Key Production Planning Methods

Why This Matters

Production planning sits at the heart of industrial engineering—it's where theory meets the factory floor. When you're tested on these methods, you're really being evaluated on your understanding of inventory management trade-offs, demand-supply synchronization, constraint identification, and waste elimination principles. These aren't isolated techniques; they form an interconnected system where the Master Production Schedule feeds into Material Requirements Planning, which connects to Capacity Requirements Planning, all while Lean and JIT philosophies shape how efficiently the whole operation runs.

Don't fall into the trap of memorizing definitions in isolation. The exam will ask you to compare methods, identify when to apply each approach, and explain the underlying logic. Know what problem each method solves, what inputs it requires, and how it connects to other planning tools. A question might ask why JIT fails without reliable suppliers, or how TOC differs from Lean in its improvement philosophy—you're being tested on systems thinking, not vocabulary recall.

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Demand-Driven Scheduling Methods

These methods translate customer demand into actionable production schedules. The core principle: work backward from what customers need to determine what, when, and how much to produce.

Master Production Schedule (MPS)

• Bridges demand and production—converts sales forecasts and customer orders into a specific production timeline with quantities and due dates
• Drives downstream planning by providing the primary input for MRP calculations and capacity assessments
• Time-fenced structure protects near-term schedules from changes while allowing flexibility in longer horizons

Aggregate Planning

• Medium-term capacity strategy—typically covers 3-18 months and determines optimal production rates, workforce levels, and inventory targets
• Balances chase vs. level strategies by deciding whether to adjust capacity to match demand or maintain steady production with inventory buffers
• Minimizes total cost across hiring/firing, overtime, inventory holding, and stockout expenses

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Material and Capacity Coordination

These methods ensure you have the right resources available at the right time. The underlying logic: production promises mean nothing if materials aren't available or machines can't handle the load.

Material Requirements Planning (MRP)

• Calculates dependent demand—uses the Bill of Materials (BOM) to "explode" finished product requirements into component and raw material needs
• Time-phases orders by working backward from due dates using lead times to determine when to release purchase and production orders
• Core equation: $\text{Net Requirements} = \text{Gross Requirements} - \text{Scheduled Receipts} - \text{On-Hand Inventory}$

Capacity Requirements Planning (CRP)

• Validates MRP feasibility—converts planned orders into labor and machine hour requirements to identify overloads
• Identifies bottlenecks by comparing required capacity against available capacity at each work center
• Informs tactical decisions about overtime authorization, subcontracting, or schedule adjustments when capacity falls short

Economic Order Quantity (EOQ)

• Optimizes order size by balancing ordering costs (setup, processing) against holding costs (storage, capital tied up)
• Classic formula: $EOQ = \sqrt{\frac{2DS}{H}}$ where $D$ = annual demand, $S$ = ordering cost, $H$ = holding cost per unit
• Assumes stable demand—works best for independent demand items with predictable consumption patterns

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Pull-Based and Flow Systems

These methods minimize inventory by producing only what's needed, when it's needed. The philosophy: inventory is waste that hides problems—reduce it to expose and solve root causes.

Just-in-Time (JIT) Production

• Eliminates buffer inventory—materials arrive precisely when needed, reducing holding costs and space requirements
• Exposes system weaknesses because without safety stock, quality problems and equipment failures immediately halt production
• Requires operational prerequisites: reliable suppliers, short setup times, consistent quality, and stable schedules

Kanban System

• Visual pull signal—cards or containers authorize production/movement only when downstream processes consume inventory
• Controls WIP levels by limiting the number of Kanban cards in circulation; fewer cards = lower inventory
• Self-regulating mechanism that automatically adjusts production pace to match actual consumption rates

Production Leveling (Heijunka)

• Smooths production mix—instead of batching (all Product A, then all Product B), produces small quantities of each product repeatedly
• Reduces demand amplification by creating predictable, stable schedules that minimize the bullwhip effect upstream
• Enables JIT success because level schedules allow suppliers to deliver smaller, more frequent shipments reliably

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Continuous Improvement Philosophies

These methods provide overarching frameworks for systematically improving production performance. The distinction: they differ in where they focus improvement efforts and how they define "better."

Lean Manufacturing

• Eliminates eight wastes—defects, overproduction, waiting, non-utilized talent, transportation, inventory, motion, and extra processing (remember: DOWNTIME)
• Value stream focus maps entire process flows to identify non-value-added activities from the customer's perspective
• Cultural transformation requiring employee engagement, continuous improvement (kaizen), and respect for people

Theory of Constraints (TOC)

• System throughput focus—identifies the single constraint limiting overall output and subordinates all other decisions to exploiting it
• Five Focusing Steps: identify the constraint, exploit it, subordinate everything else, elevate the constraint, repeat
• Drum-Buffer-Rope scheduling paces production to the constraint (drum), protects it with time buffers, and ties material release (rope) to constraint pace

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Quick Reference Table

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Self-Check Questions

1. Which two methods both address inventory optimization but use fundamentally different demand assumptions? Explain when you'd apply each approach.

2. How does the Master Production Schedule connect to both MRP and CRP? Trace the information flow between these three methods.

3. Compare and contrast Lean Manufacturing and Theory of Constraints. Where would each philosophy focus improvement efforts in a production system with scattered inefficiencies versus one clear bottleneck?

4. Why does JIT production require Heijunka (production leveling) to succeed? What happens to supplier relationships and shop floor stability without leveled schedules?

5. An FRQ describes a company using MRP but experiencing frequent stockouts despite accurate BOMs and lead times. What complementary method should they implement, and why? Consider both capacity and demand variability factors.