Planning Resources

Production-Planning Hierarchy
Aggregate Planning
Master Production Scheduling
Types of Production-Planning and Control Systems
Wrap-Up: What World-Class Companies Do

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Many companies fail to execute strategy

The
TheVision
VisionBarrier
Barrier

Only 5 % of the
work force under-
under-
stand the strategy

The
TheManagement
Management
The
ThePeople
PeopleBarrier
Barrier
Barrier
Barrier
Only 25% of 99 of
of 10
10 companies
companies 85% of executive
managers have fail to execute teams spend less
personal objectives
strategy!! *) than one hour/month
and incentives linked
discussing strategy
to the strategy

60% of organisations
dont link budgets
to strategy

The Resource
Barrier

Source: Survey from BSC Collaborative, Inc., 2001 (Fortune) 3

Types of Planning

Higher strategic
Mission
Mission decision
Corporate
Corporate Strategy
Strategy
Business
Business strategy
strategy

Functional
Functional Strategy
Strategy
Strategic
SCM/Logistics
SCM/Logistics strategy
strategy decisions for
logistics

Capacity
Capacity Issues
Issues
Aggregate
Aggregate plans
plans Tactical decisions
Master
Master Schedule
Schedule for logistics
Short-term
Short-term schedules
schedules Operational
decisions
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 Production Planning Horizons

Long-Range
Long-Range Capacity Planning
(years)

Medium-Range
Aggregate Planning
(6-18 months)
Short-Range
Master Production Scheduling
(weeks)

Production Planning and Control Systems Very-Short-Range

(hours - days)

Pond Draining Push Pull Focusing on

Systems Systems Systems Bottlenecks
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 Production Planning: Units of Measure

Entire
Long-Range Capacity Planning
Product Line

Product
Aggregate Planning
Family
Specific
Master Production Scheduling
Product Model

Production Planning and Control Systems Labor, Materials,

Machines

Pond Draining Push Pull Focusing on

Systems Systems Systems Bottlenecks
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 Production Planning in Manufacturing
Planning Units of
Horizon Measure Description
Executives such as vice-president of operations make long-
Long-Range Entire Long Range range plans for (1) facilities plant locations, layouts, size and
(years) product lines: Capacity capacities; (2) major supplier plans and amount of vertical
e.g., all Ford Planning integration; (3) processing plans new production technology,
trucks. new production processes, new systems of automation.

Medium- Range Product Division operations managers make plans for (1)
(6-18 months) family: e.g. Aggregate employment layoffs, hiring, recalls, vacations, overtime,
Ford F-series Planning part-time employees; (2) inventories; (3) utilities; (4) facility
trucks/ modifications; (5) material supply contracts.

Short-Range A specific
Master Factory operations managers make plans for master
(several weeks product
Production production schedules the quantity and timing of the
to a few model: e.g.,
Scheduling production of finished goods and end items.
months) Ford F-150

Resources required to make Factory operations managers make plans for (1) production
specific product model: e.g. labour Production schedules of parts and assemblies to be manufactured; (2)
Planning & schedules of purchased materials; (3) shop-floor schedules
hours, materials and components , Control
production capacities. Systems machine changeovers, batch movements; (4) workforce
schedules.

Pond- Push Pull Focusing on

Draining Systems Systems Bottlenecks
Systems (MRP) (JIT) (TOC)
Used in all types of Used in all types of Used in all types of Used in all types of
production. Best for production, but more production, but most production, but more
products with truly benefits obtained in job successful applications are 7
benefits obtained in job
random demand. shops in repetitive manufacturing shops.
 Why Aggregate Planning Is Necessary

Fully load facilities and minimize overloading and

under loading
Make sure enough capacity available to satisfy
expected demand
Plan for the orderly and systematic change of
production capacity to meet the peaks and valleys of
expected customer demand
Get the most output for the amount of resources
available

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 Inputs

A forecast of aggregate demand covering the selected

planning horizon (6-18 months)
The alternative means available to adjust short- to
medium-term capacity, to what extent each alternative
could impact capacity and the related costs
The current status of the system in terms of workforce
level, inventory level and production rate

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 Capacity Planning

Definition
The capacity of an operation is its maximum
throughput in a specified time
The CAPACITY of a supply chain sets the
maximum amount of product that can be
delivered to final customers in a given time

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 Type of capacity

DESIGNED CAPACITY is the

maximum possible throughput in
ideal condition
EFFECTIVE CAPACITY is the

maximum realistic throughput in

normal conditions
ACTUAL THROUGHPUT is

normally lower than effective

capacity
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 Bottlenecks

Not all parts of a supply chain have the same capacity.

There must be some part that limits overall throughput, and
this forms a bottleneck. If you want to move some bulky
materials from Lahore to Karachi you might find a
bottleneck at the docks in Rahimyar Khan. This part of the
supply chain is working at full capacity, but other parts have
spare capacity that is not used. The bottlenecks in a supply
chain limit its overall capacity

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Bottleneck

Flow of
material
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 Working Example
1. The main bottling plant at Pakola Soft drinks has a capacity
of 80,000 liters a day and works a seven day week.
2. It fills standard bottles of 750 ml, and these are passed to a
packing area which can form up to 20,000 cases a day with
12 bottles each. The packing area works a five day week.
3. The cases are taken to warehouses by a transport company
whose 8 lorries can each carry 300 cases, and make up to 4
trips a day for 7 days a week.
4. There are two main warehouses, each of which can handle up
to 30,000 cases a week. Local deliveries are made from the
warehouses by a fleet of small vans that can handle
everything passed to them by the warehouse. What is the
capacity of this part of the distribution system? How can
Pakola increase the capacity?
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Capacity of distribution at Pakola Softdrinks Plant
Bottleneck

Bottling
Packing Transport Delivery
Plant area Company Warehouse van

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 Matching capacity and demand

IPO has a contract to deliver 100 computer systems a

week to schools in Karachi. The systems have
customized software installed, which takes an hour to
test before delivery. The testing is done by trained staff,
who achieve an average efficiency of 75%. They work a
single eight-hour shift five days a week, but could move
to double shifts or have overtime at weekends. How
many testers should IPO employ

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 Matching capacity and demand

Each tester is available for 8 x 5= 40 hours a week.

Average efficiency is 75% so their useful time is 40 x .
75 = 30 hours a week. Each computer takes 1 hour to
test, so each employee can test 30 systems a week. This
is equivalent to saying
Designed capacity = 40 units a tester a week

Effective capacity = 30 units a tester a week

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 Matching capacity and demand
There are several ways of meeting the demand of 100 units
week
Working a single shift on weekdays would need 100/30 = 3.33

testers. If IPO only employs full time testers, she has to round
this up to 4. Then the utilization of each would be 3.33/4= 0.83
or 83%
Employing 3 testers full-time, and one part-time tester for

1/3 time would meet all capacity with 100% utilization

Using overtime at the weekends would need 3 full time

testers who are willing to finish 10 tests at the weekend

10/0.75=13.3 hours
We could continue like this, suggesting alternative plans,
adding allowances for holidays, problems, varying demand,
and so on. IPO now needs to complete her capacity planning
by comparing these alternatives anad implementing the best

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 Resource Requirement Planning

Examine forecast demand and translate this into a

capacity needed
Find the capacity available in present facilities
Identify mismatches between capacity needed and
that available
Suggest alternative plans for overcoming any
mismatch
Compare these plans and find the best
Implement the best and monitor performance

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