Advanced Topics in Production Planning and Control

7/29/2019 Advanced Topics in Production Planning and Control

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KISHORE P CHAKRAVARTHY1 SEM M.TECH

IEM

ADVANCED TOPICSIN PRODUCTION

PLANNING &CONTROLASSIGNMENT


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1] CUSTOMER ORDER DECOUPLING POINT (CODP) was described as the point at

which the demand changed from independent to dependent. Describe what this

means and why is it important to managers?

Ans] CODP is the point at which demand changes from independent to dependent. It

is the point at which the firm, as opposed to the customer, becomes responsible for

determining the timing and quantity of material to be purchased made, or finished.

CODP is also known as ORDER PENETRATION POINT.

This point determines how far a customer order will enter into the supply chain.

Determining the CODP is a tradeoff between lead-time and value in the supply chain

2] A company has a capacity to produce 20 transtars 3000 per week. The firm

currently has booked following orders.

week orders 1 orders 2

1 196 196

2 220 225

3 210 230

4 192 202

5 150 145

6 165 170

7 135 139

8 80 80

9 45 47

10 50 51

11 0 0

A] Plot booked orders against capacity by week.

B] Assuming the following transactions in week 1, 198 were shipped. Orders for 5

transtars were cancelled in week 5. Additional order were booked for 5 in week 2,20 in week 3, 10 in week 4, 5 in week 7, 2 in week 9 and 1 in week 11. What does

the plot look like as of week 2?


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Ans]

According to the plot as on week 2 there is a decreasing trend in the orders.

3] Explain pyramid forecasting with an example.

Ans] Pyramid Forecasting is a forecasting technique that enables management to

review and adjust forecasts made at an aggregate level and to keep lower level

forecasts in balance. The procedure begins with the roll up (aggregation) of item

forecasts into forecasts by product group. The management team establishes a

(new) forecast for the product group. The value is then forced down

(disaggregation) to individual item forecasts so that they are consistent with the

aggregate plan. The approach combines the stability of aggregate forecasts and the

application of management judgment with the need to forecast many end items

within the constraints of an aggregate forecast or sales plan.

It ensures consistency as the forecast sources are integrated

Provides a logical framework for summing lower level forecasts and

distributing higher level forecast changes to individual products.

X-AXIS - WEEK.

Y-AXIS - ORDERS.


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EXAMPLE- PROBLEM FROM A PAPER WRITTEN BY NEWBERRY AND BHAME.

In the exmaple shown in fig 1, the 11 individual product items are divided into two

product lines. Two of these items, x 1 and x 2, form productline Z. these product

lines, X and Z 9, are included in product line z. These two product lines, X and Z,

represent the firms entire range of products.

Figure 2 shows the unit prices and initial forecasts for each level. The roll-up

process starts by summarizing the individual item forecast level( level 3) to provide

a total for each line(level 2). For the X line, the roll-up forecast is 13045

units( 8200+4845). The sum of the individual Z line items gives a forecast of 28500

Figure-2

Figure-1


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units. Note that the X line doesnt roll-up corresponds to the forecast of 15000 units

for the line. If theres a substantial disagreement at this stage, reconcilation could

occur or an error might be discovered. If theres no reconcilation at his level, we

neednt prepare independent forecasts for the lines. If dollar forecasts are required

at level 2, prices at level 3 can be used to calculate an average price.

To roll-up to the level 1 dollar forecasts, the average prices at the line level are

combined with the line roll-up forecasts. The total of

$778460[(13045*16.67)+(28050*2000)] is less than independent business forecast

of $950000. For illustrative purposes, well assume management has evaluated the

business forecast and roll-up forecast and has decided to use $900000 as the

forecast at level 1. The next task is to make the line and individual item forecasts

consistent with this amount. To bring about the consistancies, we use the forcing-

down process. The ratio between roll-up forecast at level 1($778460) and the

management total($900000) is used to make the adjustment.

The forecasts at all the levels appear in figure 3. The results are consistent forecasts

throughout the organization, and the sum of the parts is forced to equal the whole.

Note, however the process of forcing the consistency needs to be approached with

caution. In the example, forecasts at the lower level are now higher than they were

originally and incorporate the plans at the higher levels. Even though the sum of the

parts equal the whole, its possible the people responsible for the forecast wont

own the number. They mustnt be made to feel theyre simply being given an

allocation of someone elses wish list.

Figure-3

Forced forecast (x) =

15082 units

Forced forecast (z) =

32429 units

Forced forecast (x 1) =

Advanced Topics in Production Planning and Control

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