Business School, Ghana Institute of Management
and Public Administration (GIMPA)
MATERIALS MANAGEMENT
Sarah Akua Mensah
2021 Academic Year
Second Semester
2. Production planning
Materials Management 1 Sarah Akua Mensah
2021/2022, Second Semester
Session objectives
At the end of this session, you should:
Know the need to match manufacturing priority with capacity
Know the major levels of planning and controlling (planning
hierarchy) in production
Demonstrate a good understanding of the basic production plan
strategies
Materials Management 2 Sarah Akua Mensah
2021/2022, Second Semester
Introduction
Manufacturing can be complex and in order to be
profitable a firm must organize its:
machinery,
equipment,
labor skills, and
materials
to make the right goods at the right time at right quality and do so
as economically as possible.
This requires a good planning and control system
Materials Management 3 Sarah Akua Mensah
2021/2022, Second Semester
Planning system questions
A good production planning must answer the following
questions of priority and capacity:
What are we to make?
How many are needed? Priority
When are they needed?
What does it take to make them?
What do we have? Capacity
What do we need?
Materials Management 4 Sarah Akua Mensah
2021/2022, Second Semester
The key is to match
Priority
What is needed, when, and how much
Capacity
Capability to produce what is needed and when
Priority Capacity
(Demand) (Resources)
Materials Management 5 Sarah Akua Mensah
2021/2022, Second Semester
Levels in planning and controlling
Strategic 2 – 10
Business Plan years
Planning Horizon
6 - 18
Production Plan months
Planning Master
3–8
Production months
Schedule
Planning cycle
Level of detail
Materials
(Frequency)
1 wk – 3
Requirement months
Plan
Implementation Production 1 day – 1
Activity Control month
Materials Management 6 Sarah Akua Mensah
2021/2022, Second Semester
Three Questions to ask at each
level
At each level, we need to decide:
1. What are the priorities?
What to produce?
How much?
When?
2. What is the available capacity?
3. How can the differences between priorities and capacities best be
resolved?
Materials Management 7 Sarah Akua Mensah
2021/2022, Second Semester
The strategic business plan
The strategic business plan is a very broad statement of
the major goals (marketing, finance, production, and
engineering) and objectives the company expects to
achieve over the next two to ten years or more
The level of detail is not high
Marketing makes decisions regarding products and
markets, levels of customer service, pricing, promotion
strategies, etc.
Materials Management 8 Sarah Akua Mensah
2021/2022, Second Semester
The strategic business plan
Finance makes decisions regarding sources and uses of
funds, cash flows, profit, return on investment, budgets,
etc
Production must satisfy the demands of the marketplace
It does so by using plants, machinery, equipment, labor, and
materials as efficiently as possible.
Materials Management 9 Sarah Akua Mensah
2021/2022, Second Semester
The strategic business plan
Engineering must work with marketing and production to
make decisions regarding the design of new products,
modifications to existing products and which can generate
the most profit
Materials Management 10 Sarah Akua Mensah
2021/2022, Second Semester
Production plan
Production management is concerned with the following:
Quantities of each product group to be produced in each period
Projected/desired inventory levels
Resources needed
Equipment
Labor
Material
Availability of needed resources
The plan must balance the resources available with
market demands
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2021/2022, Second Semester
Master production schedule (MPS)
The MPS shows, for each period, the quantity of each
end item to be made
MPS is based on actual customer orders and forecast
demand
Level of detail is higher than the Production Plan
Time period usually relatively shorter
Materials Management 12 Sarah Akua Mensah
2021/2022, Second Semester
More detailed planning and
controlling
Material Requirements Plan
End item requirements broken down into specific components –
what to make or buy, and when
Purchasing and Production Activity Control (PAC)
Execution plan, detailing specific orders to produce items from the
Material Requirements Plan
Purchasing involves items to be purchased rather than produced
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2021/2022, Second Semester
Capacity management
At each level of the planning and control system,
reconciliation with resources must be made
Must obtain the right resources or change the plan
Inadequate resources = missed production schedules
Resources significantly exceed planned production = idle
resources and extra cost
Materials Management 14 Sarah Akua Mensah
2021/2022, Second Semester
Developing the production plan
Some key questions that must be answered to develop an
effective planning strategy:
How flexible are the resources, both in quantity and timing?
Are “outside” resources available (subcontracting)?
Can we utilize inventory to meet demand?
Materials Management 15 Sarah Akua Mensah
2021/2022, Second Semester
Basic production plan strategies
Chase – vary production rates to meet changes in
demand
Often used when resources are flexible and inexpensive to
change
Level – establish average demand level and set
production rate to that level
Often used when resources difficult or very expensive to change
Subcontracting – minimum production and meeting
additional demand through outsourcing
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2021/2022, Second Semester
Basic production plan strategies
Hybrid – use a combination of some chase and some
level
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Example
No. of Units
Demand
Time
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Chase production
No. of Units
Chase Production
Demand
Time
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Level production
No. of Units
Level Production
Demand
Time
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Level production
No. of Units
USE Inventory
Level Production
CREATE Inventory
Demand
Time
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2021/2022, Second Semester
Subcontrating strategy
Subcontracting means always producing at the level of
minimum demand and meeting any additional demand
through subcontracting
The major advantage of this strategy is cost; the firm
avoids layoff and hiring costs associated with
inadequate/excess capacity
Materials Management 22 Sarah Akua Mensah
2021/2022, Second Semester
Subcontrating strategy
The main disadvantage is that the cost of purchasing
(item cost, purchasing, transportation, and inspection
costs) may be greater than if the item were made in the
plant
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Thank you very
much for your
attention!!!
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2021/2022, Second Semester
