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05mfg62s-LRP

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    Unit 5Long Range Planning

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    Unit 5Long Range Planning Unit Introduction ........................................................................................................ 1

    Objectives ............................................................................................................. 1

    Terminology .......................................................................................................... 1 MRP II and Long Range Planning ............................................................................. 2

    Long Range Planning ................................................................................................ 3

    Business Planning ................................................................................................ 4

    Purpose ........................................................................................................... 4

    Conflicting Strategic Planning Goals .............................................................. 5

    Sales Planning ..................................................................................................... 6

    Demand Management .......................................................................................... 8

    Forecasting Product ........................................................................................ 9

    Reasons for Forecasting ............................................................................... 10

    Sales Forecasting ......................................................................................... 11

    Family Forecast ............................................................................................ 11

    Production Planning ........................................................................................... 12

    Purpose ......................................................................................................... 12

    Production Planning ...................................................................................... 14

    Sales, Inventory, and Production Planning ........................................................ 15

    Purpose ......................................................................................................... 15

    Production Plan Function .............................................................................. 17

    Production PlanMake-to-Stock .................................................................. 19

    Production PlanMake-to-Order .................................................................. 20

    Production Planning Bill of Material ................................................................... 21

    Resource Capacity Planning .............................................................................. 23

    Long Range Planning Review ................................................................................. 24

     Table of Contents 5-i

List of Figures

    Figure 5 - 1. MRP II and Long Range Planning ........................................................ 2

    Figure 5 - 2. Responsibilities .................................................................................... 3

    Figure 5 - 3. Conflicting Strategic Planning Goals .................................................... 5

    Figure 5 - 4. Sales Planning Process ........................................................................ 6

    Figure 5 - 5. Forecasting Methods ............................................................................ 8

    Figure 5 - 6. Production Planning ........................................................................... 13

    Figure 5 - 7. Production Plan .................................................................................. 14

    Figure 5 - 8. Sales, Inventory, and Production Planning Meeting ........................... 16

    Figure 5 - 9. Relationship of Production Plan to Master Schedule to MRP ............ 17

    Figure 5 - 10. Production Plan Types ..................................................................... 18

    Figure 5 - 11. Example ............................................................................................ 21

    List of Tables

    Table 5 - 1. Monthly Sales Plan Performance ......................................................... 11

    Table 5 - 2. Production PlanMake-to-Stock ......................................................... 19

    Table 5 - 3. Production PlanMake-to-Order ........................................................ 20

5-ii Manufacturing WorkshopStudent Guide

Unit Introduction

    This unit discusses the uppermost element of the closed loop chartLong Range Planning.

    Objectives

    At the end of this unit you will be able to:

    ? Setup a planning bill of material.

    ? Formulate a Production Plan.

    Terminology

    Process of comparing inventory to production capabilities in Aggregate Inventory

    order to develop a business strategy. Planning

    Estimate of future demand. Forecast

    Product finished after customer order received. Make-to-Order

    Product shipped from finished goods, completed prior to Make-to-Stock

    customer order.

    Overall level of manufacturing output planned for Production Plan

    production.

    Overall sales level expected to be achieved. Sales Plan

     Long Range Planning 5-1

MRP II and Long Range Planning

    The following figure shows the MRP II process with long range planning functions

    highlighted.

    Business Planning

    AccountsSales PlanningSales PlanningOrderOrderForecastingReceivableProcessingPlanningForecastingProcessingItemBillsMaster

    Production PlanningBill ofIResourcesN

    GeneralVRough CutMasterLedgerBills ofCapacityProductionEMaterialPlanningSchedulingN(Configurable)DepartmentsTMaterialCapacityWorkORequirementsRequirementsCentersPlanningPlanningRRoutingsYFinite ForwardAccountsSchedulingCostPayableStandardsCostProductionActualsAccountingActivityPurchasingControl

    PerformanceMeasurement

    Figure 5 - 1 MRP II and Long Range Planning 5-2 Manufacturing WorkshopStudent Guide

Long Range Planning

    Planning and review at the long range level is essential for achieving manufacturing

    excellence. Long range planning consists of outlining financial and operating objectives, and

    measuring performance. Its goal is to develop business, sales, and production plans for the

    company.

    The figure below illustrates the business planning process showing top management

    responsibilities and the impact on operations management responsibilities.

    Business Planning

    ProductionSales/MarketingMonthlyTopPlannningRatePlanningManagement

    MasterWeeklyProductProductionOperationsRateManagementSchedule

    Material

    Requirement

    Plan

    Figure 5 - 2 Responsibilities

Most long range plans have at least a 12 month outlook, are reviewed monthly, and revised

    quarterly. Most companies have a strategic plan in addition to the business plan, which

    extends into the future as much as three to five years. The planning process is a dynamic

    activity. Plans impact each other and, as a result, all plans need to be updated to meet

    changes in the business environment.

     Long Range Planning 5-3

Business Planning

    The first step in long range planning is developing the business plan. A business plan defines the overall mission of the company, including products manufactured, markets served, profit or market-share goals, and non-economic goals such as corporate responsibility. The mission statement is a clear statement of corporate goals providing focus, and should be communicated to everyone in the organization.

    The business plan outlines:

    ? Products to be manufactured

    ? Markets to be served

    ? Profits and financial objectives needed to meet overall business objectives. Purpose

    The purpose of business planning is:

    ? To develop long range strategic plans for:

    ? Market development

    ? New product development

    ? Manufacturing resources/facilities

    ? Financial resources ? To set specific and measurable business objectives ? To set policy guidelines for the sales plan and production plan

5-4 Manufacturing WorkshopStudent Guide

Conflicting Strategic Planning Goals

    Different areas of the organization have very different goals. Strategic planning takes all of

    these goals and fits them together into a plan, illustrated below.

    SalesManufacturing

    ?High customer service?Low per-unit cost

    ?Short, stable lead times?Level stable schedules

    ?Broad product line?Stable employment

    ?No missed deliveries?Adequate inventories

    and capital

    ?Sufficient lead timesStrategic planning

    must fit all

    conflicting goals

    together into

    one planEngineeringFinance

    ?Minimum investment?Focused product line

    ?Low inventories?Long development time

    ?Low capital equipment

    and overhead

    Figure 5 - 3 Conflicting Strategic Planning Goals

     Long Range Planning 5-5

Sales Planning

    The Sales Plan is a plan for future demand of products and services. It is an essential part of

    the long range planning because the sales forecast affects everything that follows on the closed

    loop chart. The sales plan is a statement of what a company expects to sell in dollars, units,

    and product mix. It is created from three primary sources:

    ? History and experience

    ? Economic forecasts

    ? Company marketing plans

    The sales plan outlines:

    ? Customer demand needed to meet the business plan

    ? Number of units to be sold

    ? Company marketing plans

    The following figure illustrates the sales planning process.

    OutlinesUses

    ?History and Experience?Demand NeededSales

    ?Economic Forecasts?Units to be Sold

    ?PlanCompany Marketing?Marketing Plan

     Plans

    Figure 5 - 4 Sales Planning Process 5-6 Manufacturing WorkshopStudent Guide

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