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Production Planning System - v11
Production Planning System - v11
Production Planning System - v11
Session 2
Production Planning System
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Course Outline
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Session 2 Objectives
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1. Why Plan?
Customers Resources
(Priority) (Capacity)
Demand Resources
Revenue Cost
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1. Planning Questions
What must
we get
and
when?
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1. Manufacturing Planning and Control System (MPC)
Planning (RRP)
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1. Strategic Business Plan
Business
Business Plan
Plan
S&OP
Marketing
MPS
Financial MRP
Strategic
Business Plan
Engineering Production
Plan Plan
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1. Sales and Operations Planning (S&OP)
Business Plan
MPS
MRP
Monthly
Marketing Production
Plan Plan
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1. S&OP: Definition
Definition
Sales and Operations Planning (S&OP) is process to
help companies:
give better customer service,
lower their inventories,
shorten customer lead time,
stabilize production rates,
give top management a real handle on the
business,
and build teamwork between Sales, Operations,
Finance and Product Development.
Source: APICS – Educational Society for Resource Management
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1. S&OP: Balancing Demand and Supply
Sales Actual Production Purchase
Forecast Orders Orders Orders
Demand Supply
nd
Dema Sup
ply
Inventories increase
Customer Service is affected Production rates are cut
Layoffs become a possibility and the morale is
Customer lead times stretch out as the backlog builds
affected
Costs increase Profit margins get squeezed.
Business is lost as customers go elsewhere Prices are cut, deals and promotions become more
Quality often “gets lost in the shuffle” frequent and necessary.
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1. Demand Plan
Business Plan
S&OP
S&OP
MPS
MRP
Executive S&OP
Purchasing PAC Distribution
meeting Single
Financial requirements
company-
Pre S&OP
Management targets meeting wide
Planning scenarios game
evaluated
Recommendations
Capacity information and Agenda for plan
exec. S&OP
New process info Supply
Workforce availability Planning Capacity constraints identified
Planning scenarios generated
Management Demand
targets Planning Unconstrained demand plan
Historical demand
Demand
Market intelligence Statistical forecast
Forecast
Forecast accuracy Field sales forecast
New product info Marketing forecast
Generate
Field
Sales Forecast
Consolidate and
Run Prepare
Statistical for Demand
Forecast Consensus Meeting
Generate
Marketing
Forecast
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2. Supply Planning
Business Plan
S&OP
S&OP
MPS
MRP
Executive S&OP
Purchasing PAC Distribution
meeting Single
Financial requirements
company-
Pre S&OP
Management targets meeting wide
Planning scenarios game
evaluated
Recommendations
Capacity information
Supply and Agenda for plan
exec. S&OP
New process info
Capacity constraints identified
Workforce availability Planning Planning scenarios generated
Historical demand Production plan developed
Management
Market intelligence Demand
Forecast accuracytargets Planning Unconstrained demand plan
New product info
Demand
Forecast Statistical forecast
Field sales forecast
Marketing forecast
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1. Master Production Schedule
The MPS is a breakdown of the production plan (The anticipated build or buy schedule) for the production of
individual end items
Planning horizon usually extends from three to 18 months, but primarily depends on the purchasing and
manufacturing lead times
Plans are usually reviewed and changed weekly or monthly
Used in the order promising process
Business Plan
S&OP
MPS
MPS
MRP
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1. S&OP is not the Master Schedule
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1. Material Requirements Planning
Plan for the production and purchase of the components used in making
the items in the Master Production Schedule (MPS)
Business Plan
S&OP
MPS
MRP
MRP
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1. Purchasing and Production Activity Control
MPS
MRP
Purchasing PAC
PAC Distribution
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1. Level of Detail versus Planning Horizon
PAC
MRP
Level of Detail
(Aggregation
MPS
Level)
Production
Plan Strategic
Business
Plan
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1. Capacity Management
Strategic Business
Plan At each level in the MPC system, the
priority plan must be tested against
Resource
Sales and Operation
Requirements
the available resources and capacity
Planning
Plan
Planning (RRP) of the manufacturing system
Rough-Cut
Master Production
Capacity Basically, it involves calculating the
Schedule (MPS)
Planning (RCCP)
capacity needed to manufacture the
Capacity priority plan and finding methods to
Material Requirement
Requirements
Planning (MRP)
Planning (CRP)
make that capacity available
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2. System Support to MPC Process
Evolution
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2. Manufacturing Resource Planning (MRP II)
Business Plan
Feedback
Resourc No
es OK?
Sales Plan
Closed Loop MRP
Yes
Master Schedule
Resourc No
Feedback
es OK?
Yes
Production
Purchasing Activity Control
Performance Measures
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3. Inputs and Outputs to the Production
Planning Process
Strategic
Business Plan
Input Output
•Quantities of each product family or
Master
•Strategic Business Plan Production group to be produced
•Marketing Plan•Desired inventory levels
•Finance
Plan
•Production •All resources needed (equipment,
•Engineering Planningin each period
labor, material...)
•Availability of the resources needed
Master Production
Schedule
Material
Requirements Plan
Implementation
Production Activity
Control and Purchasing
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3. Making the Production Plan
Definition:
“...sets the general levels of production and inventories over the
planning horizon.”
—Arnold, J.R.T., Introduction to Materials Management, 4th edition
Production planning is concerned with
Planning for each product family
Meeting desired inventory levels
Determining resources needed
Comparing with available resources
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3. Typical Characteristics of the Production Plan
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3. Establishing Product Groups
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4. Basic Strategies to be used when developing a
Production Plan
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4. Chase Strategy
Production
Demand
Units
J F M A M J J A S O N D
Period
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4. Level Production Strategy
Demand
Demand
Production
J F M A M J J A S O N D
Time
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4. Combination Strategy
Demand
Demand
Production
J F M A M J J A S O N D
Time
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4. Subcontracting
Meet demand by
Advantages:
subcontracting No excess capacity
Level production
Disadvantage:
Costs of subcontracting
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5. Developing a Make-to-Stock Production Plan
Used when
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5. Ending inventory calculation
Example data:
Opening inventory = 400 units
Production = 1,300 units
Demand = 1,100 units
Formula
Ending inventory = opening inventory + production – demand
For the example data: Ending Inv. = 600 units
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5. Production Plan using Level Production Strategy
Period 1 2 3 4 5 Total
Forecast Demand 55 60 65 60 60
Production
Ending Inventory
Total production needed = total forecast demand + ending inventory – opening inventory
= _____ + _____ – _____ = _____ units
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5. Production Plan using Level Production Strategy
(Solution)
Period 1 2 3 4 5 Total
Forecast Demand 55 60 65 60 60 300
Production 58 58 58 58 58 290
Ending Inventory 53 51 44 42 40
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5. Production Plan using Chase Strategy
Period 1 2 3 4 5 Total
Forecast (cases) 150 140 160 150 140 740
Planned
Change
Ending inventory
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5. Production Plan using Chase Strategy (solution)
Period 1 2 3 4 5 Total
Forecast (cases) 150 140 160 150 140 740
Planned 150 140 160 150 140 740
Change 0 10 20 10 10 50
Ending inventory 0 0 0 0 0
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Summary
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Exercises
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Exercises
3. Which basic production planning strategy will build inventory and avoid
the costs of excess capacity?
a. Chase strategy
b. Level production strategy
c. Cycle counting strategy
d. Demand matching strategy
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