CHAPTER 3.pdf - Operations Management I Chapter 3 CHAPTER 3...

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Operations Management I Chapter 3 1 CHAPTER 3: PRODUCTION PLANNING 1. AGGREGATE PLANNING AP is useful to determine the quantity and timing of production for the immediate future. à which quantities and when to produce these quantities. The objective is to minimize cost over the planning period by adjusting: - Production rates - Labour levels - Inventory levels - Overtime work - Subcontracting rates - Other controllable variables. Required for aggregate planning (plan that tells us how much and when to produce during a period of time) - A logical overall unit for measuring sales and output - A forecast of the demand for an intermediate planning period in these aggregate terms à what sales department believes we’re going to sell for a period of time. - A method for determining costs à because we want to minimize them - A model that combines forecasts and costs so that scheduling decisions can be made for the planning period 1.1. THE PLANNING PROCESS We’re in the first and second steps; i.e., short-range and intermediate-range plans, which are a matter of operations managers.
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Operations Management I Chapter 3 2 1.2. AGGREGATE PLANNING For each of the three months within a quarter, we have the amounts that must be produced per product family ( e.g. Lawn mowers that are produced using very similar procedures and equipment.) These production numbers are computed per product family, that’s why it’s called an aggregated plan . It tells the company how many units to produce per product family. Later, the plan can be disaggregated to know how many units of each of the products of the family to produce, and, for example, to know weekly production. The manufacturing cycle works as follows:
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Operations Management I Chapter 3 3 The aggregated plan… - Combines appropriate resources into general terms - It’s part of a larger production planning system - Disaggregation breaks the plan down into greater detail - Disaggregation results in a master production schedule (MPS) Overall, the final objective is to develop the MPS (Master Production Schedule), which gives more detailed info about how much and when to produce. 1.3. AGGREGATE PLANNING STRATEGIES 1. Use inventories to absorb changes in demand 2. Accommodate changes by varying workforce size à Depending on the production, have more or less workers. 3. Use part-timers, overtime, or idle time to absorb changes 4. Use subcontractors and maintain a stable workforce 5. Change prices or other factors to influence demand Within these 5 strategies, we can influence the capacity or we can influence the demand . 1.3.1. CAPACITY OPTIONS Changing inventory levels - Increase inventory in low demand periods to meet high demand in the future à Use excess capacity to produce units that we don’t need now but we may need in the future.
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