Overview of Operational Planning Activities
Every organization must plan its activities at several levels and operate these as a system. Exhibit 15.1 presents an overall view of planning and shows how aggregate production planning relates to other activities of a manufacturing firm. The time dimension is shown as long. intermediate. and short range.
Long-range planning is generally done once a year. focusing on a time horizon that is usually greater than a year. The length of the time horizon will vary from industry to industry. For those industries that require many years to plan and construct plants and facilities. and to install specific process (e.g .. refineries). the time horizon may be 5 to 10 or more years. For other industries where the ability to expand c pastriesshorter (e.g .. clothing manufacturing and many service industries). the time horizon may be two to five years or less.
Intermediate-range planning usually covers the period from 6 to 18 months in the future. with time increments or "buckets" that are monthly and/or quarterly. (The near-term time increments are often monthly. whereas those at the end of the time horizon tend to be quarterly. as these are usually less a curate.) Intermediate-range planning is typically reviewed and updated quarterly.
Short-range planning covers the period from one day to six months. with the time incrementally being with long-range planning. the length of the time horizon for intermediate- and -Short-hunger planning will vary trot induce-it, to industry.
Long-range planning begins tent of or objective' and for the next 2 to 10 years. Corporate strategic planning.objectives and goals are to be achieved in light of the company's and it, economic and political environment as projected by it, b.tsinc sIfI« Clement-, (ll the ~tragic plan include
product-line delineation, quality and pricing levels, and market penetration goals. Product and market planning translates these into individual market and product-line objectives, and includes a long-range production plan (basically a forecast of items to be manufactured for two years or more into the future). Financial planning analyzes the financial feasibility of these objectives relative to capital requirement and return on investment goals. Resource
planning identifies the facilities. equipment, and personnel needed to accomplish the long-range production plan, and thus is frequently referred to as long-run capacity planning.
Aggregate Production Planning As noted in Exhibit 15.1, aggregate production planning provides the primary link between the long-range strategic plans and the
intermediate-range planning activities. Aggregate planning specifies monthly or quarterly output requirements by major product groups either in labor hours required or in units of production for up to 18 months into the future. Its main inputs are the product and market plans and the resource plan. Aggregate production planning seeks to find that combination f monthly or quarterly workforce levels and inventory levels that minimizes total production-related costs over the planning period while meeting the forecasted demand for product.
Item Forecasting This provides an estimate of specific products (and replacement parts), which. when integrated with the aggregate production plan, becomes the output requirement for the master production schedule (MPS). The process of monitoring and integrating this information is termed deli/Gild management.
Master Production Scheduling (MPS) The MPS generates the amounts and dates of The MPS generates the amounts and dates of specific end products. The master production schedule is usually fixed or "frozen" over he short run (six to eight weeks). Beyond six to eight weeks, various changes can be made. with essentially complete revisions possible after six months. As shown In Exhibit 15.1. the MPS depends on the product and market plans and resource plans outlined in the aggregate production plan.