Production PlanningProduction Planning

Hierarchical Production Planning

Push vs Pull Control Systems

Materials Requirement Planning (MRP)

Just-in-Time (JIT) and Kanban

Setups

Make-to-Stock vs Make-to-Order

The Big PictureThe Big Picture

To optimize our ROI, it would be nice to do all our marketing and manufacturing planning simultaneously at all levels.

Since this is not possible for humans (or computers) to manage in the lifetime of this universe, we are stuck with some sort of compromise.

Two paths have developed.– Maximize efficiency of manufacturing system and

people will buy cheaper product (Pull).– Maximize customer satisfaction and people will

pay more (Push).

Both paths are tackled at a hierarchical level

The HierarchyThe Hierarchy

Production Planning and Control often follows a hierarchical process:

strategic direction / aggregate planning

tactical planning / detailed control

Corporate Level

Aggregate Planning

Plant Level

Aggregate Planning

Plant-floor Level

Detailed Control

Production Control StrategyProduction Control Strategy

Two basic production control strategies:

when does an operation work?

PUSH PULLanticipate future demand react to current demand

forecast demand andthen produce to meet thatestimated demand

produce to replace thenumber of units withdrawnfrom the buffer

MRPMaterials Requirements

Planning

JIT (Kanban)Just-In-Time

“the right quantities to the right places at the right time”

“the necessary products in the necessary quantities at the necessary time”

The Candy GameThe Candy Game

Candy Set-up– Need volunteers for production planners– Put 3 pieces of candy into a cup between each

person.

Candy Push System – Pass candy 1 piece at a time from inventory on

your right to the buffer on your left as quickly as possible.

– Candy can’t fly all over!!! (Defects!)– 1st person in row pulls from RMI as needed

Candy Pull System– Reset inventories to 3 pieces– Customer pulls candy from last WIP in row.– Each person in the row makes sure their left-

hand buffer has exactly 3 pieces of candy. No more, no less.

– 1st person in row pull from RMI as needed

The Candy Game—QuestionsThe Candy Game—Questions

Discussion:

Which system is easier to operate in?

Which system is easier to for management to detect problems in?

Which system reacts more quickly to changes in demand?

Other comments

Basic MRPBasic MRP

axleset (2)

wheels(2)

axle(1)

body(1)

frame(1)

doors(2)

engine(1)

car

1 day

1 day 1 day 3 days

1 day 3 days 1 day 2 days

ship date 100start dateship datestart dateship datestart dateship datestart dateship datestart dateship datestart dateship datestart dateship datestart date

C

S

W

A

B

F

D

E

-5 -4 -3 -2 -1 0

Basic KanbanBasic Kanban

makewheel

makeaxle

assy.axle set

makeframe

makedoors

assy.body

assy.engine

assy.car

customerdemand

Setups: A Critical FactorSetups: A Critical Factor

Kanban is advantageous for production control…

• Reduces WIP

• Reduces _______________

• Improves quality (shortens detection time)

...but setups are a critical factor for success:

CTA = 1 min/part

10 min setup

B

CTB = 2 min/part

10 min setup

Assume Run = 20 units

If setup/changeover time = 10 mins

If setup/changeover time = 1 min

A

Process-Customer InterfaceProcess-Customer Interface

The Process-Customer interface typically follows one of two patterns:

• make-to-stock (MTS)

Customers buy from an FGI

No customization

• make-to-order (MTO)

Factory builds product to customer order

Usually customized

What crucial factors must be considered when designing this interface?

Production Planning for MTSProduction Planning for MTS

For the vast majority of consumer goods, the Process-Customer interface is MTS.

This has certain ramifications:

But, customers may not be as satisfied.

Under what conditions can MRP planning be eliminated a pure Kanban system?

The TradeoffsThe Tradeoffs

Different production control strategies are appropriate under different conditions...

When might you choose PUSH vs PULL?

PUSH PULL

Pragmatic RevolutionPragmatic Revolution

Like all good revolutions, just-in-time manufacturing is producing revolutionaries who don’t know when to stop. It is also producing overreactions from people determined to make them stop...

- Uday Karmarkar

The mainstream press portrays a mutually exclusive choice between light and dark.

push pullvs

all that is evil and dark...

all that is good and pure...

This is patently silly! Both approaches have strengths

• push - good with lumpy demand

• pull - lower inventory, simple management

The MessageThe Message

The production system appropriate for your firm depends on your customers’ needs and is unlikely to completely follow any prescribed pattern, be it MRP, Lean Production, Theory of Constraints, or anything else.

Beware of consultants with the silver bullet.