Part 2: Management of Production System

Production Planning Intro

Planning and control of production systems is needed to plan and control the use of resources to use them efficiently and meet customer requirements.

Production Management has to:

• Identify customer requirements (or estimate them)
• Aggregate requirements into a production plan
• Execute the plan
• Monitor the plan's effectiveness

Production Management is related to these activities:

• Creation and adjustment of production capacity
• Set up of the production system for new productions
• Generation and management of production plans

Production Planning and Control PP&C is based on the orders portfolio and sales forecasts and it deals with:

1. Generation of production orders
2. Their assignment to production units (in which shop production)
3. Plan the required components (old, external) and new materials
4. Assign jobs to workcenters
5. Monitoring and control of production plan progress

So, production planning answers to:

• WHAT - which product
• WHEN - time horizon
• HOW - materials
• WHERE - which workcenter
• HOW MUCH - quantity, lot size

The problem is highly complex, due to the many variables to take into account, many constraints, internal and external uncertainties and conflicting objectives.

In fact, we would like to satisfy each single request and so have product availability, but also a regularity in utilization of machines, labour force minimization of shocks and a long term view.

These things are difficult to be obtained all together.

The Hierarchical Approach helps to cope with PP complexity.

Hierarchical Approach

The higher the detail, the shorter the time horizon.

• Strategic
  • 2-5 years horizon
  • Production level
  • Planned as whole (long term production)
• Medium Term
  • 1 year horizon
  • Fulfill forecasted demand
  • Product families are planned
• Operative
  • 1 week/day horizon
  • Fulfill each production order
  • Each part is planned: when, where, how - high level of detail

After production is done:

Production Budgeting

Aggregate Planning

Master Production Schedule (MPS) plans 1 year, month by month.

Material Planning

All the items required to produce a product are planned (Push vs Pull, materials requirement plan).

Production Scheduling

Planning the single operation of the single machine (very high detail).

Production Control & Performance Measurements

Let's see an overview of them:

• Aggregate Planning

  Accounting Data (costs, ...) Demand (orders & forecast) -> Aggregate Planning Item Master Data -> Materials Planning 0.6 acceptable

  if r ≈ 1 a significant linear correlation exists

  PROS

  • Takes into account external factors
  • Higher knowledge of the product
  • Can be integrated with time series

  CONS

  • Cumbersome data analysis
  • The relationship must be built and validated
  • Caused factors must be forecasted better than demand

  Qualitative Approaches

  Sales Force

  Knowledge of customers is an affair of sales force. Knowledge of customer macroeconomic pattern, are gathered and elaborated by a bottom-up approach (salesmen, area manager, marketing division)

  Expert Panel

  A group of people belonging to different functions (marketing, design, production, finance) is in charge of making forecasts (one guy is stronger than the others, his considerations are more taken into account)

  Delphi Method

  Interaction of a group of experts through a questionnaire (anonymous) done several times without direct interaction between members till a consensus is reached