Operations and Control

Aggregate Planning

Inventory Management

Quality Control

Human Resources

Aggregate Planning

Once long-term capacity process decisions are made, operations managers begin medium-range planning that meets the objectives of the firm. Aggregate planning is concerned with determining the quantity and scheduling of production for the intermediate future, usually from 3 to 18 months ahead. Operations managers try to determine the best way to meet forecasted demand by adjusting production rates, labour levels, inventory levels, overtime work, subcontracting rates and other controllable variables. The objective of the process usually is to minimize costs over the planning period (Heizer et al, 1997). Various models can be used in helping the manager make aggregate planning decisions.

  1. Graphical and charting methods are often used because they are easy to understand. However, they do not guarantee an optimal production plan. These methods work with a few variables at a time to allow planners to compare projected demand with existing capacity.
  2. The optimizing method of linear programming (LP) can be used to allocate operating capacity to meet forecasted demand. This method not only gives an optimal plan (lowest cost), but it also can be used to perform sensitivity analysis, providing a tool to analyze the effects of holding inventory, using overtime and subcontracting. An example of such an aggregate planning model is shown in Appendix D.

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Quality Control

Broadly defined, quality refers to the ability of a manufactured product to consistently meet or exceed customer expectations. Total Quality Management (TQM) involves everyone in the organization. International quality standards such as the European Economic Community (EC) ISO 9000 Standard are being adopted in Canada in order to receive product certification for export. Planning for quality starts with product design and extends to suppliers and the distribution channels. These topics were discussed earlier in this course. Designing for reliability is a separate topic not covered in this course. Controlling quality also requires planning since quality must be designed into the manufacturing process. Monitoring in the production process can occur at three points: before production, during production and after production.

Monitoring before and after production entails acceptance sampling procedures being put in place. These procedures are intended to verify that a shipment of raw materials or final products does not contain more than a specified percentage of defectives. Computer models can be used to determine how much to inspect (usually, all batches cannot be inspected since this would be too costly) and how often to inspect. Monitoring during the production process is called statistical process control (SPC). Control charts, or a time-ordered plot of sample statistics, are used to distinguish between random and non-random variability. Non-random variability could arise from many controllable sources such as worn machine parts, improper calibration and human error. Real-time control charts are generally posted in the manufacturing plant, allowing management and employees to monitor their work. Control limits are set dividing acceptable variation from out-of-control variation. Having plans in place to take corrective action if necessary is an essential part of quality control. Computer software examples of acceptance sampling and statistical quality control are shown in Appendix E.

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Inventory Management

The manufacturing plan is not complete without an inventory management plan. All firms (including Just-In-Time or JIT operations) keep a supply of inventory for a variety of reasons. Variation in product demand, flexibility in production scheduling, safeguarding for variation in raw material delivery time and taking advantage of bulk purchases all impact inventory planning. The underlying concept of inventory management is to minimize costs taking into consideration holding (carrying), production setup, ordering and shortage costs. Many inventory models have been developed. JIT is particularly attractive since it should theoretically eliminate inventory costs. Most manufacturing processes involve the combination of two or more components, frequently shipped by many suppliers into a final product. This means that inventory systems have to be implemented that allow for dependent demand. Material Requirements Planning (MRP) systems have been installed in manufacturing firms, even those considered small. MRP is a logical, easily understandable approach to the problem of determining the number of parts, components and materials needed to produce each end item. It also provides the time schedule specifying when each of these components should be ordered or produced. MRP is particularly adaptable to a job shop environment, where a relatively large number of products are made in batches using the same productive equipment. MRP and JIT can be made to function together provided that management and all employees buy-in to the system. An example of computer software output of MRP is shown in Appendix F.

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Human Resources

The goal of human resource planning is to manage labour and design jobs so that people are utilized efficiently. Obviously, this must be done within the framework of other company objectives, while maintaining a reasonable quality of work life in an atmosphere of mutual commitment and trust. Quality of work life refers to meeting the needs of the employee, including safety, security, community and personal fulfillment. Mutual commitment means that both employer and employee buy-in to company objectives and programs. Mutual trust starts with documented company policies that are equitable and reasonable.

Labour planning is all about company policies that deal with employment stability and work schedules. Job classification and work rules are intertwined with labour planning. Generally, flexibility in job classifications and work rules is desirable, permitting the company to deal with unexpected situations. Labour standards must also be considered, specifying the amount of time required to perform a job. Important trends in the modern workplace center around job design. Job specialization, job expansion or enrichment, and self-directed teams are design topics that should be addressed at the planning stage. There is considerable research material that can be accessed in libraries on these important issues.

Human resource planning also involves the incorporation of motivation and incentive systems. Bonuses, profit sharing, gain sharing and other incentive systems can serve as psychological as well as financial motivators. Ergonomics (the study of work) and work methods is an ongoing process, however, a plan that builds a good interface between the workers and the machines is a sound preventative strategy. The plan should incorporate the work environment, operator inputs to machines and feedback to operators.

There are a number of tools that can be used in human resource planning. These include time studies, work sampling and learning curves. All three tools can help in developing labour standards. The learning curve tool can assist planners in determining cost standards for items produced as well as purchased. Further information on these tools can be obtained from most production and operations management textbooks.

Workforce Checklist

Useful References

Heizer, J., Render, B., Forrester, J.D. and K.L. Bailey, Production & Management, 1st Canadian Edition. Prentice Hall Canada Inc., 1997.

Stevenson, William J., Production Operations Management, 6th Edition, Irwin McGraw-Hill, 1999.

Weiss, Howard, POM for Windows, Version 1.4, Prentice Hall Inc., 1997. Note: This is the software used to develop the computer printouts apart from the Excel printouts.