Production planning is crucial for balancing supply and demand. Aggregate planning tackles mid-term capacity issues, while Master Production Scheduling (MPS) gets into the nitty-gritty of short-term production details.

These tools help companies optimize resources and meet customer needs. Aggregate planning sets the overall strategy, while MPS breaks it down into specific product quantities and timelines. Together, they form a powerful one-two punch for efficient production management.

Aggregate Planning in Production

Purpose and Scope of Aggregate Planning

• Aggregate planning serves as a mid-term capacity planning tool balancing supply and demand for production over 3 to 18 months
• Minimizes total production costs while meeting forecasted demand
• Considers production rates, inventory levels, workforce size, and other variables to create an overall production strategy
• Bridges long-term strategic planning and short-term operational planning in production management hierarchy
• Impacts various functional areas (finance, human resources, marketing)
• Involves forecasting demand, determining production alternatives, and selecting cost-effective plans to meet customer needs

Aggregate Planning Process and Impact

• Balances production capacity with expected demand
• Helps optimize resource utilization (labor, materials, equipment)
• Provides a framework for coordinating activities across different departments
• Enables companies to respond to seasonal or cyclical demand fluctuations
• Supports decision-making for inventory management, workforce planning, and production scheduling
• Aids in identifying potential bottlenecks or capacity constraints in advance

Developing Aggregate Production Plans

Aggregate Production Strategies

• Level production strategy maintains constant workforce and production rate, using inventory to absorb demand fluctuations
  • Example: A toy manufacturer produces at a steady rate year-round, building up inventory for peak holiday season demand
• Chase demand strategy adjusts production and workforce levels to match demand variations, minimizing inventory costs
  • Example: A custom furniture maker hires temporary workers during busy periods to meet increased order volume
• Mixed strategies combine elements of level production and chase demand to balance costs and flexibility
  • Example: An electronics company maintains a core workforce year-round but uses overtime and temporary workers during product launch periods

Optimization Techniques and Evaluation

• Quantitative techniques optimize aggregate plans
  • Linear programming models production constraints and costs to find optimal solution
  • Transportation method treats production planning as a distribution problem
  • Graphical methods visually represent different production strategies and their costs
• Key performance metrics evaluate aggregate plans
  • Total cost includes production, inventory holding, and labor-related expenses
  • Inventory levels measure the amount of stock held to meet demand
  • Workforce stability assesses the consistency of employment levels
  • Customer service levels indicate the ability to meet demand on time
• Sensitivity analysis assesses plan robustness under different demand and cost scenarios
  • Example: Testing how a 10% increase in raw material costs would affect the optimal production strategy

Master Production Schedules

MPS Fundamentals and Development

• Master Production Schedule (MPS) specifies quantity and timing of end items produced over short to medium-term planning horizon
• Translates aggregate plan into specific end item requirements, typically covering 3 to 6 months with weekly time buckets
• Considers available inventory, production capacity, and customer orders to determine production quantities for each product
• Utilizes time fences to manage changes and maintain production plan stability
  • Demand time fence: period where changes to the schedule are restricted
  • Planning time fence: separates short-term frozen schedule from longer-term flexible schedule
• Calculates Available-to-Promise (ATP) quantity to support order promising and customer service functions
  • Example: If MPS shows 100 units produced in week 3 and 60 are already committed to orders, ATP is 40 units

MPS Implementation and Integration

• Assesses MPS feasibility through rough-cut capacity planning
  • Compares required capacity to available capacity at critical resources (bottleneck work centers)
• Serves as key input for other planning systems
  • Material Requirements Planning (MRP): determines component and raw material needs
  • Capacity Requirements Planning (CRP): detailed capacity analysis for all work centers
• Balances customer demand with production capabilities
  • Example: Adjusting production quantities to account for a sudden increase in orders for a popular product
• Provides a basis for shop floor scheduling and work order release
• Supports inventory management by indicating when and how much of each product to produce

Aggregate Planning vs Master Scheduling

Scope and Level of Detail

• Aggregate planning deals with product families or groups, MPS focuses on individual end items or stock-keeping units (SKUs)
  • Example: Aggregate plan might consider "sedans" as a group, while MPS specifies production for "Model X Sedan" and "Model Y Sedan"
• Planning horizon for aggregate planning typically longer (3-18 months) compared to MPS (3-6 months)
• Aggregate plans use aggregated units of measure (labor hours, machine hours), MPS uses specific product units
  • Example: Aggregate plan might measure output in "tons of steel," while MPS specifies "200 units of Product A"

Focus and Decision Support

• Aggregate planning primarily concerned with resource allocation and capacity utilization
  • Supports decisions on overall production levels, workforce size, and inventory policies
• MPS emphasizes detailed production scheduling and inventory management
  • Guides decisions on specific product quantities, production timing, and order fulfillment
• Level of detail increases from aggregate planning to MPS, providing more granular view of production requirements
• Aggregate plans inform strategic decisions, MPS guides tactical decisions
  • Example: Aggregate plan might decide to increase overall production capacity, while MPS determines weekly production quantities for each product
• Outputs of aggregate planning serve as inputs for developing the MPS, creating hierarchical planning structure in production management