Production and Operations Planning
This domain tests the planning hierarchy from aggregate plan to shop floor, the mechanics of MRP, and the logic of lean and theory of constraints.
Planning hierarchy
Strategic business plan, then sales and operations planning (aggregate, 3-18 months, monthly cycle: demand review, supply review, financial reconciliation, executive decision), then master production schedule (end items, weeks), then MRP (components), then scheduling and dispatching. Capacity is checked coarsely by rough-cut capacity planning at MPS level and in detail by capacity requirements planning at MRP level.
Aggregate strategies
Level: constant output, inventory absorbs demand swings. Chase: output matches demand, hiring and layoff cost rises. Hybrid mixes both with overtime and subcontracting. Choose by comparing inventory carrying cost against change costs.
MRP logic
Gross requirements come from the MPS and from parent-level planned orders. Net requirement = gross requirement - on hand - scheduled receipts + safety stock. Planned orders are released offset by the item lead time, sized by lot-sizing rules (lot-for-lot, fixed quantity, period order quantity, EOQ). Low-level coding ensures each item is processed after all parents.
Lean and constraint logic
Takt time = available production time / customer demand. Kanban authorises replenishment by signal. Value stream mapping separates value-adding from non-value-adding time; the seven wastes include overproduction, waiting, transport, overprocessing, inventory, motion and defects. Theory of constraints follows five steps: identify, exploit, subordinate, elevate, repeat. The bottleneck sets throughput, protected by a drum-buffer-rope schedule. OEE = availability x performance x quality.
Worked example
A component has week-5 gross requirement 500, on hand 120, scheduled receipt 80, safety stock 50, lead time one week, fixed lot size 200.
- Net = 500 - 120 - 80 + 50 = 350.
- Round up to lots of 200: planned order receipt 400, released in week 4.
- Projected ending inventory = 120 + 80 + 400 - 500 = 100, which is above the 50 safety stock, so no further order. If safety stock were 120, net would be 420, still two lots of 400 would leave just 100, so a third lot or a different lot-size rule would be needed.
Traps that cost marks
Leaving safety stock out of netting, or adding it a second time. Exploding a BOM without offsetting lead times. Assuming MRP respects capacity. Using chase strategy where setup costs dominate. Quoting OEE without defining availability, performance and quality consistently. Confusing the drum (bottleneck schedule) with the buffer.