Dr Ron Lembke Learning Objectives Describe planning Distinguish the types of plans Define aggregate scheduling Relate aggregate scheduling to the overall planning process Explain aggregate scheduling options ID: 620733
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Slide1
11- Aggregate and Material Requirements Planning
Dr. Ron LembkeSlide2
Learning Objectives
Describe planning
Distinguish the types of plans
Define aggregate scheduling
Relate aggregate scheduling to the overall planning process
Explain aggregate scheduling options
Develop aggregate schedulesSlide3
Example
You’ve started a
new
company. You’ve developed 2 production plans:
Month Forecast Plan 1 Plan 2
Jan 900 900 800
Feb 700 700 800
Mar 800 800 800
You estimate 1 worker can make 100 units per month. Which plan do you use? How many workers do you hire? How do you meet demand? Slide4
Planning
Setting goals & objectives
Example: Meet demand within the limits
of available resources at the least cost
Determining steps to achieve goals
Example: Hire more workers
Setting start & completion dates
Example: Begin hiring in Jan.; finish, Mar.
Assigning responsibility Slide5
Types of Plans
Today
3 months
1 year
5 years
Long-Range
Facility location
Short-Range
Dispatching
Management Level
High
Low
Top Executives
Supervisors
Operations Managers
18 months
Intermediate-Range
Aggregate plansSlide6
Aggregate Scheduling
Production quantity & timing of production for intermediate future
Usually 3 to 18 months into future
Combines (‘aggregates’) production
Expressed in common units
Example: Hours, dollars, equivalents
(e.g., FTE students)
Time to make ‘average’ product Slide7
Relationships of Aggregate Schedule
Forecast &
Firm Orders
Material
Requirements
Planning
Aggregate
Production
Planning
Resource
Availability
Master
Production
Scheduling
Shop
Floor
Schedules
Capacity
Requirements
Planning
Realistic?
Yes
No, modify CRP, MRP, or MPS
Work force
Inventory
SubcontractorsSlide8
Aggregate Level Scheduling
Aggregate Schedule:
Month Jan Feb Mar Apr May
No. of Chips 600 650 620 630 640Slide9
Aggregate Schedule Example
Aggregate Schedule:
Month Jan Feb Mar Apr May
No. of Chips 600 650 620 630 640
Master Production Schedule:
Month
Jan Feb Mar Apr May
P4 1.5
ghz
300 200 310 300 340
P4 1.7 ghz 300 450 310 330 300Slide10
Aggregate Scheduling Goals
Meet demand
Use capacity efficiently
Meet inventory policy
Minimize cost
Labor
Inventory
Plant & equipment
SubcontractSlide11
Aggregate Scheduling
Options
Promotion & price
Back ordering
Counterseasonal product mixing
Capacity
Demand
Inventory
Hire or layoff
Overtime or idle
Subcontract
Part-time workers
OutsourceSlide12
Demand Management
Increasing demand
Marketing campaigns
Sales force efforts, cut prices
Changing Timing of demand
Incentives for earlier or later delivery
At capacity, don’t actively pursue moreSlide13
Costs
“Smoothing” costs:
Hiring: advertise, interview, train
Firing: severance, bad morale, future hiring
Holding costs - charged on inv At end
Shortage costs
Labor costs / overtime, materials
Subcontracting / outsourcing Slide14
Aggregate Scheduling Strategies
Level scheduling strategy
Produce same amount every
day
Keep work force level constant
Vary non-work force capacity or demand
Often results in lowest production costs
Chase strategy
Hire / Fire workers to make production capacity meet necessary productionSlide15
Graphical MethodsSlide16
Aggregate Scheduling Methods
Graphical & charting techniques
Popular & easy-to-understand
Trial & error approach
Mathematical approaches
Linear Programming
Simulation
More involved, but usually better answersSlide17
Linear Programming Parameters
C
H
= hiring cost C
F
= firing cost
C
I
= Inv. Cost C
R = reg production
CO = Ovt. Cost CI = idle costCS
= subcontract nt = days in period tK = daily prod. I0 = Inventory to startW
0 = workers to startDt = Demand for tSlide18
Variables
I
t
= Inventory for t O
t
= Overtime
W
t
= workers for t U
t = idle time
Ht = hired in t St = subcontractedF
t = fired in tPt= production for tAll must be >= 0Slide19
Constraints
Workforce conservation
W
t
= W
t-1
+ H
t
- F
tUnits Conervation It
= It-1 + Pt + St - DtProduction and workforce level
Pt= K*nt*Wt + Ot - U
tEach of these must be satisfied for all tSlide20
LP FormulationSlide21
LP Considerations
LP can be modified to include minimum inv. level each period
Negative inventory can be allowed
Care needed when roundingSlide22
Conclusion
Described role of aggregate planning
Described types of plans
Explained aggregate scheduling options
Developed aggregate schedules
Chase, Level, and Hybrid
Linear ProgrammingSlide23
Material Requirements PlanningSlide24
Historical Perspective
mrp – material
requirements
planning
MRP II – Manufacturing
Resource Planning
ERP- Enterprise Resource PlanningSlide25
MRP Crusade (1975)
Material Requirements Planning
Make sure you have enough parts when you need them
Take future demands, factor in lead times (time phase), compare to on hand, order
Determine order size and timing
Control and plan purchasing vs. OSWO inventory managementSlide26
Closed-Loop MRP
Capacity Consideration:
Part routings
Calculate loads on each work station
See if scheduled load exceeds capacity
Lead-time long enough to allow some shuffling to make plan feasibleSlide27
MRP II -- Manufacturing Resource Planning
“A method for the effective planning of all resources of a manufacturing company”
(APICS def.)
Financial accounting incorporated
Sales
Operations Planning
Simulate capacity requirements of different possible Master Production Schedules
1989, $1.2B MRPII sales in U.S., one third of total software salesSlide28
Success?
MRP Crusade
BeginsSlide29
ERP differences
Material planning
Capacity planning
Product design
Information warehousing
All functions in the entire company operate off of one common set of data
Instantaneous updating, visibility
Slide30
ERP Sales
Y2K: Worldwide sales of top 10 vendors
1995 $2.8 B
1996 $4.2 B
1997 $5.8 B $3.2 B SAP
Fortune
survey: 44% reported spending at least 4 times as much on implementation as on softwareSlide31
ERP Challenges
Modules assume “best practices:”
Change software to reflect company ($)
Change company to follow software (?)
Accuracy of data
Drives entire system
Ownership of / responsibility for
Ability to follow structureSlide32
ERP Novel?
“Goal-like” novel
Hero learns more about ERP, deciding if it is right for his company
Company rushes through installation
General introduction to ERP systems, what they do, how different from MRP
SAP R/3 screen shotsSlide33
The Heart of the Matter - mrp
System for organizing WIP releases
Work in Process – work that has been started, but not yet finished
Consider Lead Time (LT)for each item
Look at BOM to see what parts needed
Bill of Materials – what goes into what
Release so they will arrive just as neededSlide34
Bike Production
Due
Mar
1
7
14
21
28
4
Apr
11
18
Assemble
Parts
Arrive
Frame
Wheels
Drivetrain
Seat, Bars
OCLV CarbonSlide35
Snow Shovels
Example – Snow Shovel
Order quantity is 50 units
LT is one week
Simple Bill of Materials - BOMSlide36
MRP Record
4
units shortSlide37
MRP Record
Ordering policy is
50 units
at a time, LT=1wk
Order 1 week
earlierSlide38
Terminology
Projected Available balance
Not on-hand (that may be greater)
Tells how many will be available
Available to Promise – the units aren’t spoken for yet, we can assign them to a customer
Planned order releases
≠ scheduled receipts
Only when material has been committed to their production
Move to scheduled receipts as late as possible
Preserves flexibilitySlide39
1605 Snow Shovel
1605
Snow
Shovel
Front View
1605
Snow
Shovel
Back ViewSlide40
1605 Snow Shovel
1605
Snow Shovel
048
Scoop-shaft
connector
13122
Top Handle
Assy
118 Shaft
(wood)
14127
Rivet (4)
314 scoop assembly
082 Nail
(4)Slide41
314 scoop assembly
14127
Rivet (6)
314 scoop assembly
019 Blade (steel)
2142 Scoop (aluminum) Slide42
13122 Top Handle Assembly
13122 Top Handle Assembly
457 Top
handle
(wood)
082 Nail (2)
11495 Welded
Top handle bracket
Assembly
1118
Top handle
Coupling (steel)
129 Top Handle
Bracket (steel)Slide43
Linking the Records
Process of translating net requirements for one product into Gross Requirements for its component parts
Take into account existing inventories
Consider also scheduled receipts
AKA Bill of Materials ExplosionSlide44
Put in the Scoop Pieces
1605
Snow Shovel
048
Scoop-shaft
connector
13122
Top Handle
Assy
118 Shaft
(wood)
14127
Rivet (4)
314 scoop assembly
14127
Rivet (6)
019 Blade (steel)
2142 Scoop
(aluminum)
082 Nail
(4)Slide45
Entire BOM
1605
Snow Shovel
048
Scoop-shaft
connector
13122
Top Handle
Assy
118 Shaft
(wood)
14127
Rivet (4)
314 scoop assembly
14127
Rivet (6)
019 Blade (steel)
2142 Scoop
(aluminum)
457
handle
082 Nail (2)
11495
Welded
1118
Coupling
129 Top
Bracket
082 Nail
(4)Slide46
Product Structure Diagram
1605
Snow Shovel
048
connector
13122
Top Handle
Assy
118 Shaft
14127
Rivet (4)
314 scoop assembly
14127
Rivet (6)
019 Blade
2142 Scoop
457
handle
082 Nail (2)
11495
Welded
1118
Coupling
129 Top
Bracket
082 Nail
(4)Slide47
Product Structure Diagram
1605
Snow Shovel
048
connector
13122
Top Handle
Assy
118 Shaft
14127
Rivet (4)
082 Nail
(4)
314 scoop assembly
14127
Rivet (6)
019 Blade
2142 Scoop
457
handle
082 Nail
(2)
11495
Welded
1118
Coupling
129 Top
Bracket
LEVEL 0
LEVEL 1
LEVEL 3
LEVEL 2Slide48
Explosion Example
Need to make 100 shovels
We are responsible for handle assemblies.Slide49
13122 Top Handle Assembly
1118
Top handle
Coupling (steel)
11495 Welded
Top handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle
(wood)
129 Top Handle
Bracket (steel)
082 Nail (2)Slide50
Net Requirements
Sch Gross Net
Part Description Inv Rec Req Req
Top handle assy 25 -- 100 75
Top handle 22 25
Nail (2 required) 4 50
Bracket Assy 27 --
Top bracket 15 --
Top coupling 39 15Slide51
Net Requirements
Sch Gross Net
Part Description Inv Rec Req Req
Top handle assy 25 -- 100 75
Top handle 22 25 75 28
Nail (2 required) 4 50 150 96
Bracket Assy 27 -- 75 48
Top bracket 15 --
Top coupling 39 15Slide52
13122 Top Handle Assembly
1118
Top handle
Coupling (steel)
11495 Welded
Top handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle
(wood)
129 Top Handle
Bracket (steel)
082 Nail (2)Slide53
Net Requirements
Sch Gross Net
Part Description Inv Rec Req Req
Top handle assy 25 -- 100 75
Top handle 22 25 75 28
Nail (2 required) 4 50 150 96
Bracket Assy 27 -- 75 48
Top bracket 15 -- 48 33
Top coupling 39 15 48 --Slide54
Timing of Production
This tells us how many of each we need
Doesn’t tell when to start
Start as soon as possible?
Dependent events (oh no, not that!)Slide55
13122 Top Handle Assy
Order policy:
Lot-for-lot
Lt = 2Slide56
13122 Top Handle Assy
Order policy:
Lot-for-lot
Lt = 2Slide57
13122 Top Handle Assembly
1118
Top handle
Coupling (steel)
11495 Welded
Top handle bracket
Assembly
13122 Top Handle Assembly
457 Top handle
(wood)
129 Top Handle
Bracket (steel)
082 Nail (2)Slide58
457 Wooden Dowel
One handle for
Each assemblySlide59
457 Wooden Dowel
Order policy: Lot-for-lotSlide60
457 Wooden Dowel
Order policy: Lot-for-lotSlide61
457 Wooden Dowel
Order policy: Lot-for-lotSlide62
082 Nail (2 required)
Two
nails for
Each assembly
x
2!!!Slide63
082 Nail (2 required)
Four
nails for
Each
shovel final assembly
x4!!!
+300
+240
+160
+200
+100
+80
+120
+80Slide64
082 Nail (2 required)Slide65
11495 Bracket Assembly
One
bracket for
Each assemblySlide66
11495 Bracket Assembly
Order policy: Lot-for-lotSlide67
129 Top BracketSlide68
129 Top handle bracket
Order policy: Lot-for-lotSlide69
1118 Top handle couplingSlide70
1118 Top handle coupling
Order policy: Lot-for-lotSlide71
1118 Top handle couplingSlide72
Other considerations
Safety stock if uncertainty in demand or supply quantity
Don’t let available go down to 0
Safety LT if uncertainty in arrival time
Place order earlier than necessary
Order quantities
EOQ – Economic Order Quantity, Fixed Size
If that’s not enough, order what you need, OR order two or more of the Fixed Size
Lot-For-Lot, Periodic Order quantity, othersSlide73
Summary
Demand for final products
Compute needs for it and
Dependent Demand for components
Look at all parts of the Bill of Materials
Complete the Table for each
Bottom row (Pl Order Releases) becomes top row (Gross Requirements) of input components (also called children)
Multiplied by # needed for each parent