Dr. Abedini

Forecasting is used to predict the demand, production, or time required for future periods Forecasting is used to predict the demand, production, or time required for future periods Forecasting is always done first in production planning Forecasting is always done first in production planning By knowing the forecasted demands for future periods, companies can increase or decrease production to meet their needs By knowing the forecasted demands for future periods, companies can increase or decrease production to meet their needs

For data that doesn’t vary over a large range, constant forecasting applies For data that doesn’t vary over a large range, constant forecasting applies Simply take the average of the data points and assume that value for all future periods Simply take the average of the data points and assume that value for all future periods The average of 2, 5, 2, 4, 2 = 3 The average of 2, 5, 2, 4, 2 = 3 Therefore the red dashed line represents the new forecast for all future periods Therefore the red dashed line represents the new forecast for all future periods

The honesty of a forecast found by finding the mean error The honesty of a forecast found by finding the mean error N = number of data points available N = number of data points available

MayJuneJulyAugust d hat = forecasted demand d = actual demand

If +, then the actual demand is higher than the forecasted demand, commonly referred to as a pessimistic forecast If +, then the actual demand is higher than the forecasted demand, commonly referred to as a pessimistic forecast If -, then the forecasted demand is higher than the actual demand, commonly referred to as an optimistic forecast If -, then the forecasted demand is higher than the actual demand, commonly referred to as an optimistic forecast

Using linear regression we can also forecast for future periods Using linear regression we can also forecast for future periods Here are the basic formulas: Here are the basic formulas:

With the given information forecast for the 24 th period With the given information forecast for the 24 th periodtd

We now know what to expect in the 24 th period We now know what to expect in the 24 th period

We use this technique when we believe that the new data has more importance than the old data We use this technique when we believe that the new data has more importance than the old data For example, a company purchases a new lathe that can turn more pieces per minute, now the new data has more importance For example, a company purchases a new lathe that can turn more pieces per minute, now the new data has more importance

The real data minus the forecasted is the same as the new forecast minus the old forecast The real data minus the forecasted is the same as the new forecast minus the old forecast ERROR ERROR The older the data the more hats it has

Seasonal forecasting is used where data varies over the seasons of the year (Fall, winter, etc.) Seasonal forecasting is used where data varies over the seasons of the year (Fall, winter, etc.) To forecast for this type: To forecast for this type: Remove any growth effects to see seasonal changes Remove any growth effects to see seasonal changes A.) Find the average in each cycleA.) Find the average in each cycle B.) divide the data by its cycle’s averageB.) divide the data by its cycle’s average C.) Find the average for each given period of a cycleC.) Find the average for each given period of a cycle

CycleFallWinterSpringSummerAverage (30/22.5)=

Now we can plot the averages for the following future cycles Now we can plot the averages for the following future cycles = 3.75 = 3.75 = 18.5 = 18.5 = t (Equation for the line) = t (Equation for the line)

What if you want to forecast for the fifth cycle? What if you want to forecast for the fifth cycle? = (5) = = (5) = = 1.35(37.25) = = 1.35(37.25) = = 1.07(37.25) = = 1.07(37.25) = =.69(37.25) = 25.7 =.69(37.25) = 25.7 =.88(37.25) = =.88(37.25) = Forecasting for the eighth, 13 th, 50 th, etc. cycle would be done in the same manner as the fifth cycle Forecasting for the eighth, 13 th, 50 th, etc. cycle would be done in the same manner as the fifth cycle

Strategies for Aggregate planning Strategies for Aggregate planning 1.) Have constant resources no matter what the demand is 1.) Have constant resources no matter what the demand is 2.) Vary the resources as the demand varies 2.) Vary the resources as the demand varies 3.) Produce more when demand is low and keep excess good in inventory 3.) Produce more when demand is low and keep excess good in inventory 4.) Hire additional people or go overtime, add a shift when demand is high 4.) Hire additional people or go overtime, add a shift when demand is high

Anytime you go overtime, we assume the quality is the same Anytime you go overtime, we assume the quality is the same Secondly, we assume the production rate is the same Secondly, we assume the production rate is the same If they go overtime we assume they work 4 hours If they go overtime we assume they work 4 hours 5.) Use a subcontractor when demand is high ( can potentially save money) 5.) Use a subcontractor when demand is high ( can potentially save money)

1.) Develop an aggregate plan by hiring or laying off workers for future periods (11-15) 1.) Develop an aggregate plan by hiring or laying off workers for future periods (11-15) 2.) Find the total minimum cost of your proposal 2.) Find the total minimum cost of your proposalproductionAdditionalUnits Initial Inventory Production By Hired InventoryStockout

Inventory carrying cost=$2/unit/period Inventory carrying cost=$2/unit/period Backorder (stockout) cost=$3/unit/period Backorder (stockout) cost=$3/unit/period Hiring cost=$40 /person Hiring cost=$40 /person Lay off cost=$60/person Lay off cost=$60/person Regular Wages=$5/unit Regular Wages=$5/unit Overtime wages=$6/unit Overtime wages=$6/unit Sub contractor cost=$8/unit Sub contractor cost=$8/unit Regular work force = 20 workers Regular work force = 20 workers Regular time production=50 units/person/period Regular time production=50 units/person/period Initial inventory at period 11= 0 Initial inventory at period 11= 0

productionAdditionalUnits Initial Inventory Production By Hired InventoryStockout ( )(5) (2)=$27,050

Commonly known as (MRP) Commonly known as (MRP) Used for dependent products Used for dependent products A chair requires screws, an engine requires bolts, a skateboard needs wheels, etc. A chair requires screws, an engine requires bolts, a skateboard needs wheels, etc.

Now that you have your assembly planned there is some information you will need Now that you have your assembly planned there is some information you will need 1.) lead time 1.) lead time 2.) Source of material 2.) Source of material 3.) Lot size 3.) Lot size 4.) Inventory information 4.) Inventory information 5.) Safety stock 5.) Safety stock Now we can develop a Master Production Schedule (MPS) Now we can develop a Master Production Schedule (MPS)

NB= nuts and bolts NB= nuts and bolts T = trucks T = trucks B = board B = board W = wheels W = wheelsWeek demand

Skateboard: lead time = 0 Skateboard: lead time = 0 Initial inventory = 0 Lot size = 1 W: lead time = 2 weeks Initial Inventory = 200 Lot size = 300 Safety Stock = 0 T: lead time = 1 week Lot size = 10 Initial inventory = 0 Safety Stock = 0 B: Lead time = 1 week Initial Inventory = 60 Initial Inventory = 60 Lot size = 500 Lot size = 500 Safety Stock = 0 Safety Stock = 0 NB: Lead time = 0 Initial Inventory = 0 Initial Inventory = 0 Lot size = 250 Lot size = 250 Safety Stock = 0 Safety Stock = 0 The following slide will show you the format required to create an MRP schedule with this given information

Skateboard L= 0 I = 0 SS = 0 Gross req. Scheduled Rec Avail Net Required Planned Rec. Planned Release Wheels L = 2 Lot = 300 I = 200 SS = 0 Trucks L = 1 Lot = 10 I = 0 SS = 0 Board L = 1 Lot = 500 I = 60 SS = 0 Nuts and Bolts

Remember: the gross required of a child is dependent on the planned order releases of the parent Remember: the gross required of a child is dependent on the planned order releases of the parent

Used to cut down on material handling charges and inventory space Used to cut down on material handling charges and inventory space 1.) Product design 1.) Product design 2.) Process design 2.) Process design 3.) Whole person 3.) Whole person The best part is made of no parts at all The best part is made of no parts at all

1.) Inventory is 100% waste 1.) Inventory is 100% waste 2.) Queue is 100% waste 2.) Queue is 100% waste 3.) Inspection is 100% waste 3.) Inspection is 100% waste 4.) Movement is 100% waste 4.) Movement is 100% waste 5.) Process defects are 100% waste 5.) Process defects are 100% waste 6.) Setup time is 100% waste 6.) Setup time is 100% waste 7.) Poor communication is 100% waste 7.) Poor communication is 100% waste 8.) Multiple sourcing is 100% waste 8.) Multiple sourcing is 100% waste 9.) Poor design is 100% waste 9.) Poor design is 100% waste 10.) Excess capacity is 100% waste 10.) Excess capacity is 100% waste 11.) Down time is 100% waste 11.) Down time is 100% waste