Intended learning outcomes: Present the concepts resource requirements planning (RRP) and aggregate plan. Explain sales and operations planning as an iterative master planning process.
Continuation from previous subsection (5.2.2)
Once the production plan is established, the process of resource requirements planning (RRP) begins. Resource requirements are calculated for each product family in the production plan through simple explosion of product structures (bills of material) for components requirements (dependent demand) and routing sheets for capacity requirements. To do this, the process uses bills of resources or product load profiles (see Figure 1.2.5.2).
If gross requirement for each purchased item calculated in this way is weighted by purchase price, the result is a good approximation that can serve as the procurement budget. Other resource requirements can be estimated analogously. For the planning horizon covered by the production plan, there now result:
- Components requirements, procurement plan for components and materials, and the corresponding procurement or materials budget
- Capacity requirements and the capacity budget (direct and overhead costs)
- Budget for overhead costs (overhead budget)
In the case of rough-cut planning, sales and operations planning produces an aggregate plan based mainly on aggregated information (rough-cut business objects such as product families, rough-cut product structures, aggregate forecast and demand [that is, forecast and demand on product families]) rather than on detailed product information.
It is in the case of rough-cut planning in particular that long-term planning lends itself well to the simulation and the what-if analysis of several variants of the production plan.[note 512] For this, company management (or a team caring about supply chain coordination) comes together for a half-day meeting, for example, in order to simulate the various possible patterns of demand and to examine their repercussions with regard to the realization of production and procurement in the supply chain. As some components or operations have not been considered, the budgets can by multiplied by historical figures to obtain expected budgets. In a similar process, sensitivity analysis can take into consideration the effect of demand variation and thus control the whole process with regard to feasibility. Management will then choose and release one of the variants calculated in the above manner and initiate the necessary measures to fulfill the production plan in a timely fashion. For capacity, blanket orders can be given to external production, and orders can be made for the purchase of machinery and buildings or the acquisition of personnel. To procure goods or capacity, blanket orders can be placed with suppliers, or existing supply agreements can be modified.
Figure 5.2.2.1 shows a typical iterative algorithm used within sales and operations planning to determine the production plan and the procurement plan for salable products. It accords with the concept of integrated resource management: All resources are planned simultaneously.
| Plan | Content | |
|---|---|---|
| 1 | Sales plan: | Determine forecast or demand pattern. |
| 2 | Production plan, procurement plan for salable products, and inventory plan: | Set inventory policy with regard to change of production rhythm and inventory level. Determine the inventory levels and calculate the corresponding production plan (analogically, the procurement plan for salable products) or vice versa. |
| 3 | Resource requirements planning and budgeting: | Calculate the procurement budget for components and materials, the capacity budget, and overhead costs budget. Take into account macro costs due to change of production rhythm and inventory. |
| 4 | next iteration | Compare budget figures with actual possible realization and, if necessary, begin again with steps 1, 2, and 3 for each desired variation. |
Fig. 5.2.2.1 Iterative master planning: integrated resource management.
As mentioned above, this technique usually handles rough-cut business objects of the type discussed in Section 1.2.5, so that various iterations can be calculated rapidly. Resource requirements planning of this kind (rolling planning) must be repeated regularly (for example, monthly), and must include the whole planning horizon.
Continuation in next subsection (5.2.2c).
Course section 5.2: Subsections and their intended learning outcomes
5.2 Master Planning — Long-Term Planning
Intended learning outcomes: Describe demand management, sales and operations planning as well as resource requirements planning. Explain master scheduling and rough-cut capacity planning. Disclose supplier scheduling: blanket order processing, release, and coordination.
5.2.1 Demand Management: Bid and Customer Blanket Order Processing and Demand Forecasting
Intended learning outcomes:: Describe demand management, customer bid, order success probability and customer blanket order. Present some aspects of demand forecasting.
5.2.2 Sales and Operations Planning
Intended learning outcomes: Present the concepts of sales plan, production plan, procurement plan, inventory policy, and inventory plan.
5.2.2b Resource Requirements Planning (RRP) and Iterative Master Planning
Intended learning outcomes: Present the concepts resource requirements planning (RRP) and aggregate plan. Explain sales and operations planning as an iterative master planning process.
5.2.2c Iterative Master Planning — an Example of Integrated Resource Management
Intended learning outcomes: Disclose an example of iterative master planning by comparing three production plans, with zero, two or four changes in production rhythm per year.
5.2.3 Master Scheduling — The Master Production Schedule (MPS)
Intended learning outcomes: Produce an overview on master scheduling and planning time fence. Present in detail the master production schedule (MPS) as a disaggregated version of the production plan. Explain the first task for establishing a master production schedule, which is the selection of the master schedule items.
5.2.3b Master Scheduling — Break Down the Production Plan Quantity for a Product Family into Quantity for Each Product of the Family.
Intended learning outcomes: Explain the second task for establishing a master production schedule, which is the break down the production plan quantity for a product family into quantity for each product of the family.
5.2.3c Rough-Cut Capacity Planning (RCCP)
Intended learning outcomes: Describe the third task for establishing a master production schedule, which is the process of rough-cut capacity planning (RCCP).
5.2.4 Supplier Scheduling: Blanket Order Processing and Blanket Release
Intended learning outcomes: Produce an overview on supplier scheduling. Explain the systematics of blanket orders and blanket releases with quantities and time periods.
