IE652 Production Planning and Control

IE652 Production Planning and Control Instructor: Dr. Rıfat Gürcan Özdemir, Assist. Prof.

http://web.iku.edu.tr/~rgozdemir/index(ie_652).htm

Course Materials Text Books 1. “Production Planning, Control and Integration”, D. Sipper and R. Bulfin, McGraw-Hill, 1997.

Lecture notes 1. “pdf files of Power Point Slides” (will be given via internet)

Software “GAMS LP Solver” 2

Course Topics PART I – Aggregare Production Planning(APP) Chapter 1: Spread Sheet and Transportation Methods for APP Chapter 2: Linear Programming Models for APP

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Course Topics PART II – Inventory management Chapter 3: Inventory Management and EOQ Models Chapter 4: Quantity Discount and Multi Item Inventory Models Chapter 5: Dynamic Lot Sizing Techniques Chapter 6: Sthocastic Inventory Models Chapter 7: Material Requirements Planning (MRP)

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Course Topics PART III – Job scheduling Chapter 8: Scheduling and Sequencing Chapter 9: Single Machine Scheduling Chapter 10: Parallel Machine, Flow Shop and Job Shop Scheduling

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Grading Exams (85% of total grade) Quizzes (15%) Midterm (30%) Final (35%)  Assignments (15% of total grade)  Participation (5% of total grade) 

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IE652 - Chapter 1 Spread Sheet and Transportation Methods for APP

Production Planning Horizons

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Production Planning Decisions

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Aggregate Production Planning  

Step 1. Aggregation: Different products are aggregated into a common unit. Step 2. Planning: Demand fluctuations are absorbed by:  Changing

the size of the workforce (hiring & laying off),  Varying the production rate (introduction of overtime and/or idle time, relying on outside subcontracting),  Accumulating seasonal inventories,  Resorting to planned backlogs whenever customers may accept delays in filling their orders,  Shifting the demand to another period.

or a combination of these decisions 10

Costs relevant to aggregate production planning Basic production costs

1.

Material Direct labor • Overhead = fixed cost (setup cost) + variable cost • •

Production rate change costs

2. • • • • •

Hiring personnel Training personnel Laying off personnel Overtime compensations Subcontracting 11

Costs relevant to aggregate production planning Inventory related costs

3. •

Inventory holding cost

(= cost of capital tied up in inventory + storing + insurance + taxes + spoilage + obsolescense) •

Shortage cost

(very difficult to measure; loss of customer goodwill and loss of sales revenues resulting from the shortage situation)

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Approaches for APP 

Spread Sheet Method  Trial

and Error approach  Easily implemented with a spread sheet  Zero inventory / Level production / Mixed plan  

Transportation Method Linear Programming Models

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Example  

Last year, Precision made 41,383 gears of various kinds. There were 260 working days and average of 40 workers. Forecast demands over the next six months for aggregate unit are as follows: Month Jan. Feb. March April May June Total Demand 2760 3320 3970 3540 3180 2900 19,670 Working days 21 20 23 21 22 22 129

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Inventory holding cost is $5 per gear per month. New workers can be hired at a cost of $450 per worker. Workers can be laid off at a cost of $600 per worker. There is a $15/unit/month backorder cost. Wages and benefits for a worker are $15 per hour, all workers are paid for eight hours per day, and there are currently 35 workers at Precision.

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Zero Inventory Plan 41,383 gears/year  4 gears/worker-day

Units/worker-day =

10,400 worker-days/year

demand/month Workers needed = days/month x units/worker-day

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Zero Inventory Plan

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Zero Inventory Plan

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Level (Fixed) Workforce Plan Total demand Fixed # of Workers = Total # of days x units/worker-day

19,670 Fixed # of Workers =

= 38.12  39 workers 129 x 4

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Level (Fixed) Workforce Plan

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Level (Fixed) Workforce Plan

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Mixed Plan

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Mixed Plan

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Mixed Plan

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Transportation Model 

A production planning problem with constant work force can be solved as a transportation problem.

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Solution

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Extensions 

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Suppose 90 cases could be made on overtime in periods 1 and 2, 75 cases in period 3 at costs of $16, $18, $20 per case, respectively. Suppose units are backordered at a cost of $5 per unit-month. Demand of period 1 increased to 400 units.

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Solution

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