Semester-V, BBA, 2010-13

Production Planning & Control

Prof. Biranchi Prasad Panda
KSOM, KIIT University

Contents
What is PPC ? Need of PPC Objectives of PPC Phases of PPC PPC System Aggregate Planning MRP, Capacity Planning MPS Scheduling Routing

What is PPC ?
Directing & Coordinating the firms resources towards attaining the prefixed goals.

PPC: Production Planning & Control Planning is thinking in advance. Production is the execution of plan. Production Preplanning is about gathering the prerequisite information before thinking of the production market demand, plant capacitylocation-layout etc. Production Planning is thinking in advance to furnish all production functions. Production Control is getting production in the desired way.

10 Functions of PPC Cycle

Sales forecasting
Product design & development Factory layout Equipment policy Pre-planning production
1 Materials 4 Routing

7
Dispatching

Planning Resources

2 Methods

5 Estimating

8
Inspecting

3 Other Facilities

6 Scheduling

9
Expediting

Succession Feedback Preplanning Planning

10 Evaluating

Control

Shop-floor Production Planning and Control (PPC)

Organizing Staffing Routing Scheduling Estimating Dispatching (directing) Controlling (inspection, expediting, evaluating for corrective actions if any), and feedback etc.

Overall, PPC is concerned with the planning and controlling of all the production resources to be rightly available. No shortage/surplus, over/under-utilization of capacity, production well within the specifications, ensured production progress (as per Aggregate plan and MPS).

PPC is all about production planning & production control.

Production Planning
Planning for PRODUCT Planning for PLANT Planning for PROCESS Planning for PROGRAMS Planning for PEOPLE Production Planning
Strategic/ tactical/ operational (Strategies/ tactics/ operations)

Production Planning
Top level decisions having long-term implications, high risk and uncertainty

Strategic level

Risk and Uncertainties

Tactical (Middle) level

Middle level decisions having 1-2 years medium term implications

Operational decision (bottom level)

Routine decisions, no or very little Uncertainty or risk

(Figure: Decisions at different levels of Mgt.)

Operations planning and other Sub-functional areas

HR (Manpower) Finance (Money) Marketing Materials Mgt. Process Engg./ Mgt. Maintenance Mgt. Other areas

Operations planning and other Sub-functional areas

HR (Manpower)
Manpower planning Skilllevel required Operation knowledge Training Job enlargement and enrichment Motivation for productive philosophies Productivity-linked incentives etc.

Operations planning and other Sub-functional areas

Finance (Money)
Budgeting for materials Equipments Allocation of scheduled expenditure of the fund Costing of product/process/stores/transportation

Operations planning and other Sub-functional areas

Marketing
Quantity ordered Quality of Product & service Time of delivery
Speed to manufacture Speed to market Speed to distribute

Degree of customization etc.

Operations planning and other Sub-functional areas

Materials
Selection of materials Selection of suppliers Identification of right sources Procuring right
Quality Quantity

Purchasing Inventory (storing) Transporting (handling) both outside and inside

Operations planning and other Sub-functional areas

Process
Flow design
Movement of man Movement of machines/equipments Movement of material
Flow pattern/layout MHS

Assembly line
Inter departmental/divisional operations

Job design/ workstation design ergonomics etc Type of production Process monitoring-inspection-control Line balancing

Operations planning and other Sub-functional areas

Maintenance Types
Break-down (repairing as and when a failure takes place) Preventive (periodic/ sensed/ experienced to maintain in advance) Productive (minor-major maintenance plan, involving people at work)

Failure analysis (of maintenance record and failed parts/components/plants).

*** Managing all resources: MRP, ERP etc.

Business Plan/ Sales Program

Aggregate Plan

Master Production Schedule (MPS)

Monitoring Progress Labor Control

Production/ Operation Plan

Dispatch

Material Control

Manufacture

Customers

(Figure: Overall Production Control Function)

Need of PPC
To gain competitiveness in Indian manufacturing For effective utilization of firms resources To achieve production objectives in terms of Quality, Quantity, Cost & Time. For uninterrupted production To meet customers demand schedule

To provide competitive quality of products to the customers

To achieve a better production control
Material availability Maintenance Managing change in demand Managing workers Coordination & Communication Monitoring progress

Objectives of PPC
To do efficient planning for production

To organize production facilities

To achieve objective in terms of Quantity, Quality, Time and Cost To do optimal scheduling of resources To achieve uninterrupted/balanced production flow through right coordination and communication To confirm and perform to the delivery orders

Phases of PPC
Prior Planning
Planning

Product Development Product Design Forecasting Aggregate Planning Master Scheduling MRP Process Planning Routing Materials Planning Tools Planning Loading Scheduling

Active Planning

Action

Dispatching

Progress Reporting
Control Corrective Action

Data Processing

Expediting Replanning

PPC System
PPC system factors into: Quantity, Quality, Cost and Time. Components of PPC System
The business plan (6-18 months, volume of prodn./sales, coordinated plan) Aggregate production (output) plan (6-18 months, policy for inventory/empl.) Aggregate capacity plan (feasibility, utilization, short/long term, capacity limit) Master production scheduling (w.r.t. Aggregate Plan, weekly/monthly/ quarterly, links the market with production to deliver realistically) Resource requirement planning (rough-cut-plan, man, money, management) Materials requirement planning (MRP) Capacity requirement planning (CRP iteratively works with MRP and MPS) Shop floor control (timing/scheduling, job assignment, monitoring work flow) Loading (shop/machine loading - order for a work center in a planning period) Sequencing (priorities, dependencies, managing waiting lines) Detailed scheduling (calendar of start-finish-shipment) Expediting (tracking the production progress w.r.t. plan/schedule, maintenance) Input / Output control (comparing utilization - actual vs. plan, reports)

10 system parameters of PPC

1) Materials - Raw, WIP, FG, spares, consumable, bought-out components 2) Machines/Equipments available facilities, downtime, replacement policy 3) Methods alternatives ad their detail process plans 4) Routing (Process Planning) short-term/long-term, path, WBS, set-ups 5) Estimating operation times, setup time, cycle time, budget, manpower 6) Scheduling (Loading) 7) Dispatching (Releasing Orders) job order, store order, tool order, time ticket, inspection order, move order (to MHS) etc. 8) Expediting (Follow-up) 9) Inspection (and Quality Control) 10) Evaluation

Controlling
Progress reporting - materials rejection, process variation, equipment failure, operator efficiency/absenteeism etc. for performance analysis Corrective actions WIP in schedule, capacity, make/buy, expediting etc. System parameters of various levels are connected, supported in a definite way Plans and controls are hierarchical, Plans and controls are broader at top to detailed at bottom level Plans and controls act like two sub-systems Business plan to achieve the goals, guides all Aggregate production (output) plan identifies the overall level of outputs for different divisions existing capacity aligned with the companys policy for inventories, employment, contracts etc. Master Production Schedule (MPS) - an important link between marketing and production, matches the sales orders to production and delivery schedules Resource planning/leveling to check the department loads with MPS. MRP, CRP (Capacity Requirement Planning) for each work center for better Shop Floor Control (i.e. loading, sequencing, scheduling) Expediting/tracking the progress with the plans (or any last-minute change) Feedback control based on deviations, reports, adjustments etc.

Aggregate Planning
It is an intermediate-term plan (3 months to 1.5 yr, policy driven for inventorylevel and employment, can be in terms of output/capacity Aggregate capacity plan is based on feasibility, utilization factor, short/long term nature, capacity limits Aggregate planning guidelines Determine the policy for controllable variables Use of an accurate forecasting Use of accurate capacity planning Maintain workforce, inventories, flexibility, control on demand, regular evaluation Aggregate planning strategies Looks for the best combination to minimize the cost Vary the size of workforce (hire/fire) Vary the working hours (idle time in slack period/overtime in peak period) Vary inventory levels (above or below EOQ) To Make or Buy/Outsource/Sub-contract for unusual demand

Aggregate Planning Process

Determine requirements for planning horizon Identify alternatives, constraints, and costs Prepare prospective plan for planning horizon

No

Is the plan acceptable?

Move ahead to next planning session

Yes Implement and update the plan

MPS (Master Production Schedule)

MPS (normally in weeks) follows Aggregate planning and forecasts to set priorities Depends on type of production, volume, component lead-time (few weeks to an year or more), market orders Helps in preparing plans for materials (MRP), manpower (HRP), plant equipment/capacity (CRP), production (PPC) etc.

Summarily, the major functions are:

Translating the aggregate plans into specific end items Evaluating alternative schedules simultaneously assigning the priorities Generating materials requirement plan To facilitate information processing regarding plant load to coordinate with marketing, finance and HR functions Effective utilization of capacity by indicating engagements and requirements

Aggregate Plan & MPS

Market Environment Resource base and Technology
Long Range (1-15 yrs) Major capacity additions, locations, product, and process decisions (by top-level mgt.) Medium Range (3-18 months) Workforce, overtime plans, inventory and subcontracting levels, minor capacity changes (by mid-level management)

Forecast (and Orders)

Aggregate Production Plan

Capacity
(facility, labor, materials, capital

MPS
Short Range (0-4 months) Detailed scheduling, routing, alternate work centers, over time (by lower-level mgt)

Materials Requirements

Capacity Requirements

MRP
Materials Requirement Planning (MRP) is a technique for determining the quantity and timing for acquisition of dependent demand items to satisfy master production schedule.
Objectives: Inventory (materials/components) reduction Reduction in Mfg./Delivery lead-time Realistic delivery commitments Increased efficiency (uninterrupted flow of materials in production line)

Inputs to the MRP System

MPS, Inventory status report, Information, BOM

Outputs of the MRP System

Purchase Order planning, releasing and rescheduling

Capacity Planning
Capacity is the rate of productive capability of a facility. Capacity is expressed as volume of output per period of time. A Production Manager - Why to do capacity planning ?
Capacity to produce deliverables as per market demand Capacity affects the cost of production Capacity affects the scheduling system Capacity requires investment

Relation between Capacity and Output:

Reduced by long-range effects, product mix, long-range market condition, rigid quality norms, imbalance in equipment or labor Reduced by shortrange effects, actual demand, inefficiency of workers/ machines, scheduling, planning and control

Design Capacity

System Capacity

Actual Output

Capacity Planning
Effective planning of utilizing the plant capacity to convert the inputs to outputs. Strategic planning for productive use of facilities Capacity planning is done through:
Long-term strategies: multiple products, phasing in capacity, phasing out capacity Short-term strategies: Inventories, backlog, hiring/firing, training, subcontracting, process design

System efficiency = Actual output / System capacity System capacity can be:
Licensed capacity Installed capacity Rated capacity

Routing
Lays the detailed process plan of execution
Indicates the loading and sequencing of the shop floor
Loading pattern of people, work centers, departments, production lines, balancing of lines for a planning period. Sequencing determines priority, dependency, size of waiting line

Helps in developing detailed schedules for detailed phases

Techniques used in routing
Route Card carries the information /order to initiate and accomplish Work Sheet carries the specific information about the work done on a job Route Sheet indicates the sequence/ flow-direction (for operations/ w-centers) Move Order given to do operation of first-/re- work

(Detailed) Scheduling
Determines the calendar of start-progress-end times
Job orders Employees Materials (input) Job completion (output) Maintenance Delivery

Principles of Scheduling
Optimum task size Optimum production plan Optimum sequence

Inputs standards, load limits, capacity details, expected degree of flexibility,

overlapping/simultaneous operations, individual job plans.

Strategies detailed scheduling, cumulative scheduling, priority rule

Scheduling Methodology
Depends on: Type of industry, product, level of complexity Types:
Charts and Boards
Load chart (Gantt chart) Progress chart

Priority decision rules Mathematical programming Forward (start from RM/today), Backward (start from FG/due date)

Progress chart:
Get Raw Materials Operation 1 Operation 2 Final Assembly

1
Today

..

..

12
Due date

A Gantt chart is a horizontal bar chart developed as a production control tool in 1917 by Henry L. Gantt, an American engineer and social scientist. Frequently used in project management, a Gantt chart provides a graphical illustration of a schedule that helps to plan, coordinate, and track specific tasks in a project. Gantt charts, in simple versions create a graph or in complex automated versions can show a software application. . A Gantt chart is constructed with a horizontal axis representing the total time span of the project, broken down into increments (for example, days, weeks, or months) and a vertical axis representing the tasks. .

Priority decision rules

FCFS: First come, first served EDO: Earliest due date

LS: Least slack SPT: Shortest processing time LPT: Longest processing time PCO: Preferred customer order RS: Random selection

Mathematical programming
LPP, PERT/CPM etc. Forward Scheduling
Get Raw Materials Operation 1 Operation 2 Final Assembly

Due date

1
Today

..

6
Operation 1

..

12
Final Assembly

Get Raw Materials

Operation 2

Backward Scheduling

 Dispatching (releasing the order)

To start the production as per the route plan and schedule

Inspecting (accept/ reject)

To inspect the materials, process, and final products

Expediting (follow up)

Tracking the progress in production, movement through different departments, in scheduled times Accommodating last-minute changes Locating deviations of plans and schedules

Evaluating (measuring performance)

To measure performance of production activities people, process, machines, etc.

Aggregate Planning Strategies

METHOD
Hire additional personnel as demand increases. Lay off personnel as demand decreases.

COST
Employment/ advertising/ recruitment cost. Additional cost if a shift is added. Cost of compensation

Meeting demand fluctuations by changing size of work-force for desired prodn. level

Meeting demand fluctuations by changing inventory level for a desired prodn. Level
Produce early and hold until product is demanded.
Offer to deliver products later when capacity is free Spl. Mktg. efforts to shift demand to slack period.

Costs of holding inventory.

Delay in receipt of revenue lost sales and customer. Cost of advertising discounts/ promotional progs.

Meeting demand fluctuations by managing working capital for desired prodn. Level
Work addl. hrs. without changing work-force. Increase the size of work-force for high production so that overtime is avoided. Subcontract work to other firms. Revise make or buy decision to purchase items when capacity is fully loaded. Overtime premium wages. Excess wages during slack period Continue company over leads plus Subcontractors profit Waste of company skills, tooling and equipment unutilized in slack period.

ABC company produces toilet soaps at their works in Bbay. Aggregate planning measures used by ABC is tonnes of soap which includes making and packing of the soap. The planning is done for a time horizon of one year and for 4 quarters.
Quarter Demand
(in tonnes)

Example - 1
II 60

I 40

III 50

IV 45

Solution
The regular time production with a combination of remaining options (one or more) can be used to make the production plan. There is a limitation on the regular time production. It cannot be more than 35 tonnes/quarter but the demand exceeds this in each of the four quarters. So along with Regular time, other options are to be used and initial inventory is zero.

Production planning options:

Related costs:

Regular time production .. 10,000/- per tonne Overtime production ... 10,000 + (0.40) 10,000 = Rs.14,000/tonne Subcontracting 10,000 + (0.50) 10,000 = Rs.15,000/tonne Carrying inventory with OT ... 14,000 + (5,000/4) = Rs.15,250/tonnes

Max. production is preferred with the regular time option The next options is OT. The next option of subcontracting has no production limit.

Hence no scope for the option of carrying inventory with overtime.

In any quarter: Max. production in regular time = 35 tonnes Max. production in overtime = (0.20) (35) (1.25) = 8.750 tonnes Max. production in combination of regular time & overtime = 35 + 8.750 = 43.750 tonnes Any demand exceeding this volume can be met by subcontracting. Quarter Production in Production Regular Time in Overtime I II III 35 35 35 5.00 8.75 8.75 Production in Subcontracting --16.25 6.25 Total Production 40 60 50 Total Cost of Production
(35 x 10,000) + (5 x 14,000)

4,20,000
(35 x 10,000) + (8.75 x 14,000) + (16.25 x 15,000)

7,16,250
(35 x 10,000) + (8.75 x 14,000) + (6..25 x 15,000)

5,66,250

IV

35

8.75

1.25

45

(35 x 10,000) + (8.75 x 14,000)

+ (1..25 x 15,000)

4,91,250 The above composition of production volume is found to be an efficient aggregate planning. Hence the total cost of production = Rs. 21, 93, 750/-

Example 2
The forecasted demand for a product for 6 months cycle is shown. Each unit requires 10 man hours and labor cost is Rs.6/hr regular time and Rs.9/hr OT. The total cost per unit is estimated to be Rs.200 and can be subcontracted at the cost of Rs.208/unit. Currently there are 20 workers employed and hiring & training costs for additional workers are Rs.300/person whereas layoff costs/person is Rs.400/-. Company has a policy of retaining a safety stock of 20% of the monthly forecast and each months safety stock becomes the beginning inventory for the next month. There are currently 50 units in stock carried at a cost of Rs.2/month. Stock out cost is Rs. 20/unit /month.

Jan Forecast Demand Works days Worker hr at 8/day

300 22 176

Feb
500 19 152

Mar
400 21 168

Apr
100 21 168

May
200 22 176

Jun
300 20 160

Three aggregate plans are proposed. Vary the work-force size to accommodate demand. Maintain a constant work force of 20 and use overtime and idle time to meet demand Maintain constant work force of 20 and build inventory or incur stockout cost. The firm must begin January with the 50 unit inventory on hand. Compare the costs of three plans

Solution
Determine what will be the production requirements as adjusted to include a safety stock of 20% of the next months forecast. Starting with January inventory of 50 units, each subsequent months inventory reflects the difference between the forecasted demand and the production requirements of the previous month.
Month
January February March April May June

Forecasted Demand 300 500 400 100 200 300

Cumulative Demand 300 800 1200 1300 1500 1800

Safety Stock
(20% of Forecast)

Beginning Inventory 50 60 100 80 20 40

Production Requirement
(FC + SS beginning inventory)

60 100 80 20 40 60

300 + 60 - 50 = 310 500 + 100 60 = 540 400 + 80 100 = 380 100 + 20 80 = 40 200 + 40 20 = 220 300 + 60 - 40 = 320

Plan 1
(Variation in Work-force)
Sr. No. 1 2 Particulars Reqd. Prodn. Reqd. Prodn hrs (R1x10) Jan 310 3100 Feb 540 5400 Mar 380 3800 Apr 40 400 May 220 2200 Jun 320 3200 Total

3
4 5 6 7 8

Avaliable Man hrs/ 176 worker @ 8/day

Workers Reqd. (R2 3) Workers Hired Hiring Cost (R5 x 300) Workers Laid off Layoff Cost (R7x 400) 18 _ _ 2 800

152
36 18 5400 _ _

168
23 _ _ 13 5200

168
3 _ _ 20 8000

176
13 10 3000 _ _

160
20 7 2100 _ _ 14000 10500

Rs.

24500

Plan 2
(Use of Overtime and Idle-time)
Sr. No. 1 2 3 4 5 6 7 8 Particulars Reqd. Prodn. Reqd. Prodn. hrs (R1x10) Available Man hrs @ 8/day Total no. of hrs available (R3 x 20) OT hrs Required (R2 - R4) OT Premium (R5 x 3) Idle hrs (R4 - R2) Idle Time Cost (R7x 6) Jan 310 3100 176 3520 _ _ 420 3520 Feb 540 5400 152 3040 2360 7080 _ _ Mar 380 3800 168 3360 440 1320 _ _ Apr 40 400 168 3360 _ _ 2960 May 220 2200 176 3520 _ _ 1320 Jun 320 3200 160 3200 0 0 _ _ 8400 _ 28200 Total

17760 7920

Rs.

36600

Plan 3
(Use of Inventory & Stock out basis on limited work-force of 20)
Sr. No. Particulars 1 2 3 4 5 6 7 Reqd. Prodn. Reqd. Prodn hrs (R1 x 10) Total no. of hrs available (Plan-2:R3 x 20) Units Produced (R3 10) Cumulative Production Shortage (2 x 5) Shortage Cost (6 x 20) Jan 310 3100 3520 352 352 _ _ Feb 540 5400 3040 304 656 194 3880 Mar 380 3800 3360 336 992 238 4760 Apr 40 400 3360 336 1328 _ _ May 220 2200 3520 352 1680 _ _ Jun 320 3200 3200 320 2000 _ _ _ 8640 Total

8
9

Surplus (5 - 2)
Inventory Cost (8 x 2)

42
84

_
_

_
_

58
116

190
380

190
380

_
960

Rs.

9600

Finally, Plan-3 is preferred, having the lowest cost of production.

MPS
Aggregate Plan Month No. of Motors J
30

F
45

M
50

A
30

M
60

J
30

J
30

A
45

S
30

Master Production Scheduling (MPS) Quarters Month AC Motors (5 HP) AC Motors (10 HP) DC Motor (20 HP) FHP Motors (1/2 HP) J
5 10 5 10

Q1 F
5 7 10 23

Q2 M
10 10 15 15

Q3 J
6 4 10 10

Q4

A
5 5 10 10

M
15 10 15 20

J
10 5 5 10

A
10 35

S
10 20 -

N D

W1 W2 W3 W4

D1, D2 ..D7

LPP approach in Aggregate Planning

Transportation method is one of the LPP approach where transport facilities are optimally allocated to minimize the traverse thereby maximizing the profit. Similar to this, LPP is applied in Aggregate planning
To optimize the volume of production. To optimize the allocation of capacity. To minimize the cost of production.

To maximize the utilization of capacity.

To develop, compare and evaluate alternative plans of production. Overall maximizing the profit.

Example
The supply, demand, cost and inventory data for a company which has a constant work force is given. The company wants to meet all the demand (with no back orders). Allocate the production capacity to satisfy demand at minimum cost.

Supply Capacity (units)

Period
1 2 3 4

Demand Forecast
Subcontract
1000 1000 1000 1000

RT
60 50 60 65

OT
18 15 18 20

Period
1

Demand
100

2
3 4

50
70 80

Initial inventory = 20 Final inventory = 25

Regular time cost/ unit = Rs. 100/Labor = 50% of cost OT cost/unit = Rs. 125/Subcontract cost/unit = Rs. 130/Carrying cost/unit/period = Rs. 2/Cost of not using a unit

Solution
Initial Inventory
Initial inventory of 20 at period-1 at no additional cost Carrying cost is Rs.2/unit/period, if retained for next period It costs Rs.8/- if remains unused

Regular Time (RT) Production

Cost of production in the current month is Rs.100/unit Carrying cost of Rs.2/unit/month, if retained Unused regular time costs 50% i.e.Rs.50/unit.

Production on Subcontract
Cost is Rs.130/unit No cost for unused capacity

Final Inventory
Final inventory requirement is 25 at end of period-4 Added to the demand of 80 units to obtain a total of 105.

Over Time (OT) Production

Cost/unit is Rs.125/unit in the current month Carrying cost of Rs.2/unit/month Unused OT has zero cost

Allocation Matrix (by Least Cost Method)

Supply of units from Period 1 Period 1 Initial 20 Inventory: RT OT SC 2 RT OT SC 3 RT OT 60 18 02 0 100 125 130 50 Demanded Units for Period 2 2 102 127 ----100 125 130 60 10 Period 3 4 104 129 ----102 130 100 125 -8 65 20 100 50 -127 12 131 ----- 998 104 129 102 127 3 Period 4 6 8 0 0 0 0 0 104 0 Unused Capacity Total Available Capacity 20 60 18 1000 50 15 1000 60 18 Optimum Allocation of Capacity 20 60 18 2 50 12 -----60 18

130 1000 130

SC
4 RT OT SC Forecasted Demand

130

130 1000
100 125 1000

0
50 0 0

1000
65 20 1000 4326

-----65 20 -----325

70 80 + 25 = 105

4001

Example
A company manufactures seasonal products. The information regarding the seasonal demand pattern, available production capacities during regular time, overtime and other details are as follows: Available Production Capacity (units) Period
1 2 3 4

Demand Forecast Period

1 2 3 4

RT
900 1000 1100 700

OT
350 350 350 350

SC
600 600 600 600

Demand
700 1000 2000 1200

Formulate the problem as a transportation model to determine the optimum production levels and means of production for next four quarters. Initial inventory = 200 units Final inventory = 25 units Regular time prodn. cost/ unit = Rs.125/Over time prodn. cost/unit = Rs.150/Subcontracting cost/unit = Rs.175/Inventory Carrying cost/unit/period = Rs.25/-

Solution
The problem is represented as a transportation model (Matrix form)

Initial Inventory
Initial inventory of 200 at period-1 at no additional cost Carrying cost is Rs.25/unit/period, if retained for next period It costs Rs.50/- if remains unused

Regular Time (RT) Production

Cost of production in the current month is Rs.125/unit Carrying cost of Rs.25/unit/month, if retained

Production on Subcontract
Cost is Rs.175/unit No cost for unused capacity

Over Time (OT) Production

Cost/unit is Rs.150/unit in the current month Carrying cost of Rs.25/unit/month Unused OT has zero cost

Final Inventory
Final inventory requirement is 150 at end of period-4 Added to the demand of 1200 units to obtain a total of 1350.

Allocation Matrix (by Least Cost Method)

Supply of units from Period 1 Period 1 Initial Inventory RT OT SC 2 RT OT SC 3 RT OT 0 700 125 150 175 Demanded Units for Period 2 200 25 Period 3 50 175 200 175 400 150 175 150 175 1100 125 350 150 Period 4 75 200 225 175 200 150 175 350 300 175 150 350 175 600 Unused Total Capacity Available Capacity 0 0 0 0 0 0 0 0 0 200 900 350 600 50 350 600 1100 350 Optimum Allocation of Capacity 200 900 ----1000 --450 1100 350

200 150 175 175 600 125 150 175

SC
4 RT OT SC Forecasted Demand 700 1000

175

175 600
700 125 350 150 175 600

0
0 0 0 2650

600
700 350 600 7700

--700 350 --5050

2000

1350

Merit & Demerit of Aggregate Planning

Method Merit Demerit

Trial and Error

Simple to understand and apply

Approximates with an aggregate product. Does not guarantee optimum solution. Relies on judgment to determine the measurable master schedule i.e. does not guarantee optimal solution. Approximates with an aggregate produced actual problem may not fit the linear model. Actual problem does not fit in the quadratic model. Search may end with selecting local minimum instead of global minimum.

Rough cut capacity planning

Can deal with variety of products and can use weekly time blocks Optimal solution to the stated problem is found Optimal solution can be found

Linear Programming

Linear decision Rule (LDR)

Computer search techniques

Does not contain mathematical form of problems