Question

For the following three terms, explain what they are and their importance to decisions.

              (a) Master Production Scheduling (MPS)

              (b) What is Aggregate Planning? Discuss its application to a business using your own example.

              (c) Explain disaggregation planning with an example,

Answer 1

Ans 1.

Master Production Schedule- Master Production Schedule (MPS) is a plan that is created in advance for the completion of production of the goods or products. MPS takes into account various aspects of production including inventory, staffing, and production figures. The plan specifically points out the number of individual products or commodities that will be produced in each of the time frames and periods. The schedule may be created after analysing what demand the commodity will have. MPS attempts to optimise production and manufacturing by quantifying the different processes resources and parts. It also focuses on removing the bottlenecks and avoiding error and wastage. As the implementation of MPS spans across the manufacturing unit, it has a huge effect on profitability. In recent times, MPS is implemented through a software, which may also be customized or tweaked as per the user preferences.

If a software is used for implementing MPS, key elements can only be controlled and accounted for. These include production cost, inventory and inventory cost, working hours, lead times, level of inventory, storage capacity, working hours and others. MPS allows the companies to cater to the demands of the customers in time and also provides for avoidance of shortages, wasting of money due to expediting of the processes for meeting the demand, improper resource allocation and other pitfalls that may occur due to the absence of planning in production.

Aggregate Planning

Aggregate Planning is the planning of resources in advance (around 6-18 months earlier of the time of production) for a given production process. It is a plan through which a company decides the resources and the individual quantities of them that a company needs to procure for its production of the manufacturing process. The aim is to lower the cumulative costs over a period of time or to spend the least. Some of the plant activities and commodities include labour and labour cost over the given time period, outsourcing, hiring and the numbers that are required to be hired (or fired), subcontracting, inventory amount, backlogging required for the different subsequent periods of the production cycle, and others.

Planning may take inputs from organisational policies relating to the use of various alternatives, cost of the resources and any alternatives present, demand forecast, and analysis of the facilities and resources available for production. The main aim of aggregate planning is to match the demand and supply (for up to 12 months in advance) by procuring and spending resources in the most cost-effective and efficient manner.

Example of the aggregate plan- A company has estimated that the demand for its product will vary in the market. The demand will be at peak in the month of June, at around 20,000 units. From here it will start to decline and will be around 5000 units in the month of November.The average demand for company products is around 12000 units per month. The company should aim to keep the inventory at the lowest level through the period of November by reducing the orders placed to vendors. When the demand is below the average demand of 12000 units, a safety production order can be placed. The company would be able to cater to the projected demand as well as to any emergency through aggregate planning. Inventory ordering cost can be minimised by maintaining average inventory, once the demand is below the average demand. Labour can also be planned and its number should be reduced to a minimum during the periods when demand is low and lesser production is required.

Ans 3

Disaggregate Planning: Disaggregation is the creation of more focused production and operational plans for shorter time durations. While the aggregate planning measures planning for several months in advance, the larger operation is broken down into smaller and workable plants and units through disaggregation. Disaggregation divides the aggregate into smaller specifics and calculates the need for equipment, human capital, inventory and other inputs.

An example here can be the manufacturing of 1 million light bulbs of LED and halogen types. Disaggregation would allow us to focus on the production of these units specifically. Labours can be assigned in the required ratio, machines and equipment required can be upgraded or replaced, and inventory (a fraction of it) can also be held as per the immediate production requirements.