Long-range planning: Decisions involving top management (e.g. CEO and
VP of Manufacturing etc.) for one or more years into the future. Examples:
- Corporate strategic planning
- Business forecasting
- Product and market planning
- Financial and resource planning
Medium-range planning: Decisions involving middle level management (e.g.
plant managers) for 3 to 18 months into the future. Examples:
- Aggregate production planning (AP)
- Item forecasting
- Master production schedule (MPS)
- Rough-cut capacity planning
Short-range planning: Decisions involving lower level management (e.g.
shop superintendents) for days or weeks into the future. Examples:
- Material requirement planning (MRP)
- Capacity requirement planning (CRP)
- Final assembly schedule (FAS)
- Input/Output planning and control
- Production activity control
- Purchase planning and control
Aggregate Production Planning (AP)
Objective: To specify the optimal combination of production rate, work-force
level, and inventory on hand to minimize the total production-related cost over the planning horizon.
- AP requires a standard unit to measure output: e.g. tons, labor hours,
or sales dollars etc.
- AP is demand driven and the accuracy of demand forecast is very important.
- The complexity of the real world would often makes AP more of an art
than a science.
Basic AP strategies:
- Chase: Matching the capacity with the demand forecast.
- Level: Maintain a stable production capacity and use inventory to buffer
the fluctuation of demand.
- Counter-seasonal product mixing.
- Mixed: A combination of strategies.
Some AP solution techniques:
- Intuitive approach (including graphical method or computer spreadsheet).
- Mathematical models: LP or transportation method (if the cost structure
- Computer simulation.
- Heuristic solutions: linear decision rules and management coefficients
Different Approaches to Production Planning and Control
(1) Pond draining:
- Buffer stocks are kept between each stage of production process.
- Minimum amount of communication is required to coordinate work stations's
- Requirement: Sound inventory policy.
(2) Push system:
- Emphasis is on using information about customers, production and suppliers
to control material flows.
- The flow of material (timing, quantity etc) are planned and controlled
by a series of schedules.
- Requirement: Accuracy of information and schedules.
(3) Pull system:
- Emphasis is on reducing inventory level at every stage of production.
- The last (down-stream) production stage activates the production.
- Implemented with the principle of JIT.
- Requirement: Stable and level production schedule and small batch production.
(4) Systems focusing on bottleneck operations:
- Optimized Production Technology (OPT).
- Others such as Q Control.
JIT as a philosophy of operations management: It encompasses all aspects
of a firm's productive activities -- human resources, vendor relations, technology and material management, etc.
JIT as a production-control method: It includes JIT purchasing, delivery,
and inventory management, etc.
The benefits of JIT (e.g., as evidenced in Japanese automobile industry)
- Better quality products.
- Higher inventory turnover.
- Higher productivity.
- Lower production costs.
Three fundamental concepts to JIT production system:
- Elimination of waste: Production of only the minimum necessary units
in the smallest possible quantities (lot sizes) at the latest possible time.
- Employee Participation.
- Integrated systems.
JIT Concept of Elimination of Waste
(Note: Due to the differences in cultural, economic, and logistic factors,
not all JIT practices are applicable to U.S. manufacturers.)
(1) Focused factory [plant size]: Small, specialized plants that make
parts for a single major manufacturer. Keiretsu (large holding companies): maintain close linkage but independent operations.
(2) Group technology [facility layout]: Process all parts with similar
operations in the same manufacturing cell that eliminate waiting and moving times.
(3) Quality at the source [quality control]: "Quality is built-in, not
- Workers are responsible for their own works.
- An operator can stop an assembly line if something goes wrong (Jidoka).
- Automated inspection devices are installed wherever appropriate.
(4) Just-in-time production [inventory management]: Maintain minimum
inventory level and small lot sizes and make no allowance for contingency. Inventory is the "root of all evils."
(5) Uniform plant loading [level production schedule]:
- Set up a firm production plan with the output rate is frozen for the
- Produce the same mix everyday even if the quantities of some items are
(6) Kanban system [production control tool]:
- A manual, pull system (vs. computerized, push MRP system).
- The initial pull is exerted by the final assembly schedule (FAS).
- The concept can be extended to vendor: JIT purchasing.
(7) Minimized setup times [work method improvement]:
- Separate setup into internal and external setup procedures.
- Apply the time and motion studies and practice.
||Lean Flexible System (Just-in-Time System)
||Buffered/Rigid System (Just-in-Case System)|
||Customers' orders pull the products through the factory
||The system pushes the products through the factory|
|Production Lot Size
||Small batches are made with reduced setup time
||Large batches are made due to high setup time|
||Concurrent engineering design is applied
||Process is designed after product has been designed|
||High turnover with minimum inventory level
||Low turnover due to high inventory level|
||Fewer number and they are helped, informed, and kept close
||Supplier's are kept at arms length|
||Multi-skilled, flexible and work well in teams
||Specialized and with strict work rules|
||Empowerment of workers enables quick response
||Centralized at management level|
||Q.C. Inspector's Job|
||Emphasis is on small but continuous improvements
||"If it ain't broke, don't fix it" attitude|