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eBook: Closed-Loop-Planning — $3.00 Buy Now



Facility planning, resource planning, aggregate capacity planning, and production planning are all elements of long-range planning. Each encompasses the degree of detail appropriate to its planning horizon and to the organization's environment and objectives.

Capacity planning at all levels in the capacity planning hierarchy is connected to measures of product and service outputs. These measures usually are stated in both physical and monetary units. In fact, both the required new capacity resources (facilities, equipment, labor, and information) and required material inputs must be converted to financial terms for the financial planning management system. Capacity planning at all levels should focus on critical resources (bottlenecks) that may be processing centers, engineering, or Systems programmers.

Aggregate planning decisions are inherent to facility planning, resource planning, and master production planning. Although most organizations do not use mathematical aggregate planning models, they do recognize the aggregate planning problem and make decisions concerning it.

The aggregate capacity planning challenge can be met by attempting to alter demand, by managing supply through control of production output and inventories, or a combination of the two. The chase and level production strategies are at the opposite ends of the spectrum of aggregate capacity planning strategies. The costs of carrying inventory to meet future demand peaks and the cost of changing output rates are the two major costs affecting the management of supply in the aggregate planning decision.

Sensitivity analysis should be performed on the aggregate capacity plan to evaluate the effects of changes in costs or demand, This analysis can be used to develop contingency plans to deal with the situation when actual parameters differ substantially from projected parameters.

As time unfolds and the plan is implemented, control must take place. This requires that actual inventory, shipments, and costs be compared to the plan and that corrective action be taken as required.

The following are some of the principles found in this section:

1. The production plan should be consistent with and support the sales plan, the financial plan, and the business plan.

2. Aggregate plans, including the aggregate production plan, are not static. They should be reviewed at least quarterly to determine that marketing, finance, and production are operating as a team with the same game plan.

3. The more accurate and reliable the resource and production planning, the fewer the difficulties that will occur in master scheduling.

4. Available capacity should be based on the actual (demonstrated) output of the key work centers.

5. Control begins in the planning process by comparing the planned re­source requirements to the estimated available requirements.


Section IV. included an overview of long-range planning. This section examines long-range planning in more detail. It includes descriptions of strategic planning and tactical planning with examples of selected manufacturing strategic considerations. It describes the manufacturing resource (facilities and equipment) planning that precedes completion of the initial production plan. However, an initial production plan is implicitly required when deciding the number and size of facilities because those decisions affect capacity, and capacity limits the options available to production planning. In addition, a numerical example is used in the description of the relationship of production planning, sales planning, and financial planning.

Although manufacturing strategies and plans may be reviewed annually, major changes in strategies and facilities do not occur that often in most organizations. However, production planning does occur on a regular basis. For example, the production plan is extended (rolled forward) by three months every quarter in some firms, Thus, production planning bridges the long- and medium-range planning horizons. By its very nature, the production plan addresses what is known as the aggregate planning problem.

The aggregate planning problem is, strictly speaking, a medium-range planning problem because it normally covers a 12 month period. It is included in this section because long-range plans must be based on the decision of how the aggregate planning problem will be solved. In particular, the each company needs to decide whether to follow a chase, level, or combination plan, as described later in this section.


Strategic planning is the process of establishing corporate goals and objectives along with the plans to accomplish them. Tactical planning is the process of selecting the methods of achieving organizational objectives. There is no clear demarcation between strategic and tactical plans. The strategic-tactical dimension is a continuum with classification sometimes depending on the vantage point. For example, an organizational decision to diversify is strategic, while a resulting decision to enter a specific market may be tactical with respect to the diversification strategy. However, the decision to enter a specific market normally is classified as strategic, although at a lower level than the general diversification decision. Similarly, the president of a multi-division corporation may view the purchase of a bank of numerically controlled machines by a division as tactical, while the plant manufacturing manager may view the same decision as strategic.

Strategic planning begins by defining the organization's mission with answers to the following questions:

1. What is the nature of the present and future environments?

2. What are the philosophy and basic values of the organization?

3. What is the organization's business today and what should it be five or ten years from now?

4. What is the function of the firm’s output; what needs do the company's products and services fill?

5. Who are the organization's customers?

6. What are the primary factors that will enable the organization to survive and prosper; i.e., what are its competitive strengths?

7. What factors hinder its growth and prosperity; i.e., what are its weak­nesses?

8. What changes are required the organization's present range strategic goals have and what are the milestones on the route from position to its future position when its long been achieved?

Although production inventory management personnel participate in long-range and strategic planning by specifying the capacity requirements for pro­posed plans, they devote most of their time and effort to tactical decisions in the medium and short range. While recognizing the strategic impact of some decisions, this book examines production inventory management (PIM) activities in the context of the long-, medium-, and short-range time spans as does most literature in this field... (there's much more!)

eBook: Closed-Loop-Planning — $3.00 Buy Now

eBook Topics: An Integrated Set of Useful Articles
Closed-Loop Planning
How to Test and Fine-Tune Strategic and Tactical Plans so that Resources are Only Expended on Achievable Results.
Managing Uncertainty
Making and Keeping Promises that are Realistic and Achievable is a Vital Skill Needed at Every Organizational Level.
Available-To-Promise Inventory can be Strategically Projected Using the Tools of Master Scheduling by Aligning Production Plans and Sales Plans.
Rough-Cut Capacity
Projected Resource Constraints are used to Modify Production Schedules to Assure that Available-To-Promise Inventory will Meet Customer Demands.
Detailed Capacity and Material Plans become Actionable, Unanticipated Constraints are Communicated Immediately to the Scheduler.
When the Goal is Zero Inventory, the Method is JIT. Only Buy or Build to Match Real Orders. Inventory Backlog must be Zero as well!
Theory of Constraints
TOC can be seen as Similar to JIT but has a much Wider Application. Once Identified, Constraints are Exploited until it is Aleviated.
Developing Effective Work Relationships is Essential when Communication is central to the Success of Management Metrics.




ERP-MRP Evolution…  
Keeping Promises...
ERP & Hoshin Kanri…  
Responsible Action...
ERP Implementations…   
Employee Involvement...
Profit-Ability Improvement...  
Overcoming Resistance...
Profit-Ability Management Principles...  
Developing Organizational Integrity…
People, Empowerment & Profit-Ability…  
Turning Communication Into a System...
Hoshin Kanri & Deming's Plan-Do-Check-Act...  
Identifying the Heart of What Really Matters...

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