Hierarchy of Planning

Problems
Process Planning
Long-
range Strategic Capacity Planning

Intermediate-
Aggregate Planning
range

Master Production Scheduling

Material Requirements Planning

Order Scheduling

Short-
range
 Hierarchical Planning Process
Items Production Planning Capacity Planning Resource level
Product lines Aggregate Resource
or families Production Plan Requirements Plan Plants

Individual Master Production Rough -Cut Critical work

products Schedule Capacity Plan centers

Material Capacity All work

Components Requirements Plan Requirements Plan centers

Manufacturing Shop Floor Input/Output Individual

operations Schedule Control machines

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 22
 Forecast
Forecastof
ofAggregate
Aggregate
Demand
DemandFor
ForttPeriod
Period
Planning Horizon
Planning Horizon

Aggregate
AggregateProduction
ProductionPlan
Plan
Determination
Determinationof
ofAggregate
AggregateProduction
Production&&
Work
WorkForce
ForceLevels
Levelsfor
forttPeriod
PeriodPlanning
PlanningHorizon
Horizon

Master Production
Schedule
 Aggregate Planning
 Translating annual or quarterly business plans
into broad labor and output plans for the
intermediate term (6 to 18 months).
 Objective: to minimize the cost of resources
required to meet demand over that period.
 Optimal combination of production rate,
workforce level, and inventory on hand is
sought throughout the intermediate term.
Inputs and Outputs to Aggregate
Production Planning
Capacity Strategic Company
Constraints Objectives Policies

Demand Financial
Forecasts Aggregate Constraints
Production
Planning

Size of
Workforce Units or dollars
Production Inventory subcontracted,
per month Levels backordered, or
(in units or $) lost
© 1998 by Prentice -Hall Inc
Russell/Taylor Oper Mgt 2/e Ch 11 - 7
Aggregate Production Planning
(APP)
● Matches market demand to company resources
● Plans production 6 months to 12 months in
advance
● Expresses demand, resources, and capacity in
general terms
● Develops a strategy for economically meeting
demand
● Establishes a companywide game plan for
allocating resources
© 1998 by Prentice -Hall Inc
Russell/Taylor Oper Mgt 2/e Ch 11 - 6
 Goal: To plan gross work force and production levels
and set firm-wide production plans.
 We try to determine aggregate production targets
and the levels of resources required to achieve these
production goals given the demand projection for the
intermediate term.
 Namely given demand as D1, D2,…,DT
 Find the number of workers employed in each period
 Find the number of aggregate units to be produced in each
period
 Concept is based on the idea of an “aggregate unit”
of production. Aggregate Planning requires aggregation
of different goods or services.
They may be
 Actual units of production if items are similar

 Weight (tons of steel)

 Volume (gallons of gasoline)

 Dollar value (Value of sales)

 Fictitious aggregate units

 Aggregation Unit - Example
 Six different models of washing machines

Model Number Number of Worker- Selling Percentage of

Hours Required to Price total sales
Produce
A5532 4.2 $285 32
K4242 4.9 345 21
L9898 5.1 395 17
L3800 5.2 425 14
M2624 5.4 525 10
M3880 5.8 725 6

Can we use dollars as an aggregation unit? Notice: Price is not necessarily proportional
to worker hours (i.e., cost): why?
Use a fictitious washing machine as an aggregation unit which requires
(.32)(4.2)+(.21)(4.9)+(.17)(5.1)+(.14)(5.2)+(.10)(5.4)+(.06)(5.8)=4.856 hours of labor time
Forecasts for demand for aggregate units can be obtained by taking a weighted
average (using the same weights) of individual item forecasts.
 Different levels of
aggregation
 Items: Final products to be delivered to the customer
 Families: A group of items that a share common
manufacturing setup cost
 Types: Groups of families with production quantities
that are determined by a single aggregate production
plan

Above may not always work, the aggregation method

should be consistent with the firm’s organizational
structure, product line, planning needs and availability
of forecast and other data.
Production Rate
What is the best Demand
production curve in
seasonal business

Time
 Strategies for Meeting Demand
1. Use inventory to absorb fluctuations in demand
(level production)
2. Hire and fire workers to match demand (chase demand)
3. Maintain resources for high demand levels
4. Increase or decrease working hours (over & undertime)
5. Subcontract work to other firms
6. Use part -time workers
7. Provide the service or product at a later time period
(backordering)

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 8
 Strategy Details
● Level production - produce at constant rate & use
inventory as needed to meet demand
● Chase demand - change workforce levels so that
production matches demand
● Maintaining resources for high demand levels -
ensures high levels of customer service
● Overtime & undertime - common when demand
fluctuations are not extreme

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 9
 Strategy Details
● Subcontracting - useful if supplier meets
quality & time requirements
● Part -time workers - feasible for unskilled
jobs or if labor pool exists
● Backordering - only works if customer is
willing to wait for product/services

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 10
 Level Production
Demand

Production
Units

Time

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 11
 Chase Demand
Demand

Units

Production

Time

© 1998 by Prentice -Hall Inc

Russell/Taylor Oper Mgt 2/e Ch 11 - 12
Aggregate Planning for Services
1. Most services can’t be inventoried
2. Demand for services is difficult to predict
3. Capacity is also difficult to predict
4. Service capacity must be provided at the
appropriate place and time
5. Labor is usually the most constraining
resource for services
© 1998 by Prentice -Hall Inc
Russell/Taylor Oper Mgt 2/e Ch 11 - 23
 Overview of the Problem
Suppose that D1, D2, . . . , DT are the
forecasts of demand for aggregate units
over the planning horizon (T periods.)
The problem is to determine both work
force levels (Wt) and production levels (Pt
) to minimize total costs over the T
period planning horizon.
 Important Issues
 Smoothing. Refers to the costs and disruptions
that result from making changes from one period
to the next.
 Bottleneck Planning. Problem of meeting peak
demand because of capacity restrictions.
 Planning Horizon. Assumed given (T), but what is
“right” value? Rolling horizons and end of
horizon effect are both important issues.
 Treatment of Demand. Assume demand is
known. Ignores uncertainty to focus on the
predictable/systematic variations in demand,
such as seasonality.
 Costs in Aggregate
Planning
 Smoothing costs
 changing size of the work force
 changing number of units produced
 Holding costs: primary component: opportunity
cost of investment
 Shortage costs: Cost of demand exceeding stock
on hand.
 Regular time costs
 Overtime or subcontracting costs
 Idle time costs
Smoothing costs
Holding and Back-Order
Costs

$ Cost
Slope = Ci

Slope = CP

Back-orders Positive inventory

Inventory
 Prototype Problem
 Forecast demands over the next six months for disk drives.

Month Forecast
*Inventory at the end of December
January 1280
expected to be 500
February 640 *Company requires ending
March 900 inventory of 600 at the end of June
April 1200 *Initial workforce is 300
May 2000
June 1400

Cost of hiring one worker = CH = $500

Cost of firing one worker = CF = $1000
Inventory holding cost per unit, per month = CI = $80
 Prototype Problem
 Plant manager observed that over 22
working days, with the workforce level of 76,
the firm produced 245 disk drives.
 K= # of aggregate units produced per
worker per day = 245 / (22 * 76) = 0.14653
Month Net Predicted Net Predicted Cumulative
Demand Demand
January 780 780
February 640 1420
March 900 2320
April 1200 3520
May 2000 5520
June 2000 7520
 Zero Inventory Plan (Chase)
Month Number of Number of units Predicted Minimum number
working produced per net of workers
days worker demand required

January 20 2.931 780267

February 24 3.517 640182

March 18 2.638 900342

April 26 3.810 1200315
May 22 3.224 2000621
June 15 2.198 2000910
 Zero Inventory Plan (Chase)
Month Number of Number Number Number of Number of Cumulative Cumulative Ending
workers hired fired units per units production demand Inventory
worker produced

January 267 33 2.931 783 783 7803

February 182 85 3.517 640 1423 14203

March 342 160 2.638 902 2325 23205

April 315 27 3.810 1200 3525 35205
May 621 306 3.224 2002 5527 55207
June 910 289 2.198 2000 7527 75207
Total 755 145 30

Hiring costs = 755 * 500 = $377,500

Firing costs = 145 * 1000 = $145,000
Holding costs = (600+30) * 80 = $50,400
Total cost = $ 572,900
 Constant workforce plan
(Level)
Month Cumulative net Cumulative number of Ratio
demand units produced per (rounded up)
worker
January 780 2.931 267

February 1420 6.448 221

March 2320 9.086 256

April 3520 12.896 273

May 5520 16.120 343

June 7520 18.318 411

Constant workforce plan
(Level)
Month Number of Number of Cumulative Cumulative Ending
units per units produced production demand Inventory
worker

January 2.931 1205 1205 780425

February 3.517 1445 2650 14201230
March 2.638 1084 3734 23201414
April 3.810 1566 5300 35201780
May 3.224 1325 6625 55201105
June 2.198 903 7528 75208
Total 5962

 Hiring costs = (411-300) * 500 = $55,500

 Holding costs = (5962+600) * 80 = $524,960
 Total cost = $ 580,460
Mixed Strategies
 Section 1

Other scenarios
7000

6000
Cumulative number of units

5000

4000

3000

2000

1000

0
0 1 2 3 4 5 6
Month
Comparing strategies
comparing strategies Hiring/firing costs
Inventory costs

700

600
total cost (thousands)

500

400

300

200

100

0
Chase Level Mixed
strategy
 Mathematical programming
formulations
Cost definitions and input data
CH = Cost of hiring one worker
CF = Cost of firing one worker
CI = Cost of holding one unit of stock
CR = Cost of producing one unit in regular time
CO = Cost of producing one unit in over time
CU = Idle cost per unit of production
CS = Cost to subcontract one unit of production
nt = Number of production days in period t
K = Number of aggregate units produced by one worker in one day
I0 = Initial inventory
W0= Initial workforce
Dt = Forecast of demand in period t
Problem variables
Wt = Workforce level in period t
Pt = Number of units produced in period t
It = Inventory level at the end of period t
Ht = Number of workers hired in period t
Ft = Number of workers fired in period t
Ot = Overtime production in units
Ut = Worker idle time in units
St = Number of units subcontracted from outside
 Constraints
 Conservation of workforce
Wt = Wt-1+ Ht – Ft, for all t=1,..,T
 Inventory balance
It = It-1+Pt+St-Dt, for all t=1,..,T
 Relationship between production and
workforce
Pt = K nt Wt + Ot - Ut, for all t=1,..,T
 Constraints
 Initial levels for inventory and workforce
I0=I0, W0= W0
 Ending levels for inventory and workforce
IT=IT, WT= WT
 Non-negativity constraints
Wt, Pt, It, Ht, Ft, Ot, Ut, St >=0 for all t=1,..,T
 Linear program
T
Minimize ∑(c
t =1
H H t +cF Ft + cI I t + cR Pt + cO Ot + cU U t + cS St )

Subject to
Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T

Pt = Kn tWt + Ot −U t for all 1 ≤ t ≤ T

I t = I t −1 + Pt + S t − Dt for all 1 ≤ t ≤ T

H t , Ft , I t , Ot , U t , S t , Wt , Pt ≥ 0 for all 1 ≤ t ≤ T
 Properties of the optimal
solution
 If cF>=0 and cH>=0, there could be either
hiring or firing in one period (if at all), not
both. i.e.,
HtFt=0, for all t=1,..,T
 If c >=0 and c >=0, there could be either
O I
overtime or idle time in one period (if at all),
IFnot both.
THESE i.e.,
CONSTRAINTS ARE INCLUDED INTO THE
OtUt=0,ITfor
MODEL, all t=1,..,T
BECOMES NON-LINEAR. FROM OPTIMALITY
CONDITIONS, NOT NECESSARY TO INCLUDE INTO THE
MODEL.EXTREME POINTS OF THE FEASIBLE REGION
SATISFY THESE CONDITIONS
 Properties of the optimal
solution
 Not necessarily integers- fractional numbers may
not make sense for some variables, eg # of people
hired/fired.
 Requires an integer-linear programming model,
imposing that variables are integers. Hovewer this
is computationally difficult.
 Solving as LP and then rounding may be possible.
However, rounding must be performed
carefully( may lead to infeasibilities).
 Round to the next larger integer!
 Extensions
 Adding buffers for uncertainty
It >= Bt, for all t=1,..,T
Bt= Buffer stock for period t defined in
advance
 Storage constraints for inventory
It <= Vt, for all t=1,..,T
Vt=Storage capacity in period t
 Extensions
 Limits on overtime
Ot<=Mt, for all t=1,..,T
Mt: maximum overtime in period t
 Capacity constraints on production
Pt<=Ct, for all t=1,..,T
Ct: capacity in period t
 Allowing for backorders:
Inventory level is the difference of + and -
inventory
It=I+t-I-t , all non-negative for all periods
Holding cost: charged for + inventory
Stockout cost: charged against – inventory
Backorders and inventory
 In any period, there are either backorders or
positive inventory (if at all), but not both. i.e.,

+ −
I t × I t = 0 for all 1 ≤ t ≤ T
 Allowing for backorders
T

∑(cH H t +cF Ft + cI I t + cP I t + cR Pt + cOOt + cUU t + cS St )

+ −
Minimize
t =1

Subject to

Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T

Pt = Kn tWt + Ot −U t for all 1 ≤ t ≤ T

I t = I t −1 + Pt + S t − Dt for all 1 ≤ t ≤ T
+ −
I t = I t − I t for all 1 ≤ t ≤ T
+ −
H t , Ft , I t , I t , Ot , U t , S t , Wt , Pt ≥ 0 for all 1 ≤ t ≤ T
Convex piecewise-linear
costs
 Linearization
T
Minimize ∑ (cH 1 H1t + cH 2 H 2t +cF Ft + cI I t + cR Pt + cO Ot + cU U t + cS S t )
t =1

Subject to

Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T # of workers

H t = H1t + H 2t for all 1 ≤ t ≤ T hired upto
H*
H1t ≤ H * for all 1 ≤ t ≤ T

Pt = KntWt + Ot − U t for all 1 ≤ t ≤ T

I t = I t −1 + Pt + S t − Dt for all 1 ≤ t ≤ T

H1t , H 2t , Ft , I t , Ot , U t , S t , Wt , Pt ≥ 0 for all 1 ≤ t ≤ T

 Example-1
 The Paris Paint Company is in the process of planning labor force requirements and production levels
for the next 4 quarters. The marketing department has provided production with the following
forecasts of demand for Paris Paint over the next year.

Quarter Demand forecast in

(1000s of gallons)
1 380
2 630
3 220
4 160

Assume that there are currently 280 employees with the company.
Employees are hired for at least one full quarter. Hiring costs amount to
$1,200 per employee and firing costs are $2,500 per employee. Inventory
costs are $1 per gallon per quarter. It is estimated that one worker produced
1,000 gallons of paint each quarter. Assume that Paris currently has 80,000
gallons of paint in inventory and would like to end the year with an inventory
of at least 20,000 gallons.
Formulate the problem as an LP.
Linear Program-1
T
Minimize ∑(1200 H
t =1
t +2500 Ft + I t )

Subject to

Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T

Pt ≤ 1000 Wt

I t = I t −1 + Pt − Dt for all 1 ≤ t ≤ T

I 4 ≥ 20000

I 0 = 80000 , W0 = 280

D1 = 380000 , D2 = 630000 , D3 = 220000 , D4 = 160000

H t , Ft , I t , Wt , Pt ≥ 0 for all 1 ≤ t ≤ T
 Example 2
 Sun Microsystems is the producer of computer workstations. For the year 2003, they estimate
their quarterly demand for high-end workstations to be the following:

Q1 5000
Q2 5000
Q3 9000
Q4 8000
Sun Microsystems focuses on innovation and design rather than manufacturing. Therefore,
Sun developed strategic relationships with contract manufacturers Solectron and
Celestica; Solectron promising 6000, Celestica promising 2000 units of maximum
manufacturing capacity per quarter for Sun.
Solectron is the preferred vendor for Sun and charges $1000 for each high end workstation
that it manufactures. Sun may chose to use any amount of the capacity that Solectron
promised without paying any penalties.
Celestica, on the other hand, is the secondary vendor for Sun. It charges $1100 for each
high-end workstation. Celestica requires that Sun declares the Q1 subcontracted amount
in advance. Also, Sun can increase the subcontracted amount each quarter only if it pays
$100 per unit of increase. In addition, Sun can never reduce the amount it subcontracted
from Celestica from quarter to quarter.
Inventory holding costs are $50 per quarter per unit.
How much should Sun subcontract from Solectron and Celestica each quarter?
Linear Program-2
T
Minimize ∑ (1000 S
t =1
1t +1100 S 2t + 100 C2t + 50 I t )

Subject to

St = S1t + S 2t for all 1 ≤ t ≤ T

S 2t = S 2,t −1 + C2t for all 1 ≤ t ≤ T

I t = I t −1 + St − Dt for all 1 ≤ t ≤ T

S1t ≤ 6000 for all 1 ≤ t ≤ T

S 2t ≤ 2000 for all 1 ≤ t ≤ T

I0 = 0

D1 = 5000 , D2 = 5000 , D3 = 9000 , D4 = 8000

I t , St , S1t , S 2t , C2t ≥ 0 for all 1 ≤ t ≤ T

I 0 , S 20 ≥ 0
Example-3
 The personal department of the A&M Corporation wants to
know how many workers will be needed each month for the
next 4 month production period. The demands would be 1250,
1100, 950, 900 in months July, August, September, October.
 The inventory on hand at the end of June was 500 units. The
company wants to maintain a minimum inventory of 300 units
each month. Each unit requires 5 employee hours. There are
20 working days each month, and each employee works an 8-
hour day. The workforce at the end of June was 35 workers.
 The workers can also work overtime, but overtime cannot
exceed 30% of the regular time in each month. Overtime costs
an additional $20 per unit produced.
 Hiring costs $2500 per employee, firing costs $4000 per
employee, payroll costs $3000 per employee per month, and
inventory holding cost is $100.
 Formulate the problem as an LP and solve
Linear Program-3
T
Minimize ∑(2500 H
t =1
t +4000 Ft + 3000 Wt +100 I t + 20 Ot )

Subject to
Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T

Pt ≤ 32Wt + O t for all 1 ≤ t ≤ T

Ot ≤ 9.6Wt for all 1 ≤ t ≤ T

I t = I t −1 + Pt − Dt for all 1 ≤ t ≤ T

I t ≥ 300 for all 1 ≤ t ≤ T

I 0 = 500 , W0 = 35

D1 =1250 , D2 =1100 , D3 = 950 , D4 = 900

H t , Ft , I t , Wt , Pt , Ot ≥ 0 for all 1 ≤ t ≤ T
Example 4- Component
availability constraints
 Seagate is a manufacturer of hard drives for personal and
enterprise use. The enterprise division is trying to plan its
production for the first six months in 2003. The forecast for these
6 months are given below
January 12000
February 14000
March 15000
April 16000
May 16500
June 16000
Seagate does not have any constraints on workforce or equipment for
manufacturing hard drives. However, the enterprise hard drive requires two counts
of a specific chip (application specific integrated circuit – ASIC) which is sourced
from Texas Instruments. TI’s capacity is fixed for the first 4 months and it can
allocate only a portion of its capacity to Seagate. This amounts to 26000 such chips
in each of the first 4 months in 2003.
Seagate may also choose to use subcontractors for manufacturing the hard drives
which would cost an additional (on top of its own manufacturing) $50 per drive.
If the inventory holding costs are $20 per unit per month for the hard drives and $5
per unit per month for the ASICs, find the optimal production plan for the hard
drives and optimal purchase plan for the hard drives and ASICs.
Linear Program-4
∑t =1 (20 I t +5I t +50 St )
6 h c
Minimize

Subject to

I th = I th−1 + Pt h + S t − Dt for all 1 ≤ t ≤ 6

I tc = I tc−1 + Pt c − 2 Pt h for all 1 ≤ t ≤ 6

Pt c ≤ 26000 for all 1 ≤ t ≤ 4

I 0h = I 0c = 0

D1 =12000 , D2 =14000 , D3 =15000

D4 =16000 , D5 =16500 , D5 =16000

I th , I tc , Pt h , Pt c , S t ≥ 0 for all 1 ≤ t ≤ 6
Production Planning problems
with concave costs
 Why concave costs?
 Economies of scale
 Setup costs associated with
production, subcontracting,
overtime, alternate
resources
 Cannot be modeled as
linear programs
 May be more difficult to
solve
Modeling fixed (setup) costs
 Assume there is a fixed cost associated with subcontracting. No idle
time or overtime allowed.

T
Minimize ∑ (c
t =1
H H t +cF Ft + cI I t + cR Pt + cS S t + K S yt )

Subject to
Wt = Wt −1 + H t − Ft for all 1 ≤ t ≤ T

Pt = Kn tWt for all 1 ≤ t ≤ T

I t = I t −1 + Pt + S t − Dt for all 1 ≤ t ≤ T

S t ≤ My t

H t , Ft , I t , S t , Wt , Pt ≥ 0 for all 1 ≤ t ≤ T

yt ∈ (0,1)

M sufficient ly large
Example 5- Component
availability constraints
 Seagate is a manufacturer of hard drives for personal and
enterprise use. The enterprise division is trying to plan its
production for the first six months in 2003. The forecast for these
6 months are given below
January 12000
February 14000
March 15000
April 16000
May 16500
June 16000
Seagate does not have any constraints on workforce or equipment for
manufacturing hard drives. However, the enterprise hard drive requires two counts
of a specific chip (application specific integrated circuit – ASIC) which is sourced
from Texas Instruments. TI’s capacity is fixed for the first 4 months and it can
allocate only a portion of its capacity to Seagate. This amounts to 26000 such chips
in each of the first 4 months in 2003.
Seagate may also choose to use subcontractors for manufacturing the hard drives
which would cost an additional (on top of its own manufacturing) $10 per drive. In
addition, there is a fixed cost of $20,000 working with a subcontractor in any
month.
If the inventory holding costs are $20 per unit per month for the hard drives and $5
per unit per month for the ASICs, find the optimal production plan for the hard
drives and optimal purchase plan for the hard drives and ASICs.
Mixed Integer Program
Minimize ∑t =1 (20 I t + 5 I t + 10S t + 20000 yt )
6 h c

Subject to

I th = I th−1 + Pt h + St − Dt for all 1 ≤ t ≤ 6

I tc = I tc−1 + Pt c − 2 Pt h for all 1 ≤ t ≤ 6

Pt c ≤ 26000 for all 1 ≤ t ≤ 4

S t ≤ 89500 yt for all 1 ≤ t ≤ 6

yt ∈ (0,1) for all 1 ≤ t ≤ 6

I 0h = I 0c = 0

D1 = 12000, D2 = 14000, D3 = 15000

D4 = 16000, D5 = 16500, D5 = 16000

I th , I tc , Pt h , Pt c , St ≥ 0 for all 1 ≤ t ≤ 6
From Aggregate Plan to
Master Production Schedule
 The result of the aggregate plan is the production
quantities, inventory levels and required resources
at the aggregate level in the mid term.
 The firms are expected to act (acquire workforce &
resources, contact suppliers) based on the aggregate
plan.
 Such actions will be input (constraints) to lower level
(i.e. more detailed and shorter term) decisions in
the company
 Consistency between the aggregate plan and the
master production schedule is desired, but not
always possible
 Initial master production schedule dictated by the
demand plan (forecast) may not always be feasible.
 Disaggregation into MPS
 X*=optimal # of aggregatee units to
be produced for a product group ,
found by LP solution
 This aggregate qty should be
disaggregated into individual products
within this product group
 Disaggregation into MPS
 Min Σ Kj λ j/Yj , j=1.....J
s.t. Σ Yj=X* j=1.....J
aj<=Yj<=bj
Kj= setup for item j within the family
λ j = annual demand for item j
aj,bj: lower/upper bounds for item j
Kj λ j/Yj: average annual setupcost for item j
 Inputs to Master Production
Schedule
 Forecast by end item (sometimes also by customer
class or distribution channel) usually weekly
sometimes monthly
 For each item, manufacturing/distribution process flow
 For each stage of manufacturing/distribution process
flow
 Consumption rate of critical components
 Consumption rate of critical resources
 Availability for critical components and resources
 Lead times (for time phasing)
 Prioritization and allocation schemes for constrained
situations
 MPS
 Links tactical and operational planning stages
 Engine that drives MRP, CRP, purchasing and shop
floor execution systems
 Anticipated build schedule for end-products or
major product options
 A statement of production, not demand
 Sales forecast is an input but MPS is not a forecast
 Always stated in terms of part numbers for which
BOM exists
 After constructing the MPS we make a rough-cut
capacity planning in terms of critical work centers
 Creating MPS
 Decide on appropriate planning horizon
 Estimate requirements for each period in terms of
end-products in the planning horizon
 Account for any backorders
 Compare requirements against actual and
projected inventory balance
 Build the MPS
 Use rough-cut capacity planning to evaluate
feasibility
 If not, revise as appropriate
 Output: a matrix in which rows showing
individual products, columns showing
time periods