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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.
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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.
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Demand
No. of Units
Time
For Example:
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Demand
ChaseProductionNo. of Units
Time
Chase Production:
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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
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Demand
Level Production
No. of Units
Time
Level Production:
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Demand
Level Production
No. of Units
Time
Level Production:
CREATE Inventory
USE Inventory
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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
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Demand
Hybrid
No. of Units
Time
Hybrid:
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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.
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Production Plan using Chase Strategy
Period 1 2 3 4 5 6 Total
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
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Production Plan Using a Level Strategy
Period 1 2 3 4 5 6 Total
Forecast (Demand) 150 160 180 175 155 140 960
Planned
Production
160 160 160 160 160 160 960
Planned Inventory 110 110 90 75 80 100
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Production Plan using a Hybrid Strategy
Period 1 2 3 4 5 6 Total
Forecast
(Demand)
150 160 180 175 155 140 960
Planned
Production
140 140 140 175 175 175 945
Planned Inventory 90 70 30 30 50 85
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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
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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).
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Information Needed to Develop an MPS
Production Plan data
Forecasts
Actual customer orders Inventory levels
Capacity constraints
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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
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Example MPS Environments
Figure 3.3 Different MPS environments
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Master Production Scheduling
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.
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ATVs Master Production Schedule for January and February
Period Model A Model B Model C
January week 1 10 10 10
January week 2 10 10 10
January week 3 20 0 10
January week 4 0 20 10
February Week 1 20 0 0
February Week 2 0 20 0
February Week 3 0 0 20
February Week 4 20 20 0
Total 80 80 60
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Master Production Scheduling
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.
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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
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Master Production Scheduling
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.
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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
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Master Production Scheduling
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
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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 .
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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
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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
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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.
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Links To Other MPC Functions
Figure 4.2 Manufacturing planning and control systems
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