ADVANCED TOPICS IN PRODUCTION PLANNING & CONTROL

ASSIGNMENT

KISHORE P CHAKRAVARTHY 1 SEM M.TECH IEM

1] CUSTOMER ORDER DECOUPLING POINT (CODP) was described as the point at which the demand changed from independent to dependent. Describe what this means and why is it important to managers? Ans] CODP is the point at which demand changes from independent to dependent. It is the point at which the firm, as opposed to the customer, becomes responsible for determining the timing and quantity of material to be purchased made, or finished. CODP is also known as ORDER PENETRATION POINT. This point determines how far a customer order will enter into the supply chain. Determining the CODP is a tradeoff between lead-time and value in the supply chain

2] A company has a capacity to produce 20 transtars 3000 per week. The firm currently has booked following orders. week 1 2 3 4 5 6 7 8 9 10 11 orders 1 196 220 210 192 150 165 135 80 45 50 0 orders 2 196 225 230 202 145 170 139 80 47 51 0

A] Plot booked orders against capacity by week. B] Assuming the following transactions in week 1, 198 were shipped. Orders for 5 transtars were cancelled in week 5. Additional order were booked for 5 in week 2, 20 in week 3, 10 in week 4, 5 in week 7, 2 in week 9 and 1 in week 11. What does the plot look like as of week 2?

Ans]

X-AXIS - WEEK. Y-AXIS - ORDERS.

According to the plot as on week 2 there is a decreasing trend in the orders.

3] Explain pyramid forecasting with an example. Ans] Pyramid Forecasting is a forecasting technique that enables management to review and adjust forecasts made at an aggregate level and to keep lower level forecasts in balance. The procedure begins with the roll up (aggregation) of item forecasts into forecasts by product group. The management team establishes a (new) forecast for the product group. The value is then forced down (disaggregation) to individual item forecasts so that they are consistent with the aggregate plan. The approach combines the stability of aggregate forecasts and the application of management judgment with the need to forecast many end items within the constraints of an aggregate forecast or sales plan. It ensures consistency as the forecast sources are integrated Provides a logical framework for summing lower level forecasts and distributing higher level forecast changes to individual products.

EXAMPLE- PROBLEM FROM A PAPER WRITTEN BY NEWBERRY AND BHAME.

Figure-1

In the exmaple shown in fig 1, the 11 individual product items are divided into two product lines. Two of these items, x 1 and x 2, form productline Z. these product lines, X and Z 9, are included in product line z. These two product lines, X and Z, represent the firms entire range of products.

Figure-2

Figure 2 shows the unit prices and initial forecasts for each level. The roll-up process starts by summarizing the individual item forecast level( level 3) to provide a total for each line(level 2). For the X line, the roll-up forecast is 13045 units( 8200+4845). The sum of the individual Z line items gives a forecast of 28500

units. Note that the X line doesnt roll-up corresponds to the forecast of 15000 units for the line. If theres a substantial disagreement at this stage, reconcilation could occur or an error might be discovered. If theres no reconcilation at his level, we neednt prepare independent forecasts for the lines. If dollar forecasts are required at level 2, prices at level 3 can be used to calculate an average price. To roll-up to the level 1 dollar forecasts, the average prices at the line level are combined with the line roll-up forecasts. The total of $778460[(13045*16.67)+(28050*2000)] is less than independent business forecast of $950000. For illustrative purposes, well assume management has evaluated the business forecast and roll-up forecast and has decided to use $900000 as the forecast at level 1. The next task is to make the line and individual item forecasts consistent with this amount. To bring about the consistancies, we use the forcingdown process. The ratio between roll-up forecast at level 1($778460) and the Figure-3 management total($900000) is used to make the adjustment.

Forced forecast (x) = 15082 units Forced forecast (z) = 32429 units Forced forecast (x 1) = 9480 units

The forecasts at all the levels appear in figure 3. The results are consistent forecasts throughout the organization, and the sum of the parts is forced to equal the whole. Note, however the process of forcing the consistency needs to be approached with caution. In the example, forecasts at the lower level are now higher than they were originally and incorporate the plans at the higher levels. Even though the sum of the parts equal the whole, its possible the people responsible for the forecast wont own the number. They mustnt be made to feel theyre simply being given an allocation of someone elses wish list.