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IE6404 Production

Planning and Control

Instructor: Dr. Rifat Gürcan Özdemir, Associate Professor

Teaching Assistant: İlayda Ülkü

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

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Course Materials

Text Books 1. “Production Planning, Control and Integration”,

D. Sipper and R. Bulfin, McGraw-Hill, 1997.

Software “GAMS LP Solver”

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

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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 9:

Scheduling and Sequencing

Chapter 10:

Single Machine Scheduling

Chapter 11:

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

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Costs relevant to aggregate

production planning 1. Basic production costs

• Material

• Direct labor

• Overhead

= fixed cost (setup cost) + variable cost

2. Production rate change costs • Hiring personnel

• Training personnel

• Laying off personnel

• Overtime compensations

• Subcontracting

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Costs relevant to aggregate

production planning

3. Inventory related costs

• 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

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

Workers needed = demand/month

days/month x units/worker-day

Units/worker-day =

41,383 gears/year

10,400 worker-days/year

4 gears/worker-day

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Zero Inventory Plan

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Zero Inventory Plan

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Level (Fixed) Workforce Plan

Fixed # of Workers =

Total demand

Total # of days x units/worker-day

Fixed # of Workers =

19,670

129 x 4

= 38.12 39 workers

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Level (Fixed) Workforce Plan

Level (Fixed) Workforce Plan

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Comparing

Level Workforce and Zero Inventory Plans

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Mixed Plan

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Mixed Plan

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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