chapter 5 capacity planning and aggregate production planning

8/11/2019 Chapter 5 Capacity Planning and Aggregate Production Planning

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Chapter 5

CAPACITY PLANNING AND AGGREGATE PRODUCTION PLANNING5.1 Capacity Planning

5.2 Rough Cut Capacity Planning

5. Capacity R!"ui#!$!nt Planning5.% Input & Output Cont#ol

5.5 Agg#!gat! P#o'uction Planning

5.( Agg#!gat! Planning )o# *!#+ic!,

Hierarchical Planning Process

-y '!t!#$ining a ,t#at!gy )o# $!!ting an' $anaging '!$an' agg#!gat! planning

p#o+i'!, a )#a$!/o#0 /ithin /hich ,ho#t!#t!#$ p#o'uction an' capacity '!ci,ion, can! $a'!. In p#o'uction planning th! n!3t l!+!l o) '!tail i, a master production schedule,

in /hich /!!0ly 4not $onthly o# "ua#t!#ly p#o'uction plan, a#! ,p!ci)i!' y in'i+i'ual

)inal p#o'uct 4not p#o'uct lin!. At anoth!# l!+!l o) '!tail material requirements

planning'!al, /ith th! p#o'uction o) th! co$pon!nt, that go into th! )inal p#o'uct,.Shop floor scheduling ,ch!'ul!, th! $anu)actu#ing op!#ation, #!"ui#!' to $a0! !ach

co$pon!nt.

In capacity planning /! $ight '!+!lop a resource requirements plan,to +!#i)y that anagg#!gat! p#o'uction plan i, 'oal! an' a rough-cut capacity plana, a "uic0 ch!c0 to

,!! i) th! $a,t!# p#o'uction ,ch!'ul! i, )!a,il!. On! l!+!l 'o/n a $uch $o#! '!tail!'

capacity requirements planthat $atch!, th! )acto#y6, $achin! an' lao# #!,ou#c!, to th!

$at!#ial #!"ui#!$!nt, plan i, '!+!lop!'. 7inally th! input/output control i, u,!' to$onito# th! p#o'uction that ta0!, plac! at in'i+i'ual $achin!, o# /o#0 c!nt!#,. At !ach

l!+!l '!ci,ion, a#! $a'! /ithin th! pa#a$!t!#, ,!t y th! high!#l!+!l '!ci,ion,. Th!

p#oc!,, o) $o+ing )#o$ th! agg#!gat! plan to th! n!3t l!+!l 'o/n i, call!'

disaggregation.Each l!+!l o) p#o'uction an' capacity planning i, ,ho/n in )igu#! 5.1.

Th! )i+! l!+!l, o) capacity planning acti+iti!, #ang! )#o$ la#g! agg#!gation, o) capacity

)o# long ti$! p!#io', to +!#y '!tail!' $achin! ,ch!'uling )o# an hou# o# ,ho#t!# ti$!

int!#+al.

8o,t o) th! chapt!# 'i,cu,,ion /ill )ocu, on #ough cut capacity planning p#oc!'u#!, 4)o#

$!'iu$ #ang! capacity planning an' on th! t!chni"u! call!' capacity #!"ui#!$!nt,

planning 4,ho#t #ang! capacity #!"ui#!$!nt, '!t!#$in!' )o# in'i+i'ual /o#0 c!nt!#,.


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7igu#! 5.1

5.1 Capacity Planning

Capacity planning i, a longt!#$ ,t#at!gic '!ci,ion that !,tali,h!, a )i#$6, o+!#all l!+!l

o) #!,ou#c!,. It !3t!n', o+!# a ti$! ho#i9on long !nough to otain tho,! #!,ou#c!,u,ually a y!a# o# $o#! )o# uil'ing n!/ )aciliti!, o# ac"ui#ing n!/ u,in!,,!,. Capacity

'!ci,ion, a))!ct p#o'uct l!a' ti$!, cu,to$!# #!,pon,i+!n!,, op!#ating co,t, an' a )i#$6,

aility to co$p!t!. Ina'!"uat! capacity can l!a' to lo,, o) cu,to$!#, !,calating /o#0 inp#oc!,, li$it g#o/th an' )#u,t#at!' $anu)actu#ing p!#,onn!l /ho /ill "uic0ly tu#n ac0

to th! in)o#$al ,y,t!$ to ,ol+! p#ol!$,. E3c!,, capacity can '#ain a co$pany6,#!,ou#c!, an' p#!+!nt in+!,t$!nt, in $o#! luc#ati+! +!ntu#!,. Whento inc#!a,! capacityan' how muchto inc#!a,! capacity a#! c#itical '!ci,ion,.

Th! co$$on capacity !3pan,ion ,t#at!gi!, a#! na$!ly capacity l!a' ,t#at!gy capacity

lag ,t#at!gy a+!#ag! capacity ,t#at!gy an' inc#!$!ntal on! ,t!p !3pan,ion ,t#at!gy.


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7igu#! 5.2

7igu#! 5.2 4a 4 an' 4c ,ho/ th#!! a,ic ,t#at!gi!, )o# th! ti$ing o) capacity

!3pan,ion in #!lation to a ,t!a'y g#o/th in '!$an'.

Capacity lead strategy.Capacity i, !3pan'!' in anticipation o) '!$an' g#o/th.

Thi, agg#!,,i+! ,t#at!gy i, u,!' to lu#! cu,to$!#, )#o$ co$p!tito#, /ho a#!capacity con,t#ain!' o# to gain a )oothol' in a #api'ly !3pan'ing $a#0!t.

Capacity lag strategy.Capacity i, inc#!a,!' a)t!# an inc#!a,! in '!$an' ha, !!n

'ocu$!nt!'. Thi, con,!#+ati+! ,t#at!gy p#o'uc!, a high!# #!tu#n on in+!,t$!ntut $ay lo,! cu,to$!#, in th! p#oc!,,. It i, u,!' in in'u,t#i!, /ith ,tan'a#'

p#o'uct, an' co,ta,!' o# /!a0 co$p!tition. Th! ,t#at!gy a,,u$!, that lo,t

cu,to$!#, /ill #!tu#n )#o$ co$p!tito#, a)t!# capacity ha, !3pan'!'. Average capacity strategy. Capacity i, !3pan'!' to coinci'! /ith a+!#ag!

!3p!ct!' '!$an'. Thi, i, a $o'!#at! ,t#at!gy in /hich $anag!#, a#! c!#tain th!y

/ill ! al! to ,!ll at l!a,t ,o$! po#tion o) th! a''itional output.

Con,i'!# high!# !'ucation6, ,t#at!gy in p#!pa#ing )o# a t#ipling o) th! ,tat!6, coll!g!

oun' population in th! n!3t '!ca'!. An !,tali,h!' uni+!#,ity gua#ant!!' applicant,!+!n in l!an y!a#, $ay )ollo/ a capacity lag ,t#at!gy. A young uni+!#,ity $ight l!a'

capacity !3pan,ion in hop!, o) captu#ing tho,! ,tu'!nt, not a'$itt!' to th! $o#!

!,tali,h!' uni+!#,iti!,. A co$$unity coll!g! $ay choo,! th! a+!#ag! capacity ,t#at!gyto )ul)ill it, $i,,ion o) !'ucating th! ,tat!6, youth ut /ith littl! #i,0.

:o/ $uch to inc#!a,! capacity '!p!n', on 41 th! +olu$! an' c!#tainty o) anticipat!'

demand;42strategic o!ectivesin t!#$, o) g#o/th cu,to$!# ,!#+ic! an' co$p!tition;

an' 4 th! costso) !3pan,ion an' op!#ation.

Capacity can ! inc#!a,!' inc#!$!ntally o# in on! la#g! ,t!p a, ,ho/n in 7igu#! 5.24'.

Inc#!$!ntal !3pan,ion i, l!,, #i,0y ut $o#! co,tly. An att#acti+! alt!#nati+! to !3pan'ing

capacity i, outsourcing,in /hich ,uppli!#, a,o# th! #i,0 o) '!$an' unc!#tainty.


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Th! best operating level)o# a )acility i, th! p!#c!nt o) capacity utili9ation that $ini$i9!,

a+!#ag! unit co,t. Ra#!ly i, th! !,t op!#ating l!+!l at 1

7igu#! 5.

7igu#! 5. ,ho/, th! !,t op!#ating l!+!lin thi, ca,! th! opti$al occupancy #at!)o#

th#!! 'i))!#!nt ,i9! hot!l,. O) th! th#!! alt!#nati+!, th! 5


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Econo$i!, o) ,cal! 'o not continu! in'!)init!ly. Ao+! a c!#tain l!+!l o) output

diseconomies of scalecan occu#. O+!#ta3!' $achin!, an' $at!#ial han'ling !"uip$!nt

#!a0 'o/n ,!#+ic! ti$! ,lo/, "uality ,u))!#, #!"ui#ing $o#! #!/o#0 lao# co,t,inc#!a,! /ith o+!#ti$! an' coo#'ination an' $anag!$!nt acti+iti!, !co$! 'i))icult. In

a''ition i) cu,to$!# p#!)!#!nc!, ,u''!nly chang! high+olu$! p#o'uction can l!a+! a

)i#$ /ith unu,al! in+!nto#y an' !3c!,, capacity.

Longt!#$ capacity '!ci,ion, conc!#ning th! nu$!# o) )aciliti!, an' )acility ,i9! p#o+i'!th! )#a$!/o#0 )o# $a0ing $o#! int!#$!'iat!t!#$ capacity '!ci,ion,,uch a, in+!nto#y

polici!, p#o'uction #at!, an' ,ta))ing l!+!l,. Th!,! '!ci,ion, a#! coll!cti+!ly 0no/n a,

aggregate production planningo# u,t plain aggregate planning.

5.2 RoughCut Capacity Planning

Roughcut capacity planning ch!c0, /h!th!# c#itical #!,ou#c!, a#! a+ailal! to ,uppo#t

th! p#!li$ina#y $a,t!# ,ch!'ul!. A resource bill,ho/, th! ti$! #!"ui#!' )o# in'i+i'ual

it!$, on a c#itical #!,ou#c!. Onc! th! p#!li$ina#y 8P*, a#! $a'! th!y $u,t ! ch!c0!'again,t th! a+ailal! capacity. Thi, p#oc!,, i, call!' #oughcut capacity planning; it,

pu#po,! i, to ch!c0 /h!th!# c#itical #!,ou#c!, a#! a+ailal! to ,uppo#t th! $a,t!#

p#o'uction ,ch!'ul!.

A 0!y conc!#n in ou# aility to $!!t th! $a,t!# ,ch!'ul! i, th! !3i,t!nc! o) bottlenecks.You $ay not 0no/ /h!#! you# ottl!n!c0 /o#0 c!nt!#, a#! ut you can ! ,u#! you ha+!

th!$. *uppo,! you ha+! in+!nto#y pil!' up at !ach /o#0 c!nt!#. *o$!thing i, '!)init!ly

/#ong. At you# ottl!n!c0 /o#0 c!nt!# you /ant to ha+! a ac0log o) /o#0 ,o that itB,n!+!# out o) $at!#ial ut !+!#ything up,t#!a$ o) th! ottl!n!c0 c!nt!# ,houl'nBt ha+!

ac0log; th!y ,houl' ! #unning /ith !3c!,, capacity. It $ay ! n!c!,,a#y to ta0! /o#0

o#'!#, o)) th! ,hop )loo# an' #!$o+! IP )#o$ th! /o#0 c!nt!#,.

I) thatB, th! ca,! you n!!' to 'o a #oughcut capacity ch!c0. Ch!c0 tho,! 0!y /o#0c!nt!#, an' ch!c0 you# #!,ou#c! ill. 8a0! ,u#! you can uil' /hat you n!!' to. YouBll

p#oaly )in' that you# '!$an' an' you# #!,ou#c!, a#! out o) alanc!. Onc! you )in' out

that th!y a#! out o) alanc! th! n!3t thing youB#! going to ha+! to 'o i, chang!

,o$!thing.

YouB#! going to ha+! to inc#!a,! capacity i) you n!!' $o#! capacity; youB#! going to

ha+! to g!t $o#! $at!#ial i) you n!!' $o#! $at!#ial; youB#! going to ha+! to ,hi)t ,0ill, i)

thatB, /hat you n!!'. You $ay al,o ha+! to chang! th! $a,t!# ,ch!'ul!. hat Chang!

th! $a,t!# ,ch!'ul! O) cou#,!> Th! $a,t!# ,ch!'ul! i, ,i$ply a tool.

5. Capacity R!"ui#!$!nt, Planning 4CRP

Capacity requirements planning (CP!i, a co$put!#i9!' ,y,t!$ that p#o!ct, th! loa'

)#o$ a gi+!n $at!#ial plan onto th! capacity o) a ,y,t!$ an' i'!nti)i!, un'!# loa', an'o+!#loa',. It i, th!n up to th! 8RP plann!# to level the load,$ooth out th! #!,ou#c!


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#!"ui#!$!nt, ,o that capacity con,t#aint, a#! not +iolat!'. Thi, can ! acco$pli,h!' y

,hi)ting #!"ui#!$!nt, #!'ucing #!"ui#!$!nt, o# t!$po#a#ily !3pan'ing capacity.

Th!#! a#! th#!! $ao# input, to CRP a, ,ho/n in )igu#! 5.%

7igu#! 5.%

Th!planned order releases)#o$ th! 8RP p#oc!,,;

A routing file,/hich ,p!ci)i!, /hich $achin!, a#! #!"ui#!' to co$pl!t! an o#'!#

)#o$ th! 8RP plan in /hat o#'!# th! op!#ation, a#! to ! con'uct!' an' th!

l!ngth o) ti$! !ach op!#ation ,houl' ta0!; an'

An open orders file,/hich contain, in)o#$ation on th! ,tatu, o) o, that ha+!

al#!a'y !!n #!l!a,!' to th! ,hop ut ha+! not y!t !!n co$pl!t!'.

ith thi, in)o#$ation CRP can p#o'uc! a load profile)o# !ach $achin! o# /o#0 c!nt!#in th! ,hop. Th! loa' p#o)il! co$pa#!, #!l!a,!' o#'!#, an' plann!' o#'!#, /ith /o#0

c!nt!# capacity.

Capacity,u,ually !3p#!,,!' a, ,tan'a#' $achin! hou#, o# lao# hou#, i, calculat!' a,)ollo/,?

Capacity 4no. $achin!, o# /o#0!#, F 4no. ,hi)t, F 4utili9ation F 4!))ici!ncy

"tili#ation#!)!#, to th! p!#c!ntag! o) a+ailal! /o#0ing ti$! that a /o#0!# actually

/o#0, o# a $achin! actually #un,. *ch!'ul!' $aint!nanc! lunch #!a0, an' ,!tup ti$!

a#! !3a$pl!, o) acti+iti!, that #!'uc! actual /o#0ing ti$!. $fficiency#!)!#, to ho/ /!lla $achin! o# /o#0!# p!#)o#$, co$pa#!' to a ,tan'a#' output l!+!l. *tan'a#', can !

a,!' on pa,t #!co#', o) p!#)o#$anc! o# can ! '!+!lop!' )#o$ th! /o#0$!a,u#!$!nt

t!chni"u!,. An !))ici!ncy o) 1


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%oad i, th! ,tan'a#' hou#, o) /o#0 4o# !"ui+al!nt unit, o) p#o'uction a,,ign!' to a

p#o'uction )acility. A)t!# loa' an' capacity ha+! !!n '!t!#$in!' a load percentcan !

calculat!' a,

C!nt!#, loa'!' ao+! 1


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= 28 hours or 1,680 minutes

The projected load for Monday of next week is as follows:

Copy Courier is loaded 42 percent over capacity next Monday.

Increasing utilization (even to 100 percent) would not be sufficient to get the workdone. To complete the customer orders on time, another shift could be added (i.e.,

another person hired). With this adjustment, the copy shop's daily capacity would

increase to

2 machines F3 shifts F8 hours/shift F100% efficiency F87.5% utilization

= 42 hours or 2,520 minutes

The revised load percent is:

In the future, Copy Courier should determine if it has enough capacity to complete a

job by the customer's requested due date beforethe job is accepted.

Loa' p#o)il!, can ! 'i,play!' g#aphically a, ,ho/n in )igu#! 5.5. Th! no#$al capacityo) $achin! 2A i, %< hou#, p!# /!!0. ! can ,!! that th! $achin! i, underloaded in

p!#io', 1 5 an' ( an' overloadedin p!#io', 2 an' %.


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Figure 5.5: Load profile for machine 32A

Under-loaded conditions can be leveled by:

1. Ac"ui#ing $o#! /o#0;

2. "ulling wor# aheadthat i, ,ch!'ul!' )o# lat!# p!#io',; o#. R!'ucing no#$al capacity.

A''itional /o#0 can ! ac"ui#!' y t#an,)!##ing ,i$ila# /o#0 )#o$ oth!# $achin!, in th!

,a$! ,hop that a#! n!a# o# o+!# capacity y $a0ing co$pon!nt, inhou,! that a#!

no#$ally pu#cha,!' )#o$ out,i'! ,uppli!#, o# y ,!!0ing /o#0 )#o$ out,i'! ,ou#c!,.Pulling /o#0 ah!a' ,!!$, li0! a "uic0 an' !a,y alt!#nati+! to all!+iat! oth un'!#loa',

an' o+!#loa',. :o/!+!# /! $u,t #!$!$!# that th! 8RP plan /a, '!+i,!' a,!' on an

int!##!lat!' p#o'uct ,t#uctu#! ,o th! )!a,iility o) ,ch!'uling /o#0 in an !a#li!# ti$!

p!#io' i, conting!nt on th! a+ailaility o) #!"ui#!' $at!#ial, o# co$pon!nt,. In a''ition/o#0 co$pl!t!' p#io# to it, 'u! 'at! $u,t ! ,to#!' in in+!nto#y an' thu, incu#, a hol'ing

co,t. h!n /o#0 i, ,hi)t!' to oth!# ti$! p!#io', th! 8RP plan ,houl' ! #!#un to ch!c0th! )!a,iility o) th! p#opo,!' ,ch!'ul!.

I) an un'!# loa'!' con'ition continu!, )o# ,o$! ti$! #!'ucing th! ,i9! o) th! /o#0)o#c!

$ay ! n!c!,,a#y. *$all!# un'!# loa', can ! han'l!' y #!'ucing th! l!ngth o) th!

/o#0ing 'ay o# /o#0/!!0 y ,ch!'uling i'l!' /o#0!#, )o# t#aining ,!,,ion, o# +acation,o# y t#an,)!##ing /o#0!#, to oth!# po,ition, at $achin! c!nt!#, o# '!pa#t$!nt, /h!#!

o+!#loa', a#! occu##ing.

O+!#loa'!' con'ition, a#! th! p#i$a#y conc!#n o) th! 8RP plann!# !cau,! ano+!#loa'!' ,ch!'ul! l!)t unch!c0!' cannot po,,ily ! co$pl!t!' a, plann!'. O+!#loa',can ! #!'uc!' y?

1. Eli$inating unn!c!,,a#y #!"ui#!$!nt,;

2. R!#outing o, to alt!#nati+! $achin!, o# /o#0 c!nt!#,;

. *plitting lot, !t/!!n t/o o# $o#! $achin!,;%. Inc#!a,ing no#$al capacity;


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5. *ucont#acting;

(. Inc#!a,ing th! !))ici!ncy o) th! op!#ation;

H. Pu,hing /o#0 ac0 to lat!# ti$! p!#io',; o#=. R!+i,ing th! $a,t!# ,ch!'ul!.

*o$! capacity p#ol!$, a#! g!n!#at!' )#o$ an 8RP plan that inclu'!, lot ,i9!, ,a)!ty,toc0 o# un,u,tantiat!' #!"ui#!$!nt, )o# ,!#+ic! pa#t, o# )o#!ca,t!' '!$an'. To +!#i)y

that a capacity o+!#loa' i, cau,!' y #!al n!!' th! plann!# $ight !3a$in! th! 8RP$at#ic!, o) th! it!$, p#oc!,,!' th#ough a $achin! c!nt!# 'u#ing an o+!#loa'!' p!#io' a,

/!ll a, th! $at#ic!, o) th! pa#!nt, o) tho,! it!$, p#oc!,,!' all th! /ay up th! p#o'uct

,t#uctu#! to th! $a,t!# ,ch!'ul!. O# th! 8RP ,y,t!$ coul' ! #!#un /ith lot ,i9!,t!$po#a#ily ,!t to on! an' ,a)!ty ,toc0 to 9!#o to ,!! i) th! capacity p#ol!$ i,

!li$inat!'.

8RP ,y,t!$, a,,u$! that an !nti#! lot o) goo', i, p#oc!,,!' at on! $achin!. Gi+!n th!

o ,hop !n+i#on$!nt in /hich $o,t 8RP ,y,t!$, a#! in,tall!' th!#! a#! u,ually ,!+!#al

$achin!, that can p!#)o#$ th! ,a$! o 4although p!#hap, not a, !))ici!ntly. ith CRPloa' p#o)il!, a#! '!t!#$in!' /ith o, a,,ign!' to th! p#!)!##!' $achin! )i#,t ut /h!n

capacity p#ol!$, occu# o, can c!#tainly ! #!a,,ign!' to alt!#nat! $achin!,. Ina''ition i) t/o o# $o#! ,i$ila# $achin!, a#! a+ailal! at th! ,a$! ti$! it $ay !

po,,il! tosplita atchthat i, a,,ign pa#t o) an o#'!# to on! $achin! an' th! #!$ain'!#

to anoth!# $achin!.

EXAMPLE

5.2

Splitting Orders

Duffy's Machine Shop has a shortage of lathes. Next week's schedule loaded the lathe

department 125 percent. Management's usual response is to schedule overtime, but the

company is in a tight financial bind and wants to evaluate other options. The shop

supervisor, who has been reading about methods for reducing processing time, suggests

something called order splitting.

It turns out that some of the lathe work can actually be performed on a milling machine,

but it is rarely done that way because the process takes longer and the setup is more

involved. Setup time for lathes averages 30 minutes, whereas setup for milling machinesaverages 45 minutes. Processing time per piece is 5 minutes on the lathe, compared to 10

minutes on the milling machine. Management is wondering what the effect would be of

producing an entire order of 100 pieces on the lathe or splitting the order in half between

the lathe and milling machine. Further, if the objective is to complete the order as soon

as possible, is there an optimum split between the two types of machines?


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SOLUTION:

If the order were processed on lathe alone, it would take

If the order were equally split between lathe and milling machine, the processing time at

each machine would be:

Assuming that the lathe and milling machine are run simultaneously, the completion

time for the entire order of 100 units is calculated by determining the completion time at

each machine and taking the largest number, in this case, 545 minutes. Thus, if the orderwere equally split between the two machines, it would actually take longer to complete.

Determining the optimalsplit between machines requires algebra. We want the

machines to finish processing at the same time, so we need to equate the processing-time

equations for each machine and solve for the optimum number of units processed. If we

let xrepresent the number of units processed on the lathe, then (100 x) is the number

of units processed on the milling machine.

Thus, the optimal split would process 68 units on the lathe and 32 units on the milling

machine. Completion time for the optimal split is calculated as follows:

By splitting the order, it can be completed in 370 minutes, versus the 530 minutes on the

lathe alone. That is a 39 percent reduction in processing time. Applied to the weekly

demand, the 25 percent overload could be alleviated by splitting orders.

No#$al capacity can ! inc#!a,!' y a''ing !3t#a hou#, to th! /o#0'ay !3t#a 'ay, to th!

/o#0/!!0 o# !3t#a ,hi)t,. T!$po#a#y o+!#loa', a#! u,ually han'l!' /ith o+!#ti$!. 8o#!!3t!n,i+! o+!#loa', $ay #!"ui#! hi#ing a''itional /o#0!#,. o#0 can al,o ! out,ou#c!'.


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I$p#o+ing th! !))ici!ncy o) an op!#ation inc#!a,!, it, capacity. A,,igning th! $o,t

!))ici!nt /o#0!#, to an o+!#loa'!' $achin! i$p#o+ing th! op!#ating p#oc!'u#!, o# tool,

o# '!c#!a,ing th! p!#c!ntag! o) it!$, that n!!' to ! #!/o#0!' o# ,c#app!' inc#!a,!,!))ici!ncy an' allo/, $o#! it!$, to ! p#oc!,,!' in th! ,a$! a$ount o) ti$!. -!cau,!

output inc#!a,!, /ith th! ,a$! a$ount o) inputproductivityinc#!a,!,. Thi, i, !,p!cially

u,!)ul )o# all!+iating ch#onic o+!#loa', at ottl!n!c0 op!#ation, ut it 'o!, ta0! ti$! toput into !))!ct.

I) lat!# ti$! p!#io', a#! un'!# loa'!' it $ay ! po,,il! to pu,h /o#0 ac0 to tho,!

p!#io', ,o that th! /o#0 i, co$pl!t!' ut lat!# than o#iginally ,ch!'ul!'. Th!#! a#! t/o

p#ol!$, /ith thi, app#oach. 7i#,t po,tponing ,o$! o, coul' th#o/ th! !nti#! ,ch!'ul!o)) $!aning cu,to$!#, /ill not #!c!i+! th! goo', /h!n p#o$i,!'. Thi, coul' in+ol+! a

p!nalty )o# lat! '!li+!#y lo,, o) an o#'!# o# lo,, o) a cu,to$!#. *!con' )illing up th!

lat!# ti$! p!#io', $ay p#!clu'! acc!pting n!/ o#'!#, in tho,! p!#io',. It i, no#$al )o#ti$! p!#io', )u#th!# in th! )utu#! to ! un'!# loa'!'. A, th!,! p!#io', '#a/ n!a#!#

cu,to$!# o#'!#, acc!l!#at! an' !gin ta0ing up $o#! o) th! ,y,t!$6, capacity.

I) all th! p#!c!'ing app#oach!, to #!$!'ying o+!#loa', ha+! !!n t#i!' ut an o+!#loa'

,till !3i,t, th! only option i, to #!+i,! th! $a,t!# ,ch!'ul!. That $!an, ,o$! cu,to$!#/ill not #!c!i+! goo', a, p#!+iou,ly p#o$i,!'. Th! plann!# in conunction /ith ,o$!on!

)#o$ $a#0!ting ,houl' '!t!#$in! /hich cu,to$!# ha, th! lo/!,t p#io#ity an' /h!th!# it,

o#'!# ,houl' ! po,tpon!' o# canc!l!'.

Th!#! a#! co,t con,!"u!nc!, a,,ociat!' /ith !ach o) th!,! alt!#nati+!, ut th!#! i,u,ually no att!$pt to '!#i+! an opti$u$ ,olution. 8o#! than li0!ly th! 8RP plann!# /ill

u,! th! option, that p#o'uc! a )!a,il! ,olution "uic0ly. In $any $anu)actu#ing

!n+i#on$!nt, n!/ cu,to$!# o#'!#, a##i+! 'aily an' )!a,il! 8RP plan, can !co$!

in)!a,il! o+!#night.

7igu#! 5.(

7igu#! 5.( ,ho/, on! po,,il! #!$!'y )o# th! o+!#loa', ,ho/n in 7igu#! 5.5. T!n hou#,

o) /o#0 a#! pull!' ah!a' )#o$ p!#io' 2 to p!#io' 1. T!n hou#, o) o+!#ti$! a#! a,,ign!' in


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p!#io' 2. An !nti#! %


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EXAMPLE

8.4

Input/Output

Control

The following information has been compiled in an input/output report for work center

5. Complete the report and interpret the results.

SOLUTION:

The input/output report has planned a level production of 75 units per period for work

center 5. This is to be accomplished by working off the backlog of work and steadily

increasing the input of work.

The report is completed by calculating the deviation of (actual-planned) for both inputs

and outputs and then summing the values in the respective planned, actual, and

deviation rows. The initial backlog (at the beginning of period 1) is 30 units.

Subsequent backlogs are calculated by subtracting each period's actual output from the

sum of its actual input and previous backlog.

The completed input/output report shows that work center 5 did not process all the jobs

that were available during the four periods; therefore, the desired output rate was not

achieved. This can be attributed to a lower-than-expected input of work from feeding

work centers. The I/O reports from those work centers need to be examined to locate

the source of the problem.


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Input&output cont#ol p#o+i'!, th! in)o#$ation n!c!,,a#y to #!gulat! th! )lo/ o) /o#0 to

an' )#o$ a n!t/o#0 o) /o#0 c!nt!#,. Inc#!a,ing th! capacity o) a /o#0 c!nt!# that i,

p#oc!,,ing all th! /o#0 a+ailal! to it /ill not inc#!a,! output. Th! ,ou#c! o) th! p#ol!$n!!', to ! i'!nti)i!'. E3c!,,i+! "u!u!, o# ac#logs,a#! on! in'ication that ottlenec#s

!3i,t. To all!+iat! ottl!n!c0 /o#0 c!nt!#, th! p#ol!$ cau,ing th! ac0log can !

/o#0!' on th! capacity o) th! /o#0 c!nt!# can ! a'u,t!' o# input to th! /o#0 c!nt!#can ! #!'uc!'. Inc#!a,ing th! input to a ottl!n!c0 /o#0 c!nt!# /ill not inc#!a,! th!

c!nt!#6, output. It /ill $!#!ly clog th! ,y,t!$ )u#th!# an' c#!at! long!# "u!u!, o) /o#0

inp#oc!,,.

5.5 Agg#!gat! P#o'uction Planning

Agg#!gat! p#o'uction planning 4APP '!t!#$in!, th! #!,ou#c! capacity a )i#$ /ill n!!'

to $!!t it, '!$an' o+!# an int!#$!'iat! ti$! ho#i9on,i3 to t/!l+! $onth, in th! )utu#!.

ithin thi, ti$! )#a$! it i, u,ually not )!a,il! to inc#!a,! capacity y uil'ing n!/

)aciliti!, o# pu#cha,ing n!/ !"uip$!nt; ho/!+!# it is)!a,il! to hi#! o# lay o)) /o#0!#,

inc#!a,! o# #!'uc! th! /o#0 /!!0 a'' an !3t#a ,hi)t ,ucont#act out /o#0 u,! o+!#ti$!o# uil' up an' '!pl!t! in+!nto#y l!+!l,.

! u,! th! t!#$ aggregate!cau,! th! plan, a#! '!+!lop!' )o# p#o'uct lin!, o# p#o'uct

)a$ili!, #ath!# than in'i+i'ual p#o'uct,. An agg#!gat! p#o'uction plan $ight ,p!ci)yho/ $any icycl!, a#! to ! p#o'uc!' ut /oul' not i'!nti)y th!$ y colo# ,i9! ti#!, o#

typ! o) #a0!,. R!,ou#c! capacity i, al,o !3p#!,,!' in agg#!gat! t!#$, typically a, lao#

o# $achin! hou#,. Lao# hou#, /oul' not ! ,p!ci)i!' y typ! o) lao# no# $achin!hou#, y typ! o) $achin!. An' th!y $ay ! gi+!n only )o# c#itical /o#0 c!nt!#,.

7o# ,!#+ic!, capacity i, o)t!n li$it!' yspace--nu$!# o) ai#lin! ,!at, nu$!# o) hot!l

#oo$, nu$!# o) !', in a co##!ctional )acility. %ime can al,o a))!ct capacity. Th!nu$!# o) cu,to$!#, /ho can ! ,!#+!' lunch in a #!,tau#ant i, li$it!' y th! nu$!# o),!at, a, /!ll a, th! nu$!# o) hou#, lunch i, ,!#+!'. In o+!#c#o/'!' ,chool, lunch

!gin, at 1


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inc#!a,!' #!+!nu! )#o$ th! ,al! an' i) th! ,al! i, con,i,t!nt /ith th! ,t#at!gy o) th! )i#$.

Thu, th! agg#!gat! p#o'uction plan ,houl' not ! '!t!#$in!' y $anu)actu#ing

p!#,onn!l alon!; #ath!# it ,houl' ! ag#!!' upon y top $anag!$!nt )#o$ all th!)unctional a#!a, o) th! )i#$$anu)actu#ing $a#0!ting an' )inanc!. 7u#th!#$o#! it

,houl' #!)l!ct company policy4,uch a, a+oi'ing layo)), li$iting in+!nto#y l!+!l, o#

$aintaining a ,p!ci)i!' cu,to$!# ,!#+ic! l!+!l an' strategic ob)ectives 4,uch a,captu#ing a c!#tain ,ha#! o) th! $a#0!t o# achi!+ing ta#g!t!' l!+!l, o) "uality o# p#o)it.

-!cau,! o) th! +a#iou, )acto#, an' +i!/point, that a#! con,i'!#!' th! p#o'uction plan i,

o)t!n #!)!##!' to a, th! co$pany6,game plan)o# th! co$ing y!a# an' '!+iation, )#o$th! plan a#! ca#!)ully $onito#!'.

Th! ,!con' o!cti+! #!)!#, to '!+!loping an !cono$ic ,t#at!gy )o# $!!ting '!$an'.

D!$an' can ! $!t y ad!usting capacityo# managing demand.

7igu#! 5.H

7igu#! 5.H ,ho/, th! input, to an' output, )#o$ agg#!gat! p#o'uction planning. Th!

input, a#! '!$an' )o#!ca,t, capacity con,t#aint, ,t#at!gic o!cti+!, co$pany polici!,an' )inancial con,t#aint,. Th! output, inclu'! ,i9! o) th! /o#0)o#c! p#o'uction !3p#!,,!'

a, !ith!# unit, o# ,al!, 'olla#, in+!nto#y l!+!l, that ,uppo#t th! p#o'uction plan an' th!

nu$!# o) unit, o# 'olla#, ,ucont#act!' ac0o#'!#!' o# lo,t.

5.( Agg#!gat! Planning )o# *!#+ic!,

Th! agg#!gat! planning p#oc!,, i, 'i))!#!nt )o# ,!#+ic!, in th! )ollo/ing /ay,?

1. &ost services cannot e inventoried.It i, i$po,,il! to ,to#! an ai#lin! ,!at hot!l

#oo$ o# hai# appoint$!nt )o# u,! lat!# /h!n '!$an' $ay ! high!#. h!n th! goo',

that acco$pany a ,!#+ic! can ! in+!nto#i!' th!y typically ha+! a +!#y ,ho#t li)!.

N!/,pap!#, a#! goo' )o# only a 'ay; )lo/!#, at $o,t a /!!0; an' coo0!'ha$u#g!#, only t!n $inut!,.

2. 'emand for services is difficult to predict.D!$an' +a#iation, occu# )#!"u!ntly an'

a#! o)t!n ,!+!#!. Th! !3pon!ntial 'i,t#iution i, co$$only u,!' to ,i$ulat! th!!##atic '!$an' )o# ,!#+ic!,high'!$an' p!a0, o+!# ,ho#t p!#io', o) ti$! /ith long


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p!#io', o) lo/ '!$an' in !t/!!n. Customer service levels !,tali,h!' y

$anag!$!nt !3p#!,, th! p!#c!ntag! o) '!$an' that $u,t ! $!t an' ,o$!ti$!, ho/

"uic0ly '!$an' $u,t ! $!t. Thi, i, an i$po#tant input to agg#!gat! planning )o#,!#+ic!,.

. Capacity is also difficult to predict. Th! +a#i!ty o) ,!#+ic!, o))!#!' an' th!

in'i+i'uali9!' natu#! o) ,!#+ic!, $a0! capacity 'i))icult to p#!'ict. Th! capacity o)a an0 t!ll!# '!p!n', on th! nu$!# an' typ! o) t#an,action, #!"u!,t!' y th!

cu,to$!#. Unit, o) capacity can al,o +a#y. *houl' a ho,pital '!)in! capacity in t!#$,

o) nu$!# o) !', nu$!# o) pati!nt, ,i9! o) th! nu#,ing o# $!'ical ,ta)) o# nu$!#o) pati!nt hou#,

%. Service capacity must e provided at the appropriate place and time. 8any ,!#+ic!,

ha+! #anch!, o# outl!t, /i'!ly 'i,p!#,!' o+!# a g!og#aphic #!gion. D!t!#$ining th!

#ang! o) ,!#+ic!, an' ,ta)) l!+!l, at !ach location i, pa#t o) agg#!gat! planning.5. (aor is usually the most constraining resource for services.Thi, i, an a'+antag! in

agg#!gat! planning !cau,! lao# i, +!#y )l!3il!. Ja#iation, in '!$an' can !

han'l!' y hi#ing t!$po#a#y /o#0!#, u,ing pa#tti$! /o#0!#, o# u,ing o+!#ti$!.

*u$$!# #!c#!ation p#og#a$, an' th!$! pa#0, hi#! t!!nag!#, out o) ,chool )o# th!,u$$!#. 7!'!#al E3p#!,, ,ta)), it, p!a0 hou#, o) $i'night to 2 a.$. /ith a#!a coll!g!

,tu'!nt,. 8cDonal'6, al8a#t an' oth!# #!tail !,tali,h$!nt, /oo ,!nio# citi9!n,a, #!lial! pa#tti$! /o#0!#,.

o#0!#, can al,o ! c#o,,t#ain!' to p!#)o#$ a +a#i!ty o) o, an' can ! call!' upon a,

n!!'!'. A co$$on !3a$pl! i, th! ,al!, cl!#0 /ho al,o ,toc0, in+!nto#y. L!,, co$$on

a#! th! polic! o))ic!#, in a ,uu# /ho a#! c#o,,t#ain!' a, )i#!)ight!#, an' pa#a$!'ic,.

Th!#! a#! ,!+!#al ,!#+ic!, that ha+! uni"u! agg#!gat! planning p#ol!$,. Docto#,la/y!#, an' oth!# p#o)!,,ional, ha+! !$!#g!ncy o# p#io#ity call, )o# th!i# ,!#+ic! that

$u,t ! $!,h!' /ith #!gula# appoint$!nt,. :ot!l, an' ai#lin!, #outin!ly overoo#th!i#capacity in anticipation o) cu,to$!#, /ho 'o not ,ho/ up. Th! p#icing ,t#uctu#! )o#'i))!#!nt cla,,!, o) cu,to$!#, a'', an !3t#a )acto# to th! agg#!gat! planning '!ci,ion.

P#icing ,t#uctu#!, )o# ai#lin!, a#! !,p!cially co$pl!3. A, pa#t o) th! agg#!gat! planning

p#oc!,, plann!#, $u,t '!t!#$in! th! p!#c!ntag! o) ,!at, o# #oo$, to ! allocat!' to'i))!#!nt )a#! cla,,!, in o#'!# to $a3i$i9! p#o)it o# yi!l'. Thi, p#oc!,, i, call!' yi!l'

$anag!$!nt.

chapter 5 capacity planning and aggregate production planning

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