CLASS 4, PLANNING PRODUCTION

PLANNING:

GOALS OF PRODUCTION PLANNING:

§ DETERMINE WHAT PRODUCTS TO PRODUCE

§ WHEN TO PRODUCE THEM

§ PRODUCT MIX (HOW MUCH)

EFFECTIVE PRODUCTION PLAN MEETS OVERALL PRODUCT DEMAND OBLIGATIONS ON TIME AND AT LOW[EST] COST

RESOURCES (PEOPLE, EQUIPMENT, MATERIALS) AND DELIVERY OBLIGATIONS (DEMAND OBLIGATIONS) MUST BE MATCHED TO BE COST EFFECTIVE.

· RESOURCES IN EXCESS OF DELIVERY OBLIGATIONS PRODUCE EXCESSIVE OUT-OF-POCKET COSTS

THERE ARE CAUTIONS TO CONSIDER WHEN USING SHORT-TERM MEANS TO INCREASE CAPACITY, I.E. EXTRA WORKERS/SHIFTS, SUB-CONTRACTING, ETC.)

· DELIVERY OBLIGATIONS IN EXCESS OF AVAILABLE RESOURCES REDUCE SERVICE LEVELS AND CAN LOSE CUSTOMERS.

· DEMAND IN EXCESS OF PRODUCTION CAPACITY (RESOURCES) CAUSES OPPORTUNITY COSTS BY PREVENTING POTENTIAL OUTPUT FROM BEING SOLD.

KEY IS TO MATCH PRODUCTION TO CUSTOMER ORDERS OR, PUT ANOTHER WAY, TO BALANCE RESOURCES AND DEMAND OBLIGATIONS.

AT THE JOB SHOP END OF THE SPECTRUM (BURGER KING, JOS. A. BANKS, NORCEN) STRENGTHS ARE VIEWED AS LYING IN CUSTOMER SERVICE.

· PRODUCTION IS MATCHED TO CUSTOMER ORDERS AND TIMELY DELIVERY.

ALSO, AT JOB SHOP END OF SPECTRUM, 3 PRODUCTION PLANNING POLICIES AFFECT CUSTOMER SERVICE:

1. MODULATING CAPACITY- (BURGER KING) VARYING RESOURCES TO MEET CHANGING DEMANDS

· INPUTS BALANCED TO MEET REQUIRED OUTPUTS.

· ASSEMBLY LINE CONSTANTLY REBALANCED

BANKS AND NORCEN CAN MODULATE CAPACITY TO MEET THEIR DEMANDS BY SCHEDULING OVERTIME.

SINCE THE PRODUCT OF A SERVICE INDUSTRY CANNOT BE PLACED IN INVENTORY, DEMAND MUST BE MET PRIMARILY BY:

§ ADJUSTING (modulating) CAPACITY

§ IMPROVING DELIVERY PROCESS

2. INVENTORY BUFFERS - MAINTAINING A FINISHED GOODS INVENTORY SUFFICIENT TO ACCOMMODATE DEMAND PEAKS. (ANDROSCOGGIN, BANKS)

· SUITABLE FOR PRODUCT ORIENTED FIRMS ONLY, NOT SERVICES (WHY?).

3. MANAGING DEMAND - NORCEN, BY BIDDING HIGH DURING HEAVY WORKLOAD PERIODS WAS ABLE TO "CHOKE OFF NEW BUSINESS" THAT WOULD TAX ITS DELIVERY CAPABILITY. LIKEWISE, DURING PERIODS OF EXCESS CAPACITY, THEY COULD BID LOW IN HOPES OF DRAWING ADDITIONAL BUSINESS.

OTHER PROCESSES APPROACH TO MANAGING PRODUCTION:

· STROH, CARRIER SOMETIMES HAD TO DEFER PRODUCTION OF AN ORDER FOR A SHORT PERIOD OF TIME UNTIL IT COULD FIT IN THE SCHEDULE.

· ANDROSCOGGIN WOULD PROBABLY BE OPERATING AT FULL CAPACITY AT ALL TIMES, THEREFORE, ANY DEMAND PEAK IN EXCESS OF THAT CAPACITY MIGHT RESULT IN RATIONING OF PAPER TO ITS CUSTOMERS.

· THE HYBRID PROCESS AT STROH'S (BATCH/CONTINUOUS FLOW FOR BREWING AND PACKAGING RESPECTIVELY) , PRODUCES A BEER INVENTORY BETWEEN THE PROCESSES THEREBY DECOUPLING THEM. THIS ALLOWS BREWING TO BE DRIVEN BY THE SALES FORECAST AND PACKAGING TO BE TRIGGERED BY ACTUAL ORDERS.

MORE ON COSTS:

THE "SCARCE RESOURCE" (EITHER WORKERS OR EQUIPMENT) IS THAT RESOURCE WHOSE EXCESS CAPACITY IS THE MOST COSTLY.

THE OTHER RESOURCE WILL (SHOULD) BE IDLE WHEN BOTH THE MIX OF RESOURCES ARE NOT BALANCED TO DEMAND OBLIGATIONS. IN OTHER WORDS, MAXIMIZE UTILIZATION OF THE SCARCE RESOURCE FIRST.

THE "VALUE CONTRIBUTION" OF A PRODUCT OR SERVICE IS AN IMPORTANT CONSIDERATION IN PRODUCTION PLANNING.

SOME PRODUCTS OR SERVICES IN THE MIX MAKE GREATER CONTRIBUTIONS TO PROFIT RELATIVE TO REQUIRED RESOURCES THAN OTHERS. THEREFORE, THEY MAY RECEIVE PRIORITY IN SCHEDULING PRODUCTION RUNS.

MATERIALS - SCHOOLS OF THOUGHT:

“JUST-IN-CASE” MATERIALS SCHEDULING IS INFORMATION INTENSIVE, TENDS TO PUSH MATERIALS ACCORDING TO SET SCHEDULE , BUFFER STOCKS, SAFETY LEAD TIMES MAY BE REQUIRED

“JUST-IN-TIME” MATERIALS SCHEDULING PULLS MATERIALS AS NEEDED, DELIVERED WHERE NEEDED - RESULTS: LOW INVENTORY LEVELS (HENCE CARRYING COSTS), SMOOTHER PRODUCTION FLOW

MATERIALS ARE "PULLED" BECAUSE PRODUCTION IS NOT TRIGGERED BY AN ESTABLISHED SCHEDULE BUT RATHER BY NEEDS OF DOWN-STREAM OPERATIONS.

"KANBAN" (CARD) TECHNIQUE, DEVELOPED BY JAPANESE

· PULL TECHNIQUE

· ALLOWS DOWNSTREAM OPERATIONS TO CONTROL THEIR INPUTS FROM UPSTREAM.

· DOWNSTREAM DEMAND TRIGGERS UPSTREAM PRODUCTION OR MATERIALS RELEASE FROM STOCKROOM (THIS IS INTEGRAL TO THE JIT PHOLOSOPHY)

CONTROL IN THE SERVICE INDUSTRY - A SPECIAL CHALLENGE:

SINCE INVENTORIES CANNOT BE BUILT UP IN ANTICIPATION OF DEMAND (WHICH IS OFTEN ERRATIC ANYWAY), SERVICE INDUSTRIES MUST OFTEN OPERATE IN A REACTIVE MODE

CUSTOMIZATION OF SERVICES ADDS TO DIFFICULTY IN MAINTAINING CONTROL OVER PRODUCT UNIFORMITY, TRAINING, PLANNING

CUSTOMER INTERFERENCE (INTENTIONAL/UNINTENTIONAL) CREATES CONTROL PROBLEMS

MEASUREMENT OF OUTPUT AND QUALITY IS DIFFICULT - ATTRIBUTE MEASUREMENT IS NORMALLY USED, PROVIDES LESS INFORMATION

TRADITIONAL CONTROL TECHNIQUES SOMETIMES APPLY, I.E., INVENTORY, FISCAL, TIMELINESS, QUALITY (ALTHOUGH QUALITY

STANDARDS BECOME DIFFICULT TO DEFINE IN SOME SERVICE INDUSTRIES LIKE CUSTODIAL, FOOD SERVICE, OTHER?)

PRODUCTION RESOURCES =

· PEOPLE

· FACILITIES

· EQUIPMENT

· MATERIALS

· CAPITAL

AND

· TECHNOLOGY (PROCESS, DESIGN, PATENTS,ETC.)

· TIME (MAY BE EITHER A CONSTRAINT OR A RESOURCE)

Back to PROC 5820 Gateway Page