Parametric

Production
planning
GROUP-2

Production Planning Process

Process
Planning

Strategic
Capacity
Planning

Aggregate
Planning

How much & when

to produce

Methods for Aggregate Planning

Intuitive

Approach

Analytical

Approach

Transportation
Linear

method of linear programming

Decision Rule (LDR)

Management
Parametric
Search

Coefficients Model (MCM)

Production Planning (PPP)

Decision Rule (SDR), etc.

Introduction

Parametric Production Planning postulates the existence of two

linear feed back rules.

Rule 1: Provide number of workers

Rule 2: Production Rate

Many sets of parameters are applied to a likely sequence of

forecasts and sales to provide many series of work force and
production level decisions.

The evaluation of each set of parameter Is performed by costing

out the series of decision by the cost structure of particular firm.

PPP provide answers very close to optima provided by linear

programming and the linear decision rule.

When applied to more complex models, it provide more profitable

results than the other methods.

The Development of Rules

The linear decision rule approach of two rules:

Long-Term Resource

Short-Term Resource

First Rule: Allows adjustment of long term resource, work force, to the underlying
trends in demands

Second Rule: Allows rapid adjustment of short term resource, overtime or undertime to the short term fluctuations in demand

Work force on hand at the end of preceding period as the base in work force rule

Calculation of desired long term resource Conversion of work force to a lowest

unit cost production rate Base for the second rule

The Work Force Rule

WR = (1-A)Wo + AWD
WR= estimated work force
A=Parameter between 0 and 1
WD= Workforce desired to meet the future sales

Number of worker should be employed in a period is sum of

worker already on hand and number of worker that would be
employed if costs of hiring and laying off could be ignored.

Value of A depends upon cost of hiring, if high A is low almost

zero and vice verse otherwise.

The whole idea is determining a optimum value of A by the cost of

the firm only as long as there is no change in the cost structure.

WD is determined by converting the series of sales forecast into

number of workers best able to produce those quantities. Thus we
get a series of workforce and hence weighted averages are used.

The Work Force Rule

For
periodic weighted averages, concave functions are preferred
that will provide decreasing weights for the forecast of increasing
distance.

bi=Bi/(

bi = weight applied to ith period in future

B = parameter between 0 and 1

Summation bi = 1

K function for converting a forecast measure into forecast

measure in worker

W1 = W0 + A(

I = period number

E = planning horizon

The Work Force Rule

To prevent the extreme inventory positions between ideal and

actual inventory a compensating term is added which can be
constant, linear, square root or any other suitable function.

Because bi and A will cause the inventory to be built up or down

in response to the needs to smooth production.

K(I*-I0)

I*= ideal inventory

The Production Rule

Except for the change in the base from which we measured

discrepancy, the production rule is very similar to work force rule.

Here K-1 function is used as optimal number in units to produce w

workers.

Heuristic Nature of Parametric Production

Planning

Heuristic- When there is no proof, the answer is Optimal

Three significant steps in PPP which might be called Heuristic

First: Restricted production plans produced by

ad-hoc period-by-period decision rules

non-linear functions of existing work force

those which require parameter value outside the range of zero and one

Second: Search process used to select the best parameter values

The relative efficiency of different search techniques depends on the nature of

universe being searched

Third: inclusion of the insights of the planner into the process of screening the
numerical answers to make sensible decision

Screening process might consider physical, economic and political constraints.