1. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Operation Management Week 07 Production Planning

2. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Planning System Questions What are we going to make? What does it take to make it? What do we already have? What do we need to get? Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 2

3. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Key is to match Priority –What is needed, when, and how much Capacity –Capability to produce what is needed and when Priority (Demand) Capacity (Resources) Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 3

4. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Major levels of Planning and Control In order of time span (long to short) and detail (general to detailed): –Strategic business plans –Sales and Operations Plans (Production Plans and Marketing Plans) –Master Production Schedules –Material Requirements Plans –Purchasing and Production Activity Control Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 4

5. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Planning Hierarchy Strategic Business Plan Production Plan Master Production Schedule Material Requirements Plan Production Activity Control and Purchasing Master Plan Planning Implementation Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 5

6. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Production Plan Quantities of each product group to be produced each period Projected/desired inventory levels Resources needed –Equipment –Labor –Material Availability of needed resources Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 6

7. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Master Production Schedule Shows, for each period, the quantity of each end item to be made. Level of detail is higher than the Production Plan –End items versus groups of items –Time periods usually shorter (e.g., weeks versus months) Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 7

8. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. More Detailed Planning and Control Material Requirements Plan –End item requirements broken down into specific components – what to make or buy, and when Production Activity Control –Execution plan, detailing specific orders to produce items from the Material Requirements Plan Purchasing –Similar to Production Activity Control, only includes items to be purchased rather than produced. Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 8

9. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Capacity Management At each level of the planning and control system, reconciliation with resources must be made –Must obtain the right resources or change the plan Inadequate resources = missed production schedules Resources significantly exceed planned production = idle resources and extra cost Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 9

10. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Sales and Operations Plan Strategic Business Plan Marketing Plan Production Plan Detailed Sales Plan Master Production Schedule SALES AND OPERATIONS PLAN Annual Monthly Weekly or Daily Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 10

11. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Developing the Production Plan Some key questions that must be answered to develop an effective planning strategy: –How flexible are the resources, both in quantity and timing? –Are “outside” resources available (subcontracting)? –Can we utilize inventory to meet demand? Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 11

12. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Basic Production Plan Strategies Chase – vary production rates to meet changes in demand –Often used when inventory cannot be used or when resources are flexible and inexpensive to change Level – establish average demand level and set production rate to that level –Often used when resources difficult or very expensive to change Hybrid – use a combination of some chase and some level Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 12

13. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Demand Chase Production No. of Units Time Chase Production: Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 13

14. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Demand Level Production No. of Units Time Level Production: Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 14

15. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Demand Level Production No. of Units Time Level Production: CREATE Inventory USE Inventory Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 15

16. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Demand Hybrid No. of Units Time Hybrid: Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 16

17. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Numerical Example: Period123456Total Forecast (Demand)150160180175155140960 Suppose the forecasted demand for a product family looks like the table below. Assume the product family is a Make-to-Stock family with a starting inventory of 100. Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 17

18. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Production Plan Using a Level Strategy Period123456Total Forecast (Demand)150160180175155140960 Planned Production 160 960 Planned Inventory110 907580100 Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 18

19. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Production Plan using Chase Strategy Period123456Total Forecast (Demand)150160180175155140960 Planned Production 150160180175155140960 Planned Inventory100 Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 19

20. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Production Plan using a Hybrid Strategy Period123456Total Forecast (Demand) 150160180175155140960 Planned Production 140 175 945 Planned Inventory907030 5085 Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 20

21. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Make-to-Order Production Plans Products made to customer specifications The customer is willing to wait for completion Generally products more expensive to make and/or store Often several options offered Company often uses a backlog of unfilled customer orders rather than inventory Arnold, Chapman & Clive : Intro Materials Management 6 th ed. © Pearson Education, Upper Saddle River, N J 07458 All Right Reserved Operation Management Week 7 Page 21

22. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Case Study Aggregate Planning Week 7 Page 22

23. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Cost Information RegulerRp 2/unit OvertimeRp 3/unit Subcontract Rp 6/unit InventoryRp 1/unit/Period BacklogsRp 5/unit/Period Week 7 Page 23

24. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Tabel: Perencanaan Kapasitas Produksi Kasus 1 Week 7 Page 24

25. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Tabel: Perencanaan Kapasitas Produksi Kasus 2 Week 7 Page 25

26. Arnold, Chapman, & Clive: Intro Materials Management, 6 th ed. © 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved. Diagram: Perbandingan Total Biaya Kasus 1 dan Kasus 2 Week 7 Page 26