Production Planning and Control

Master Schedule

• The master schedule is the heart of production planning and control, determining quantities needed to meet demand from all sources.
• It enables marketing to make valid delivery commitments to warehouses and final customers.
• It enables production to evaluate capacity requirements.
• It provides necessary information for production and marketing to negotiate when customer requests cannot be met by normal capacity.
• It provides senior management with the opportunity to determine whether the business plan and strategic objectives will be achieved.

Functions of Master Scheduler

• Evaluating the impact of new orders.
• Providing delivery dates for orders.
• Dealing with problems, including evaluating the impact of production delays or late deliveries, revising the master schedule, and bringing instances of insufficient capacity to the attention of production and marketing personnel.

Information Needed by Master Production System

• The production plan.
• Forecasts for individual end items.
• Actual orders received from customers and for stock replenishment.
• Inventory levels for individual end items.
• Capacity restraints.

Inventory Management

• Inventory is a vital part of business, contributing to customer satisfaction.
• Kinds of inventories include raw materials, partially completed goods, finished-goods inventories, tools and supplies, maintenance and repairs, and goods-in-transit.
• Functions of inventory include meeting anticipated customer demand, smoothing production requirements, decoupling operations, protecting against stockouts, taking advantage of order cycles, hedging against price increases, and permitting operations.

Little's Law

• The average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system.

Inventory Ordering Policies

• Cycle stock is inventory intended to meet expected demand.
• Safety stock is inventory held to reduce the probability of experiencing a stock-out due to demand and/or lead time variability.

Economic Order Quantity (EOQ)

• Identifies the optimal order quantity by minimizing the sum of certain annual costs that vary with order size and order frequency.
• Assumptions of the basic EOQ include:
  • Only one product is involved.
  • Annual demand requirements are known.
  • Demand is spread evenly throughout the year.
  • Lead time is known and constant.
  • Each order is received in a single delivery.
  • There are no quantity discounts.
• Annual holding costs = (Order Quantity in Units / 2) Holding (or carrying) Cost per annum.
• Annual ordering costs = (Demand in units per year / Order Quantity in Units) Ordering Cost per order.
• Total cost = Annual holding costs + Annual ordering costs.
• Optimal order quantity = √2Do / C.

Economic Production Quantity (EPQ)

• Similar to EOQ, except units are received incrementally during production.
• Assumptions of EPQ include:
  • Only one item is involved.
  • Annual demand is known.
  • The usage rate is constant.
  • Usage occurs continually, but production occurs periodically.
  • The production rate is constant.
  • Lead time does not vary.
  • There are no quantity discounts.

Reorder Point Ordering

• Occurs when the quantity on hand drops to a predetermined amount.
• Determinants of reorder point quantity include:
  • The rate of demand (usually based on a forecast).

Quality Management

• Quality is the degree to which performance of a product or service meets or exceeds customer expectations.
• Dimensions of product quality include:
  • Performance.
  • Aesthetics.
  • Special features.
  • Conformance.
  • Reliability.
  • Durability.
  • Perceived quality.
  • Serviceability.
• Dimensions of service quality include:
  • Convenience.
  • Reliability.
  • Responsiveness.
  • Time.
  • Assurance.
  • Courtesy.
  • Tangibles.
  • Consistency.
• Assessing service quality using SERVQUAL, a widely used tool.