Aggregate planning and Master

Production Scheduling
 Exhibit
Exhibit14.1
14.1 Process planning
Long
range
Strategic capacity planning

Intermediate Forecasting
range & demand Sales and operations (aggregate) planning
manageme
nt Sales plan Aggregate operations plan
Manufacturing
Services
Master scheduling

Material requirements planning

Weekly workforce and

Order scheduling customer scheduling
Short
range
Daily workforce and customer scheduling
Sales and Operations Planning Activities
Long-range planning
 Greater than one year planninghorizon
 Usually performed in annual increments

Medium-range planning
 Six to eighteenmonths
 Usually with weekly, monthly or quarterly
increments

Short-range planning
 One day to less than six months
 Usually with weekly or daily increments
The Aggregate Operations Plan
Main purpose: Specify the optimal
combination of
 production rate (units completed per unit of
time)
 workforce level (number of workers)
 inventory on hand (inventory carried from
previous period)
Product group or broad category
(Aggregation)
This planning is done over an
intermediate-range planning period of 3
to18 months
Balancing Aggregate Demand
and Aggregate Production Capacity
10000
Suppose
Supposethe thefigure
figureto
to
10000
8000
the
theright
rightrepresents
represents 8000 7000
forecast
forecastdemand
demandin in 6000 5500
6000
4500
units
units 4000

Now
Nowsuppose
supposethis
this 2000
lower
lowerfigure
figurerepresents
represents 0
the
theaggregate
aggregatecapacity
capacity Jan Feb Mar Apr May Jun
of
ofthe
thecompany
companyto to
meet
meetdemand
demand 10000 9000
8000
8000
What
Whatwewewant
wanttotodo
dois
is 6000
6000

balance
balanceout
outthe
the
4500 4000 4000
4000
production
productionrate,
rate,
workforce
workforcelevels,
levels,and
and
2000

inventory
inventorytotomake
make 0
these
thesefigures
figuresmatch
matchup
up
Jan Feb Mar Apr May Jun
Production plan when forecast is available only one mo
Month November December Total Cost
Salary
No. of units to be produced 2000 3000
No. of workers required 20 30
Salary @ Rs 4000 per worker 80000 120000 200000
Hiring Cost
No. of workers hired 0 10
Hiring cost @ Rs 500 per worker 0 5000 5000
Laying-off Cost
No. of workers laid-off 5 0
Laying-off cost @ Rs 800 per worker 4000 0 4000
Inventory Cost
No. of units in inventory 0 0
Cost @ Rs 10 per unit 0 0 0
Grand Total of Costs excluding Salary 9000

Production plan when forecast is available two months

Month November December Total Cost
Salary
No. of units to be produced 2500 2500
No. of workers required 25 25
Salary @ Rs 4000 per worker 100000 100000 200000
Hiring Cost
No. of workers hired 0 0
Hiring cost @ Rs 500 per worker 0 0 0
Laying-off Cost
No. of workers laid-off 0 0
Laying-off cost @ Rs 800 per worker 0 0 0
Inventory Cost
No. of units in inventory 500 0
Cost @ Rs 10 per unit 5000 0 5000
Grand Total of Costs excluding Salary 5000
 Required Inputs to the Production Planning System
Competitors’beh Raw material Market
avior availability demand
External to
firm

External Economic
capacity Planning for
conditions
production

Current Current Inventory Activities Internal to

physical workforce levels required for firm
capacity production
Graphical Method
Cumulative demand values and cumulative
production capacities are plotted on the same graph.
Identify gap between demand and production
capacity in different periods
 Demands
800
700
Month Deman Cumul 600
s ds ative 500
deman Demands
400
d
300
200
J 270 270 100
F 220 490 0
J F M A M J Ju Au
M 470 960 3500
3000
A 670 1630
2500
M 450 2080 2000 Series 2
1500 Cumulative
J 270 2350
1000 demand
Ju 200 2550 500
Au 370 2920 0
J F M A M J Ju Au
Heuristic Method- Key Strategies for Meeting Demand

Level- inventory size is varied keeping the workforce

size and utilization of workers constant(inventory
accumulation, zero training and hiring costs, no lay off
cost, high employee morale, high inventory cost)
Chase – workforce size is varied according to
demand, keeping the utilization of workers and
inventory size constant (no backorders, negligible
inventory handling costs, substantial hiring and
layoff costs, low workers morale ,overtime costs
during high demand)
Some combination of the two-
utilization of workers is varied keeping the workforce
size and inventory size constant(save inventory costs,
idle time loss and overtime costs less efficiency)
Demand Forecast

Month January February March April May June

Demand forecast (units) 1000 3000 1000 5000 7000 2000
Cumulative demand 1000 4000 5000 10000 17000 19000
No. of working days 24 25 20 22 20 24
Cumulative number of working days 24 49 69 91 111 135
Units to be produced per day to meet demand 41.66667 120 50 227.2727 350 83.33333
Units to be produced per day to meet demand (approx.) 42 120 50 228 350 84

No. of units to be produced per day (Level output rate) 153.1532

Approx. 154
Level Output Rate Plan

Month January February March April May June

Demand forecast (units) 1000 3000 1000 5000 7000 2000
No. of working days 24 25 20 22 20 24
Output Rate (units/day) 154 154 154 154 154 154
Output (units) 3696 3850 3080 3388 3080 3696
Beginning Inventory 0 2696 3546 5626 4014 94
Net Addition (or Subtraction) 2696 850 2080 -1612 -3920 1696
Ending Inventory 2696 3546 5626 4014 94 1790
Average Inventory 1348 3121 4586 4820 2054 942 16871
Total
Chase Plan

Month January February March April May June

Demand forecast (units) 1000 3000 1000 5000 7000 2000
No. of working days 24 25 20 22 20 24
Output Rate (units/day) 42 120 50 228 350 84
Output (units) 1008 3000 1000 5016 7000 2016
Beginning Inventory 0 8 8 8 24 24
Net Addition (or Subtraction) 8 0 0 16 0 16
Ending Inventory 8 8 8 24 24 40
Average Inventory 4 8 8 16 24 32 92 Total
Change in output rate 0 78 -70 178 122 -266
Cost of change in output rate 0 2000 2000 5000 5000 8000 22000 Total
No. of units above max. capacity 28 150
Overtime Cost (@ Rs 3 per unit/ day) 1848 9000 10848
32940 Grand tota

Number of units change in output rate (positive or negative) compared to previous month
Range (units) Cost (Rs)
1-100 2000
101-200 5000
201-300 8000
Intermediate Plan
Month January February March April May June
Demand forecast (units) 1000 3000 1000 5000 7000 2000
No. of working days 24 25 20 22 20 24
Output Rate (units/day) 100 100 100 200 200 200
Output (units) 2400 2500 2000 4400 4000 4800
Beginning Inventory 0 1400 900 1900 1300 -1700
Net Addition (or Subtraction) 1400 -500 1000 -600 -3000 2800
Ending Inventory 1400 900 1900 1300 -1700 1100
Average Inventory 700 1150 1400 1600 -200 -300 4350 Total
Change in output rate 0 0 0 100 0 0
Cost of change in output rate 0 0 0 2000 0 0 2000 Total
No. of units above max. capacity
Overtime Cost (@ Rs 3 per unit/ day) 0
6350 Grand tota

Number of units change in output rate (positive or negative) compared to previous month
Range (units) Cost (Rs)
1-100 2000
101-200 5000
201-300 8000
Intermediate Plan

Month January February March April May June

Demand forecast (units) 1000 3000 1000 5000 7000 2000
No. of working days 24 25 20 22 20 24
Output Rate (units/day) 125 125 125 200 200 200
Output (units) 3000 3125 2500 4400 4000 4800
Beginning Inventory 0 2000 2125 3625 3025 25
Net Addition (or Subtraction) 2000 125 1500 -600 -3000 2800
Ending Inventory 2000 2125 3625 3025 25 2825
Average Inventory 1000 2062.5 2875 3325 1525 1425 12212.5 Total
Change in output rate 0 0 0 75 0 0
Cost of change in output rate 0 0 0 2000 0 0 2000 Total
No. of units above max. capacity
Overtime Cost (@ Rs 3 per unit/ day) 0
14212.5 Grand total

Number of units change in output rate (positive or negative) compared to previous month
Range (units) Cost (Rs)
1-100 2000
101-200 5000
201-300 8000
Master schedule
It is the result of disaggregation of an aggregate plan.
it shows quantity and timing of specific end items for a
time horizon often spanning six to eight weeks.
Right cut a capacity planning
Master production schedule
Available to promise inventory
Time fences
Master Production Schedule (MPS)
January February
week 1 week 2 week 3 week 4 week 5 week 6 week 7 week 8
Demand Forecast (units) 300 200 100 500 800 900 600 700
Customer Orders (committed) 350 100 50 300 400
Initial inventory in period week 0 = 500 units 500
Net inventory before MPS 150 -50 850 350 -450 -350 50 -650
Master Production Schedule (MPS) 1000 1000 1000 1000
Projected on-hand inventory 150 950 850 350 550 650 50 350

Master Production Schedule (MPS) with Available-to-promise Inventory

January February
week 1 week 2 week 3 week 4 week 5 week 6 week 7 week 8
Demand Forecast (units) 300 200 100 500 800 900 600 700
Customer Orders (committed) 350 100 50 300 400
Initial inventory in period week 0 = 500 units 500
Net inventory before MPS 150 -50 850 350 -450 -350 50 -650
Master Production Schedule (MPS) 1000 1000 1000 1000
Projected on-hand inventory 150 950 850 350 550 550 50 350
Available-to-promise inventory (ATP) (uncommitted) 150 550 600 1000 1000