the achievement of his 14 points. 1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business and to provide jobs. 2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. 4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a Long-Range relationship of loyalty and trust. 5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs. 6. Institute training on the job. 7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. 8. Drive out fear, so that everyone may work effectively for the company. 9. Break down barriers between departments. People in research, design, sales, and production must work as a team to foresee problems of production and use that may be encountered with the product or service. 10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. 11a. Eliminate work standards (quotas) on the factory floor. Substitute leadership. 11b. Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership. 12a. Remove barriers that rob the hourly worker(s) of their right to pride of workmanship. 12b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. 13. Institute a vigorous program of education and self-improvement. 14. Put everybody in the company to work to accomplish the transformation. The transformation is everybodys job. Q # 5. Explain in detail 7 tools of quality improvement? Seven Basic Tools of Quality Control. Ishikawa believed that 90% of a companys problems could be improved using these seven tools, and that - with the exception of Control Charts they could easily be taught to any member of the organisation. This ease-of-use combined with their graphical nature makes statistical analysis easier for all. The seven tools are:

Cause and Effect Diagrams Pareto Charts Flow Charts Check sheet

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Scatter Plots Control (Run) Charts Histograms

What follows is a brief overview of each tool. If you would like to know more or be trained in their use, please get in touch using the form at the top of the page.

Cause and Effect Diagrams

First used by Ishikawa in the 194os, they are employed to identify the underlying symptoms of a problem or effect as a means of finding the root cause. The structured nature of the method forces the user to consider all the likely causes of a problem, not just the obvious ones, by combining brainstorming techniques with graphical analysis. It is also useful in unraveling the convoluted relationships that may, in combination, drive the problem. The basic Cause and Effect Diagram places the effect at one end. The causes feeding into it are then identified, via brainstorming, by working backwards along the spines (sometimes referred to as vertebrae), as in the diagram below: For more complex process problems, the spines can be allocated a category and then the causes/inputs of each identified. There are several standard sets of categorisations that can be used, but the most common is Material, Machine/Plant, Measurement/Policies, Methods/Procedures, Men/People and Environment - easily remembered as the 5Ms and an E - as shown in the below: Each spine can then be further sub-divided, as necessary, until all the inputs are identified. The diagram is then used to highlight the causes that are most likely a contributory factor to the problem/effect, and these can be investigated for inefficiencies/optimization.

Control (Run) Charts

Dating back to the work of Shewhart and Deming, there are several types of Control Chart. They are reasonably complex statistical tools that measure how a process changes over time. By plotting this data against pre-defined upper and lower control limits, it can be determined whether the process is consistent and under control, or if it is unpredictable and therefore out of control. The type of chart to use depends upon the type of data to be measured; i.e. whether it is attributable or variable data. The most frequently used Control Chart is a Run Chart, which is suitable for both types of data. They are useful in identifying trends in data over long periods of time, thus identifying variation. Data is collected and plotted over time with the upper and lower limits set (from past performance or statistical analysis), and the average identified, as in the diagram below.

Pareto Charts
Based upon the Pareto Principle that states that 80% of a problem is attributable to 20% of its causes, or inputs, a Pareto Chart organises and displays information in order to show the relative importance of various problems or causes of problems. It is a vertical bar chart with items organised in order from the highest to the lowest, relative to a measurable effect: i.e. frequency, cost, time. A Pareto Chart makes it easier to identify where the greatest possible improvement gains can be achieved. By showing the highest incidences or frequencies first and relating them to the overall percentage for the samples, it highlights what is known as the vital few. Factors are then prioritized, and effort focused upon them.

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Scatter Diagrams
A Scatter Diagram, or Chart, is used to identify whether there is a relationship between two variables. It does not prove that one variable directly affects the other, but is highly effective in confirming that a relationship exists between the two. It is a graphical more than statistical tool. Points are plotted on a graph with the two variables as the axes. If the points form a narrow cloud, then there is a direct correlation. If there is no discernible pattern or a wide spread, then there is no or little correlation. If both variables increase as the other increases i.e. the cloud extends at roughly 45 degrees from the point where the x and y axes cross then they are said to be positively correlated. If the one variable decreases as the other increases, then they are said to be negatively correlated. These are linear correlations; they may also be non-linearly correlated. Below is an example of a Scatter Diagram where the two variables have a positive linear correlation.

Histogram
Like Pareto Charts, Histograms are a form of bar chart. They are used to measure the frequency distribution of data that is commonly grouped together in ranges or bins. Most commonly they are used to discern frequency of occurrence in long lists of data. For instance, in the list 2, 2, 3, 3, 3, 3, 4, 4, 5, 6, the number 3 occurs the most frequently. However, if that list comprises several hundred data points, or more, it would be difficult to ascertain the frequency. Histograms provide an effective visual means of doing so. Bins are used when the data is spread over a wide range. For example, in the list 3, 5, 9, 12, 14, 17, 20, 24, 29, 31, 45, 49, instead of looking for the occurrence of each number from 1 to 49, which would be meaningless, it is more useful to group them such that the frequency of occurrence of the ranges 1-10, 11-20, 21-30, 31-40 and 41-50 are measured. These are called bins. Histograms are very useful in discerning the distribution of data and therefore patterns of variation. They monitor the performance of a system and present it in a graphical way which is far easier to understand and read than a table of data. Once a problem has been identified, they can then also be used to check that the solution has worked.

Flow Chart
A flow chart is a visual representation of a process. It is not statistical, but is used to piece together the actual process as it is carried out, which quite often varies from how the process owner imagines it is. Seeing it visually makes identifying both inefficiencies and potential improvements easier. A series of shapes are used to depict every step of the process; mental decisions are captured as well as physical actions and activities. Arrows depict the movement through the process. Flow charts vary in complexity, but when used properly can prove useful for identifying non-value-adding or redundant steps, the key parts of a process, as well as the interfaces between other processes. Problems with flow charts occur when the desired process is depicted instead of the actual one. For this reason, it is better to brainstorm the process with a group to make sure everything is captured.

Check sheet

POM 5 Like flow charts, check sheets are non-statistical and relatively simple. They are used to capture data in a manual, reliable, formalised way so that decisions can be made based on facts. As the data is collected, it becomes a graphical representation of itself. Areas for improvement can then be identified, either directly from the check sheet, or by feeding the data into one of the other seven basic tools. Simply, a table is designed to capture the incidences of the variable(s) to be measured. Tick marks are then manually put in the relevant boxes. As the ticks build up, they give a graphical representation of the frequency of incidences. Below is a typical example. Q # 6. Define achieving, organizing and recognizing quality? Quality is an important characteristic for companies and organizations to have. It is not enough to state you have a quality product or quality service to your customers, it must be proven. Companies need to recognize within their structure when employees exhibit quality characteristics in what they do. This can be accomplished from an individual level, team level, department level or division level. Regardless of which level is involved when quality targets are achieved they need to be recognized accordingly. Quality is something to be proud of and recognizing employees quality work makes them feel they are appreciated for the effort they provide to their company or organization. Recognizing quality achievements within a company is great but there are also measures society has in place to recognize quality achievements outside of companies or organizations. These measurements in some instances are not part of an evaluation process but are efforts to recognize quality achievements through an independent organization. Our country like other countries needs to have quality efforts both in products and service recognized not only within organizations but outside. The quality of products and services needs to get exposure so the public is generally aware of the efforts achieved by individuals and/or organizations. The process of recognizing quality efforts must be defined with specific evaluation criteria. Creating mechanisms to recognize quality is important. Businesses and organizations must make sure that the process of recognizing quality does not become routine causing their value to be reduced. Another factor involved in recognizing quality achievements is to make sure that they are not merely a set of goals. Goals are great to have and quality principles and objectives should be a part of them but the achievements should not be ones that are easily obtained. Achievements in quality add value to a business or organization. It is one characteristic that customers look for in making a decision to become a customer. Another point to make is what a quality achievement or award represents. There are many quality awards throughout the United States and the world and many have been recognized for what the award represents not only for individuals but also organizations. Today in these economic times it is important to have an edge as a business or organization. Achieving a quality level and being recognized for it outside of their organization is important. Competition today is all about quality products and services. There are a few last points to make about recognizing quality achievements. For individuals, organizations or businesses that achieve measured quality levels they create a sense of pride for all those who are part of an organization or business. Another important point to make is achieving quality levels is the result of all employees not just a few. The quality of an organization is the result of those individuals who are part of it. Achieving quality levels requires the efforts of an entire organization or business and when they are achieved they must be properly recognized. Any company or organization that achieves quality levels does so with the contributions from all employees. Being recognized for quality products or services is something for which all businesses or organizations should strive. Awards or recognition for quality achievements is important but they can only have one winner but when quality is achieved the business or organization is a winner and so are

POM 6 their customers. If we are part of an organization or business let us work together to deliver the best quality product or service we can. If we have a business we must have a policy of delivering quality products or services. Increasing the efforts by all of us to deliver quality products and services will benefit the organization or business of which we are a part and it will benefit those who are the customers. The unemployment figure of today has the potential of improving if the quality of the products or services being produced is increased or at high levels. Quality products and services are always in demand and when demand rises there is an increase need for employees to fill that demand.

Q # 7 Define inventory also explain ABC and FSN analysis? Inventory: Inventory is the total amount of goods and/or materials contained in a store or factory at any given time. Store owners need to know the precise number of items on their shelves and storage areas in order to place orders or control losses. Factory managers need to know how many units of their products are available for customer orders. Restaurants need to order more food based on their current supplies and menu needs. All of these business rely on an inventory count to provide answers. The word 'inventory' can refer to both the total amount of goods and the act of counting them. Many companies take an inventory of their supplies on a regular basis in order to avoid running out of popular items. Others take an inventory to insure the number of items ordered matches the actual number of items counted physically. Shortages or overages after an inventory can indicate a problem with theft (called 'shrinkage' in retail circles) or inaccurate accounting practices. ABC Analysis The ABC analysis is a business term used to define an inventory categorization technique often used in materials management. It is also known as Selective Inventory Control. Policies based on ABC analysis:

A ITEMS: very tight control and accurate records B ITEMS: LESS TIGHTLY CONTROLLED and good records C ITEMS: simplest controls possible and minimal records

The ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, [1] while also providing a mechanism for identifying different categories of stock that will require different management and controls. The ABC analysis suggests that inventories of an organization are not of equal value. [2] Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance. 'A' items are very important for an organization. Because of the high value of these A items, frequent value analysis is required. In addition to that, an organization needs to choose an appropriate order pattern (e.g. Just- in- time) to avoid excess capacity. 'B' items are important, but of course less important, than A items and more important than C items. Therefore B items are intergroup items. 'C' items are marginally important. [3]

ABC analysis categories

There are no fixed threshold for each class, different proportion can be applied based on objective and criteria. ABC Analysis is similar to the Pareto principle in that the 'A' items will typically account for a large proportion of the overall value but a small percentage of number of items.[4] Example of ABC class are

A items 20% of the items accounts for 70% of the annual consumption value of the items.

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7 B items - 30% of the items accounts for 25% of the annual consumption value of the items. C items - 50% of the items accounts for 5% of the annual consumption value of the items.[5]

Another recommended breakdown of ABC classes[6]: 1. "A" approximately 10% of items or 66.6% of value 2. "B" approximately 20% of items or 23.3% of value 3. "C" approximately 70% of items or 10.1% of value FSN Analysis By doing FSN analysis materials can be classified based on their movement from inventory for a specified period. Items are classified based on consumption and average stay in the inventory. Higher the stay of item in the inventory, the slower would be the movement of the material F Fast SSlow N- Non moving Sometimes the terms FNS is also being used, where F Fast NNormal SSlow There following steps in doing the FSN analysis Calculation of average stay and the consumption rate of the material in warehouse FSN Classification of materials based on average stay in the inventory FSN Classification of the material based on consumption rate Finally classifying based on above FSN analysis. Q # 8 Define and explain production methods? The processes and methods employed to transform tangible inputs (raw materials, semi finished goods, or subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Definition In our introduction to production and operations management ("POM") we suggested that there are several different methods of handling the conversion or production process - Job, Batch, Flow and Group. This revision note explains these methods in more detail. Introduction The various methods of production are not associated with a particular volume of production. Similarly, several methods may be used at different stages of the overall production process. Job Method With Job production, the complete task is handled by a single worker or group of workers. Jobs can be small-scale/low technology as well as complex/high technology. Low technology jobs: here the organisation of production is extremely simply, with the required skills and equipment easily obtainable. This method enables customer's specific Moving Moving Moving Moving Moving

POM 8 requirements to be included, often as the job progresses. Examples include: hairdressers; tailoring High technology jobs: high technology jobs involve much greater complexity - and therefore present greater management challenge. The important ingredient in hightechnology job production is project management, or project control. The essential features of good project control for a job are: - Clear definitions of objectives - how should the job progress (milestones, dates, stages) - Decision-making process - how are decisions taking about the needs of each process in the job, labour and other resources Examples of high technology / complex jobs: film production; large construction projects (e.g. the Millennium Dome) Batch Method As businesses grow and production volumes increase, it is not unusual to see the production process organised so that "Batch methods" can be used. Batch methods require that the work for any task is divided into parts or operations. Each operation is completed through the whole batch before the next operation is performed. By using the batch method, it is possible to achieve specialisation of labour. Capital expenditure can also be kept lower although careful planning is required to ensure that production equipment is not idle. The main aims of the batch method are, therefore, to: Concentrate - Achieve high equipment utilisation skills (specialisation)

This technique is probably the most commonly used method for organising manufacture. A good example is the production of electronic instruments. Batch methods are not without their problems. There is a high probability of poor work flow, particularly if the batches are not of the optimal size or if there is a significant difference in productivity by each operation in the process. Batch methods often result in the build up of significant "work in progress" or stocks (i.e. completed batches waiting for their turn to be worked on in the next operation). Flow Methods Flow methods are similar to batch methods - except that the problem of rest/idle production/batch queuing is eliminated. Flow has been defined as a "method of production organisation where the task is worked on continuously or where the processing of material is continuous and progressive," The aims of flow methods are: Improved work Reduced need - Added value / completed work faster & for material labour flow skills

Flow methods mean that as work on a task at a particular stage is complete, it must be passed directly to the next stage for processing without waiting for the remaining tasks in the "batch". When it arrives at the next stage, work must start immediately on the next process. In order for the flow to be smooth, the times that each task requires on each stage must be of equal length and there should be no movement off the flow production line. In theory, therefore, any fault or error at a particular stage In order that flow methods can work well, several requirements must be met:

POM 9 (1) There must be substantially constant demand If demand is unpredictable or irregular, then the flow production line can lead to a substantial build up of stocks and possibility storage difficulties. Many businesses using flow methods get round this problem by "building for stock" - i.e. keeping the flow line working during quiet periods of demand so that output can be produced efficiently. (2) The product and/or production tasks must be standardized Flow methods are inflexible - they cannot deal effectively with variations in the product (although some "variety" can be accomplished through applying different finishes, decorations etc at the end of the production line). (3) Materials used in production must be to specification and delivered on time Since the flow production line is working continuously, it is not a good idea to use materials that vary in style, form or quality. Similarly, if the required materials are not available, then the whole production line will come to a close - with potentially serious cost consequences. (4) Each operation in the production flow must be carefully defined - and recorded in detail (5) The output from each stage of the flow must conform to quality standards Since the output from each stage moves forward continuously, there is no room for substandard output to be "re-worked" (compare this with job or batch production where it is possible to compensate for a lack of quality by doing some extra work on the job or the batch before it is completed). The achievement of a successful production flow line requires considerable planning, particularly in ensuring that the correct production materials are delivered on time and that operations in the flow are of equal duration. Common examples where flow methods are used are the manufacture of motor cars, chocolates and televisions. Q # 9. Explain and Draw Production Planning Hierarchy?

Long-Range Capacity Planning Aggregate Planning Master Production Scheduling Production Planning and Control Systems Pond Draining Push Systems Systems
Long-Range Capacity Planning

Pull Systems

Focusing on Bottlenecks

POM 10 Long-Range planning gives you an overview of future plans for production and procurement. You can plan several versions of the demand program using a simulated planning run and check the result using special evaluations. The planning run as well as the evaluations in Long-Range planning are separated from the tools in Materials Requirements Planning because LongRange planning involves planning in simulation. Entries are made in a special planning file for Long-Range planning as well as simulated capacity requirements for Long-Range planning. The handling and functionality of Long-Range planning differ from that of capacity planning but not from that of material requirements planning. Therefore the description of the capacity planning functions in MRP is also valid for Long-Range planning Aggregate planning Aggregate planning is an operational activity that does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period.. The quantity of outsourcing, subcontracting of items, overtime of labour, numbers to be hired and fired in each period and the amount of inventory to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company ethics, policies, and long term commitment to the society, community and the country of operation. Aggregate planning has certain prerequired inputs which are inevitable. They include:

Information about the resources and the facilities available. Demand forecast for the period for which the planning has to be done. Cost of various alternatives and resources. This includes cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, backordering and overtime. Organizational policies regarding the usage of above alternatives.

"Aggregate Planning is concerned with matching supply and demand of output over the medium time range, up to approximately 12 months into the future. Term aggregate implies that the planning is done for a single overall measure of output or, at the most, a few aggregated product categories. The aim of aggregate planning is to set overall output levels in the near to medium future in the face of fluctuating or uncertain demands. Aggregate planning might seek to influence demand as well as supply." Master Production Scheduling A master production schedule (MPS) is a plan for individual commodities to produce in each time period such as Due to software limitations, but especially the intense work required by the "master production schedulers", schedules do not include every aspect of production, but only key elements that have proven their control effectivity, such as forecast demand, production costs, inventory costs, lead time, working hours, capacity, inventory levels, available storage, and parts supply. The choice of what to model varies among companies and factories. The MPS is a statement of what the company expects to produce and purchase (i.e. quantity to be produced, staffing levels, dates, available to promise, projected balance).

POM 11 The MPS translates the business plan, including forecast demand, into a production plan using planned orders in a true multi-level optional component scheduling environment. Using MPS helps avoid shortages, costly expediting, last minute scheduling, and inefficient allocation of resources. Working with MPS allows businesses to consolidate planned parts, produce master schedules and forecasts for any level of the Bill of Material (BOM) for any type of part. Production Planning and control System. Once the entrepreneur has taken the decisions regarding the product design and production processes and system, his next task is to take steps for production planning and control, as this function is essentially required for efficient and economical production. One of the major problems of small scale enterprises is that of low productivity small scale industries can utilise natural resources, which are otherwise lying. Small scale sector can play an important role, similar to the one played by small scale industries in other developed countries. Planned production is an important feature of the small industry. The small entrepreneur possessing the ability to look ahead, organize and coordinate and having plenty of driving force and capacity to lead and ability to supervise and coordinate work and simulates his associates by means of a programme of human relation and organization of employees, he would be able to get the best out of his small industrial unit. Gorden and Carson observe production; planning and control involve generally the organization and planning of manufacturing process. Especially it consists of the planning of routing, scheduling, dispatching inspection, and coordination, control of materials, methods machines, tools and operating times. The ultimate objective is the organization of the supply and movement of materials and labour, machines utilization and related activities, in order to bring about the desired manufacturing results in terms of quality, quantity, time and place. Production planning without production control is like a bank without a bank manager, planning initiates action while control is an adjusting process, providing corrective measures for planned development. Production control regulates and stimulates the orderly how of materials in the manufacturing process from the beginning to the end. Q # 10.Explain Production Planning Horizon? Production and operations planning in organizations quite often is a multi-level sequential process, involving aggregate planning, master production scheduling, and detailed operations planning and scheduling. To obtain good planning results, it is desirable to have a proper planning horizon for each level of planning. There have been a considerable number of studies dealing with planning horizons for aggregate planning or production smoothing problems. There are also many planning horizon studies for single-item lot sizing problems. No study has addressed the issues associated with the planning horizons for master production schedules (which is a multi-item lot sizing problem in nature), particularly with respect to the relationship to the aggregate plan. This study addresses the issue of planning horizons for companies employing a make-tostock competitive strategy facing a seasonal demand for their products. We formulate the aggregate planning problem and the master scheduling problem as two separate mathematical programs to approximate the two-stage process that typically takes place in practice. Rolling planning horizons are used to approximate the periodic updates of the plans commonly done in practice. The models also incorporate resource requirements planning concepts to estimate loads on the critical work centers.

POM 12 The planning process is simulated as a single pass procedure where the results of aggregate planning are passed to the master production scheduling model once per month and the results of the master scheduling model (i.e., the portion of the master schedule actually implemented) are passed back to the aggregate planning model for the next planning session. The experimental results show that when the planner faces extreme cost structures such as high smoothing costs/high setup costs or low smoothing costs/low setup costs, the planning horizon effects are reduced to a minimum. Master schedule planning horizons need not be as long as aggregate planning horizons. Alternatively, non-extreme cost structures such as high smoothing costs/low setup costs and low smoothing costs/high setup costs should be handled with equal planning horizons for both aggregate planning and master scheduling. It is also found that the firm's cost structure has an impact on the appropriate planning horizon for both aggregate planning and master scheduling. Some cost conditions allow for smaller master schedule horizons. The best horizon choice seems to be equal planning horizons for both aggregate planning and master scheduling, even though the cost savings is slight in some cases. Finally, the proper length of the planning horizon for master scheduling is affected by the planning horizon of the aggregate plans. Section IV. included an overview of long-range planning. This section examines longrange planning in more detail. It includes descriptions of strategic planning and tactical planning with examples of selected manufacturing strategic considerations. It describes the manufacturing resource (facilities and equipment) planning that precedes completion of the initial production plan. However, an initial production plan is implicitly required when deciding the number and size of facilities because those decisions affect capacity, and capacity limits the options available to production planning. In addition, a numerical example is used in the description of the relationship of production planning, sales planning, and financial planning. Although manufacturing strategies and plans may be reviewed annually, major changes in strategies and facilities do not occur that often in most organizations. However, production planning does occur on a regular basis. For example, the production plan is extended (rolled forward) by three months every quarter in some firms, Thus, production planning bridges the long- and medium-range planning horizons. By its very nature, the production plan addresses what is known as the aggregate planning problem. The aggregate planning problem is, strictly speaking, a medium-range planning problem because it normally covers a 12 month period. It is included in this section because longrange plans must be based on the decision of how the aggregate planning problem will be solved. In particular, the each company needs to decide whether to follow a chase, level, or combination plan, as described later in this section.