XX. Planning Operations

As you recall from previous topics, there are two basic types of plans, strategic (where the organization wants to go) and tactical (how they plan to get there). These plans are translated into operational plans when the organization moves from concept to reality.

Strategic operations plans are created in four sequential steps: capacity planning, facilities location planning, process planning and facilities layout planning. After these plans are made the tactical operations plans are generated. The sequence of tactical plans is aggregate planning, master scheduling and then materials requirements planning.

A. Strategic Operations Planning

    1. Capacity Planning

Capacity planning builds upon sales estimates to anticipate demand that must be met during the period in question. Organizations need to determine if they are carrying excess capacity (too much plant, not enough sales) or need to expand capacity (too much demand for the size of plant). Excess capacity translates into excessive overhead costs, undercapacity either means demand is not being met, revenue is being lost.

In the short term, capacity can be expanded in a number of ways. Organizations can add a shift, increase overtime, rent additional space or equipment, or develop inventories of product during slack periods. Long term capacity can be increased through purchasing new equipment or facilities.

    2. Facilities Location Planning

These plans deal with the physical location and layout of the operations facility. The location is dependent on a number of external factors including taxation, access to appropriate labor and transportation, energy cost and distance from suppliers and customers. The optimal location will depend on each organization and the relative importance of each of the above factors.

The facility design may depend on how the inputs are received and the product shipped. If the inputs are offloaded from a railhead, the building shape will be different than if they are trucked in by semi. Another factor in layout is linked to the next planning set, the process to be housed.

    3. Process Planning

This is a difficult process of balancing methods of production with desired outputs. Critical decisions include the degree of custom work desired, the degree of automation, the routineness of the process, and the workflow itself.

    4. Facilities Layout Planning

The last strategic planning to be done is the actual layout of the equipment and workstations within the facility. Layouts can be done by process, product, or fixed- position. Process layouts keep components (like work centers and equipment) together according to similarity of function. With this layout a room may be set aside for system printers, copying machines and paper supply to consolidate the function of transferring electronic data to paper. Product layouts place components in progressive order of manufacture. A classic example is Henry Ford's first assembly line. The fixed-position layout keeps the product static and moves people and equipment to the product. Much of aerospace construction is based on this form.

B. Tactical Operations Planning

    1. Aggregate Planning

This is the overall "big picture" of operations for up to a year in the future. It is concerned with the production activities and necessary operating resources. This is a very general plan whose two basic decisions are the best production rate to adopt and the overall number of workers who must be employed for each period in the planning time frame.

    2. Master Scheduling

Master scheduling converts the general guidance of the aggregate plan into specific schedules of the quantity and type of items to be produced. It will detail where the items are to be produced, when they will be produced, the labor force level required and the resulting inventory.

    3. Material Requirements Planning (MRP)

Now that a detailed schedule is available, the precise amount and timeliness of the materials required for the process can be calculated. Purchasing and inventory decisions are made in this plan, as is the priority of the requirements. Computer software is now aiding the manager in creating a Just-in-Time (JIT) inventory system to minimize the amount of capital tied up in material inventory awaiting processing.

C. Flexibility as a Competitive Advantage

Even though it may appear at first glance that the preceeding operational planning sequence is very rigid and unbending, all good plans have some flexibility built into them. Creating a family of plans, each of which meets a specific environmental condition, can do this.

A related aspect of flexibility is building flexibility into the process itself. These flexible- manufacturing systems can customize the product through the aid of computer-aided design (CAD) and computer-driven manufacturing equipment. This allows firms to rapidly shift production within a given range to meet customer desires without excessive planning or retooling of the plant.


Copyright Information
Title: Planning & Operations (Lecture Notes)
Author: John Anderson  (Instructor)
University: National University
Course: MGT 409C- Principles of Management and Organization
Date: June 1, 2002 (Received)

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