Material Management 2 (b)

7/30/2019 Material Management 2 (b)

1/30

Aggregate Production Plan

THREE BASIC PRODUCTION STRATEGIES

1. Chase Strategy-

Adjusts capacity to match the demand pattern. Firmhires & lays off workers to match production todemand. Workforce fluctuates but finished goodsinventory remains constant.

Works well for make-to-order firms as they cannot

rely on finished goods inventory to satisfy thefluctuating demand pattern and cannot manufactureahead of the order as the actual specifications of thefinished goods are not known.

1


2/30

Aggregate Production Plan

2. Level Production Strategy- Relies on a constantoutput rate & capacity while varying inventory &backlog levels according to fluctuating demandpattern. Workforce levels stay constant & firmrelies on fluctuating finished goods inventories &backlogs to meet demand. Works well for make-to-stock manufacturing firms.

3. Mixed Production Strategy- To maintain stableworkforce core while using other short-termmeans, such as overtime, & additionalsubcontracting or part time helpers to manageshort-term demand.


3/30

Demand

No. of Units

Time

For Example:


4/30

Demand

ChaseProductionNo. of Units

Time

Chase Production:


5/30

An Example of Chase Production Strategy

Capacity (Labor)

Period Forecast Demand Needed Workers Production Ending Inventory

January 120 Units 960 Hrs 6 120 Units 100 Units

February 100 Units 800 Hrs 5 100 Units 100 Units

March 300 Units 2400 Hrs 15 300 Units 100 Units

April 460 Units 3680 Hrs 23 460 Units 100 Units

May 600 Units 4800 Hrs 30 600 Units 100 Units

June 700 Units 6600 Hrs 35 700 Units 100 Units

July 760 Units 6080 Hrs 38 760 Units 100 Units

August 640 Units 5120 Hrs 32 640 Units 100 Units

September 580 Units 4640 Hrs 29 580 Units 100 Units

October 400 Units 3200 Hrs 20 400 Units 100 Units

November 200 Units 1600 Hrs 10 200 Units 100 Units

December 140 Units 1120 Hrs 9 180 Units 40 Units

5,000 Units 40000 Hrs 252 5040 Units


6/30

Demand

Level Production

No. of Units

Time

Level Production:


7/30

Demand

Level Production

No. of Units

Time

Level Production:

CREATE Inventory

USE Inventory


8/30

An Example of Level Production Strategy

Capacity (Labor)

Period Forecast Demand Hours Workers Production Ending Inv/backing

January 120 Units 960 Hrs 21 420 Units 300 Units

February 100 Units 800 Hrs 21 420 Units 620 Units

March 300 Units 2400 Hrs 21 420 Units 740 Units

April 460 Units 3680 Hrs 21 420 Units 700 Units

May 600 Units 4800 Hrs 21 420 Units 520 Units

June 700 Units 6600 Hrs 21 420 Units 240 Units

July 760 Units 6080 Hrs 21 420 Units (100) Units

August 640 Units 5120 Hrs 21 420 Units (320) Units

September 580 Units 4640 Hrs 21 420 Units (480) Units

October 400 Units 3200 Hrs 21 420 Units (460) Units

November 200 Units 1600 Hrs 21 420 Units (240) Units

December 140 Units 1120 Hrs 21 420 Units 40 Units

5,000 Units 40000 Hrs 252 5040 Units


9/30

Demand

Hybrid

No. of Units

Time

Hybrid:


10/30

Numerical Example:

Period 1 2 3 4 5 6 Total

Forecast (Demand) 150 160 180 175 155 140 960

Suppose the forecasted demand for a product family looks

like the table below. Assume the product family is a

Make-to-Stock family with a starting inventory of 100.


11/30

Production Plan using Chase Strategy


Forecast (Demand) 150 160 180 175 155 140 960

Planned

Production

150 160 180 175 155 140 960

Planned Inventory 100 100 100 100 100 100


12/30

Production Plan Using a Level Strategy


Forecast (Demand) 150 160 180 175 155 140 960

Planned

Production

160 160 160 160 160 160 960



13/30

Production Plan using a Hybrid Strategy


Forecast

(Demand)

150 160 180 175 155 140 960

Planned

Production

140 140 140 175 175 175 945



14/30

The Master Production Schedule

The formal link between production planningand actual production

The basis for calculation of resources needed The driving force behind the material

requirements plan

The primary priority plan for manufacturing


15/30

Master Production Scheduling

A detailed disaggregation of the aggregateproduction plan, listing the exact end items to beproduced by a specific period.

More detailed than APP & easier to plan under stabledemand. Planning horizon is shorter than APP, butlonger than the lead time to produce the item.

The sum of the Master Production Schedule ( MPS) isequal to the total of the Aggregate Production Plan(APP).

15


16/30

Information Needed to Develop an MPS

Production Plan data

Forecasts

Actual customer orders Inventory levels

Capacity constraints


17/30

Master Schedule Focal Points

Make-to-Stock Limited end products, manycomponents

Make-to-Order Many end products, fewercomponents

Assemble-to-Order Many end products,combination of components and

subassemblies


18/30

Example MPS Environments

Figure 3.3 Different MPS environments


19/30


The MPS is the production quantity to meetdemand from all sources & is used forcomputing the requirements of all time-

phased end items.

Frequent changes to the MPS may createsystem nervousnessa situation where a

small change in the upper-level-productionplan causes a major change in the lower-levelproduction plan.

19


20/30

ATVs Master Production Schedule for January and February

Period Model A Model B Model C

January week 1 10 10 10




February Week 1 20 0 0




Total 80 80 60


21/30


Many firms use a time fence system to deal withsystem nervousness. A time fence separates theplanning horizon into two segments

Firmed Segment (demand time fence), fromcurrent period to several weeks into future. Canonly be altered by senior management.

Tentative segment (planning time fence), fromend of the firmed segment to several weeksfarther into the future.


22/30

Time Fences

The flexibility allowed in the MPS Frozen Zone (closest to current date)

Capacity and materials committed to customerorders, forecast generally ignored

Senior management approval for changes Slushy Zone

Less commitment of materials and capacity Tradeoffs negotiated between marketing and

manufacturing Liquid Zone All changes allowed within limits of the Production

Plan


23/30


Available-to-Promise (ATP) Quantities-

The MPS decides whether additional orders can be acceptedfor difference between confirmed customer orders & the

quantity the firm planned to produce.

Three methods to calculate available-to-promise quantities:

1. Discrete available-to-promise

2. Cumulative available-to-promise without look ahead, &

3. Cumulative available-to-promise with look ahead.

23


24/30

Discrete ATP Calculations for January and February

Week 1 2 3 4 5 6 7 8

Model A-0. 4-liter EngineMPS BI=30Committed Customer Order

ATP:D

1010

20

100

0

2030

0

010

0

200

0

020

0

00

0

2010

10Model B-0.5-liter EngineMPS BI=40Committed Customer OrderATP:D

102010

10100

0100

2000

000

20200

0200

200

20

Model C-o0.6-liter EngineMPS BI=40Committed Customer OrderATP:D

102020

10100

10200

1000

000

0100

2005

0150


25/30


Discrete Available-to-Promise

1. Add the beginning Inventory to the MPS for Period

1, and subtract the Committed Customer Orders.

2. For the next period, subtract the CommittedCustomer Orders from MPS. If quantity is positive,this becomes the Period 2 ATP. If negative, subtractenough from the previous periods ATP to make thecurrent periodsATP zero.

3. For subsequent periods, follow Step 2

25


26/30

Materials Requirement Planning

A computer-based materials managementsystem. The materials requirement plan

calculates the exact quantities, need dates, &planned order releases for sub-assemblies &materials required to manufacture the finalproducts listed on .

26


27/30

Independent versus Dependent demand

Independent Demand

Not related to demand for other assemblies orproducts, instead from outside sources

Generally forecasted demand

Dependent Demand

Generally related to production of an end product

(as defined on the MPS) Can be calculated instead of forecasted


28/30

Dependent Demand Approach

Materials Requirement Planning (MRP)

Major objectives of MRP

Determine requirements calculated to meet

product requirements defined in the MPS

What to order

How much to order

When to order When to schedule delivery

Keep priorities current


29/30

Materials Requirement Planning

MRP requires: The independent demand information. Parent-component relationships from the bill

of materials. Inventory status of the final product & all of

the components. Planned order releases (output of the MRP

system)

Advantage of MRP- provides planning information

Disadvantage of MRP- loss of visibility, especiallyacute for products with a deep bill of materials, & ignorecapacity & shop floor conditions.


30/30

Links To Other MPC Functions

Figure 4.2 Manufacturing planning and control systems

Material Management 2 (b)

Documents