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7/29/2019 Advanced Topics in Production Planning and Control
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KISHORE P CHAKRAVARTHY1 SEM M.TECH
IEM
ADVANCED TOPICSIN PRODUCTION
PLANNING &CONTROLASSIGNMENT
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1] CUSTOMER ORDER DECOUPLING POINT (CODP) was described as the point at
which the demand changed from independent to dependent. Describe what this
means and why is it important to managers?
Ans] CODP is the point at which demand changes from independent to dependent. It
is the point at which the firm, as opposed to the customer, becomes responsible for
determining the timing and quantity of material to be purchased made, or finished.
CODP is also known as ORDER PENETRATION POINT.
This point determines how far a customer order will enter into the supply chain.
Determining the CODP is a tradeoff between lead-time and value in the supply chain
2] A company has a capacity to produce 20 transtars 3000 per week. The firm
currently has booked following orders.
week orders 1 orders 2
1 196 196
2 220 225
3 210 230
4 192 202
5 150 145
6 165 170
7 135 139
8 80 80
9 45 47
10 50 51
11 0 0
A] Plot booked orders against capacity by week.
B] Assuming the following transactions in week 1, 198 were shipped. Orders for 5
transtars were cancelled in week 5. Additional order were booked for 5 in week 2,20 in week 3, 10 in week 4, 5 in week 7, 2 in week 9 and 1 in week 11. What does
the plot look like as of week 2?
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Ans]
According to the plot as on week 2 there is a decreasing trend in the orders.
3] Explain pyramid forecasting with an example.
Ans] Pyramid Forecasting is a forecasting technique that enables management to
review and adjust forecasts made at an aggregate level and to keep lower level
forecasts in balance. The procedure begins with the roll up (aggregation) of item
forecasts into forecasts by product group. The management team establishes a
(new) forecast for the product group. The value is then forced down
(disaggregation) to individual item forecasts so that they are consistent with the
aggregate plan. The approach combines the stability of aggregate forecasts and the
application of management judgment with the need to forecast many end items
within the constraints of an aggregate forecast or sales plan.
It ensures consistency as the forecast sources are integrated
Provides a logical framework for summing lower level forecasts and
distributing higher level forecast changes to individual products.
X-AXIS - WEEK.
Y-AXIS - ORDERS.
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EXAMPLE- PROBLEM FROM A PAPER WRITTEN BY NEWBERRY AND BHAME.
In the exmaple shown in fig 1, the 11 individual product items are divided into two
product lines. Two of these items, x 1 and x 2, form productline Z. these product
lines, X and Z 9, are included in product line z. These two product lines, X and Z,
represent the firms entire range of products.
Figure 2 shows the unit prices and initial forecasts for each level. The roll-up
process starts by summarizing the individual item forecast level( level 3) to provide
a total for each line(level 2). For the X line, the roll-up forecast is 13045
units( 8200+4845). The sum of the individual Z line items gives a forecast of 28500
Figure-2
Figure-1
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units. Note that the X line doesnt roll-up corresponds to the forecast of 15000 units
for the line. If theres a substantial disagreement at this stage, reconcilation could
occur or an error might be discovered. If theres no reconcilation at his level, we
neednt prepare independent forecasts for the lines. If dollar forecasts are required
at level 2, prices at level 3 can be used to calculate an average price.
To roll-up to the level 1 dollar forecasts, the average prices at the line level are
combined with the line roll-up forecasts. The total of
$778460[(13045*16.67)+(28050*2000)] is less than independent business forecast
of $950000. For illustrative purposes, well assume management has evaluated the
business forecast and roll-up forecast and has decided to use $900000 as the
forecast at level 1. The next task is to make the line and individual item forecasts
consistent with this amount. To bring about the consistancies, we use the forcing-
down process. The ratio between roll-up forecast at level 1($778460) and the
management total($900000) is used to make the adjustment.
The forecasts at all the levels appear in figure 3. The results are consistent forecasts
throughout the organization, and the sum of the parts is forced to equal the whole.
Note, however the process of forcing the consistency needs to be approached with
caution. In the example, forecasts at the lower level are now higher than they were
originally and incorporate the plans at the higher levels. Even though the sum of the
parts equal the whole, its possible the people responsible for the forecast wont
own the number. They mustnt be made to feel theyre simply being given an
allocation of someone elses wish list.
Figure-3
Forced forecast (x) =
15082 units
Forced forecast (z) =
32429 units
Forced forecast (x 1) =