1. 1 Forecasting, Planning and Scheduling http://www.managementsupport.com http://www.managementsupport.com

2. 2 Outline Forecasting Planning Scheduling MRP & ERP

3. 3 Strategy and Issues During a Product’s Life IntroductionGrowth Maturity Decline Standardization Less rapid product changes - more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Over capacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focused Enhance distribution Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Best period to increase market share R&D product engineering critical Practical to change price or quality image Strengthen niche Cost control critical Poor time to change image, price, or quality Competitive costs become critical Defend market position OM Strategy/Issues Company Strategy/Issues HDTV CD-ROM Color copiers Drive-thru restaurants Fax machines Station wagons Sales 3 1/2” Floppy disks Internet

4. 4 Forecasting Approaches Used when situation is ‘stable’ & historical data exist Used when situation is ‘stable’ & historical data exist Existing products Existing products Current technology Current technology Involves mathematical techniques Involves mathematical techniques e.g., forecasting sales of color televisions e.g., forecasting sales of color televisions Quantitative Methods Used when situation is vague & little data exist Used when situation is vague & little data exist New products New products New technology New technology Involves intuition, experience Involves intuition, experience e.g., forecasting sales on Internet e.g., forecasting sales on Internet Qualitative Methods

5. 5 Overview of Qualitative Methods Jury of executive opinion Jury of executive opinion Pool opinions of high-level executives, sometimes augment by statistical models Pool opinions of high-level executives, sometimes augment by statistical models Delphi method Delphi method Panel of experts, queried iteratively Panel of experts, queried iteratively Sales force composite Sales force composite Estimates from individual salespersons are reviewed for reasonableness, then aggregated Estimates from individual salespersons are reviewed for reasonableness, then aggregated Consumer Market Survey Consumer Market Survey Ask the customer Ask the customer

6. 6 Relationships of the Aggregate Plan Aggregate Plan for Production Demand Forecasts, orders Master Production Schedule, and MRP systems Detailed Work Schedules External Capacity Subcontractors Inventory On Hand Raw Materials Available Work Force Marketplace and Demand Research and Technology Product Decisions Process Planning & Capacity Decisions

7. 7 Qualitative factors Qualitative factors Number and variety of jobs Number and variety of jobs Complexity of jobs Complexity of jobs Nature of operations Nature of operations Quantitative criteria Quantitative criteria Average completion time Average completion time Utilization (% of time facility is used) Utilization (% of time facility is used) WIP inventory (average # jobs in system) WIP inventory (average # jobs in system) Customer waiting time (average lateness) Customer waiting time (average lateness) Choosing a Scheduling Method

8. 8 Priority Rules for Dispatching Jobs First come, first served First come, first served The first job to arrive at a work center is processed first The first job to arrive at a work center is processed first Earliest due date Earliest due date The job with the earliest due date is processed first The job with the earliest due date is processed first Shortest processing time Shortest processing time The job with the shortest processing time is processed first The job with the shortest processing time is processed first Longest processing time Longest processing time The job with the longest processing time is processed first The job with the longest processing time is processed first Critical ratio Critical ratio The ratio of time remaining to required work time remaining is calculated, and jobs are scheduled in order of increasing ratio. The ratio of time remaining to required work time remaining is calculated, and jobs are scheduled in order of increasing ratio. FCFS EDD SPT LPT CR

9. 9 Inputs to the Production Plan Aggregate Production Plan Marketing Customer Demand Engineering Design Completion Management Return on Investment Capital Human Resources Manpower Planning Procurement Supplier Performance Finance Cash Flow Production Capacity Inventory

10. 10 Increased customer satisfaction due to meeting delivery schedules Increased customer satisfaction due to meeting delivery schedules Faster response to market changes Faster response to market changes Improved labor & equipment utilization Improved labor & equipment utilization Better inventory planning & scheduling Better inventory planning & scheduling Reduced inventory levels without reduced customer service Reduced inventory levels without reduced customer service MRP Benefits

11. 11 Distribution Resource Planning DRP requires: DRP requires: Gross requirements, which are the same as expected demand or sales forecasts Gross requirements, which are the same as expected demand or sales forecasts Minimum levels of inventory to meet customer service levels Minimum levels of inventory to meet customer service levels Accurate lead times Accurate lead times Definition of the distribution structure Definition of the distribution structure