Resource Planning

Learning Objectives
• Understand the chase, level and mixed
aggregate production strategies.
• Describe the hierarchical operations planning
process in terms of materials planning and
capacity planning.
• Describe ERP system
 Introduction
• Resource Planning : Determine the production
capacity required to meet demand.
• Capacity: maximum workload that an
organization is capable of completing in a
given period of time.
• Balance production plan with capacity.
 Operations Planning
• 3 categories:
• Long-range: covers one year or more
• Intermediate range: span six to 18 months
• Short-range planning horizons: cover few days
to few weeks depending on the type and size
of the firm.
• Long-range is planned 1st, to guide medium
and medium guides short-range.
Aggregate Production Planning APP
• Plans are stated in terms of product families or
groups.
• A product family=different prodcuts sharing
similar characteristics, components or
manufacturing processes.
 Example of APP
• ATV: All-Terrain-Vehicle can be automatic or
manual drive options.
• Same manufacturer may group the two
together.
• Productions processes and material
requirements are similar.
• Two drive options can be grouped into a
family.
 Horizon of APP
• Planning horizon of APP covers at least one
year
• It is extended or rolled by 3 months every
quarter.
 Cost considered in APP
• aggregate planning decision include inventory
cost, setup cost, machine operating cost,
hiring cost, firing cost, training cost, overtime
cost and
• costs incurred for hiring part-time and
temporary workers to meet peak demand.
 Strategies to complete APP
1. the chase strategy
2. the level strategy
3. the mixed strategy.
 Chase Production Strategy
• Adjust capacity to match the demand pattern.
• Hire and lay off workers to match its
production rate to demand.
• Workforce fluctuates from month to month,
but finished goods inventory remains contant.
 The level production strategy
• Constant output rate
• Constant capacity
• Varying inventory and backlog levels
To handle the fluctuating demand pattern.
• Workforce levels are kept constant
• The firm relies on fluctuating finished goods inventories
and backlogs to meet demand.
• More suitable for firms taht require highly skilled labor.
• Workforce have more higher morale than chase strategy
 Example
• 420 units rate monthly, (5000 units annual
demand + 40 units additional eneding
inventory) /12 months.
• This requires 21 workers
 The Mixed Production Strategy
• Maintain stable workforce using short-term
means such as overtime, additional shift,
subcontracting or hiring part-time and
temporary workers to manage short-term high
demand.
• Is to minimize stockouts and cyscle time.
• Low-cost and make-to-order items
 Master Production Scheduling
• Time-phased
• Listing the exact end items to be produced
• More detailed than APP.
• Horizon is shorter than AAA but item should
be completed withng the planning horizon.