Production Planning and Scheduling
This domain covers forecasting, aggregate planning, the master schedule, MRP, capacity, and shop-floor sequencing.
Forecasting
Moving averages lag demand changes; exponential smoothing uses F(t+1) = αA(t) + (1−α)F(t). A larger α tracks shifts faster but is noisier. Judge methods by holdout error using MAD, MSE, or MAPE - not by how well they fit history. Seasonality needs decomposition; trend needs Holt's method.
Planning hierarchy
The aggregate plan works in product families over months; the master production schedule works in end items over weeks; MRP explodes the bill of materials into components by time bucket. MRP netting: net requirement = gross requirement − on-hand − scheduled receipts, then apply a lot-sizing rule. Lot sizing options include lot-for-lot, EOQ = √(2DS/H), periodic order quantity, and the dynamic Wagner-Whitin method. Capacity requirements planning then checks the resulting load against available capacity.
Scheduling
Priority rules: SPT minimizes average flow time and average work in process; EDD minimizes maximum lateness and maximum tardiness; critical ratio = time remaining ÷ work remaining. Johnson's rule sequences two machines to minimize makespan: pick the smallest time, place it in the earliest slot if it belongs to the first machine and the latest slot if it belongs to the second, then repeat. Theory of Constraints says identify, exploit, subordinate to, and elevate the bottleneck - do not balance capacity to demand.
Traps
Using EOQ when demand is lumpy; skipping the lead-time offset; confusing gross MPS quantities with net MRP requirements; assuming SPT meets due dates.
Worked example
D = 10,000 units/yr, S = $50 per order, H = $4 per unit-year: EOQ = √(2 × 10,000 × 50 / 4) = √250,000 = 500 units.