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Managing Production across the Supply Chain

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1 Managing Production across the Supply Chain
Chapter 12

2 Chapter Objectives Be able to:
Explain the activities that make up planning and control in a typical manufacturing environment. Explain the linkage between sales and operations planning (S&OP) and master scheduling. Complete the calculations for the master schedule record and interpret the results. Explain the linkage between master scheduling and material requirements planning (MRP). Complete the calculations for the MRP record and interpret the results. Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities. Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

3 Planning and Control Planning and control – A set of tactical and execution-level business activities that includes master scheduling, material requirements planning, and some form of production activity control and vendor order management.

4 Top-Down Model of Manufacturing Planning and Control Systems
Figure 12.1

5 Master Scheduling Master Scheduling – A detailed planning process that tracks production output and matches this output to actual customer orders. Controls the timing and quantity of production for products or product families. Serves as the primary interface point for actual customer orders. Coordinates forecasted demand and actual orders with production activity. Serves as a tool for agreement between marketing and operations (but at a different level than S&OP).

6 Link between S&OP and MPS
Month: January February March Output: S&OP January (weeks) Push Mowers Self-propelled Riding MPS

7 Master Schedule Record
Forecasted demand Booked orders Projected inventory levels Production quantities Units still available to meet customer needs (Available to Promise)

8 Forecasted Demand vs. Booked Orders
Forecasted demand – A company’s best estimate of the demand in any period. Booked orders – Confirmed demand for products Projected Requirements = Maximum (Forecasted demand, Booked orders)

9 Master Production Schedule (MPS)
Master Production Schedule (MPS) – The amount of product that will be finished and available for sale at the beginning of each week. The MPS quantities drive more detailed planning activities, such as material requirements planning.

10 Ending Inventory Projected Ending Inventory – Best estimate of what inventory levels will look like at the end of each week based on current information.

11 Available to Promise (ATP)
Available to Promise – A field in the master schedule record that indicates the number of units that are available for sale each week, given those that have already been promised to customers.

12 Available to Promise (ATP)
Calculating ATP for the first week of the master schedule record:

13 Available to Promise (ATP)
Calculating ATP for any subsequent week in which MPS > 0:

14 Partial Master Schedule Record (Snowblowers)
Figure 12.4

15 Calculating ATP Figure 12.5

16 Calculating ATP Figure 12.6

17 Complete Master Schedule Record (Snowblowers)
Figure 12.7

18 MPS Example (Backpacks)
Figure 12.8 Now Calculate Projected Ending Inventory and Available to Promise

19 Calculations (Backpacks)
Calculating Ending Inventory: Calculating ATP:

20 MPS Example (Backpacks) with ATP
Figure 12.9 What are the implications of the Master Production Schedule?

21 Planning Horizon Planning Horizon – The amount of time the master schedule record or MRP record extends into the future. The longer the production and supplier lead times, the longer the planning horizon must be.

22 Material Requirements Planning
Material Requirements Planning (MRP) – A planning process that translates the master production schedule into planned orders for the actual parts and components needed to produce the master schedule items. Manages dependent demand inventory

23 Material Requirements Planning
MRP is based on: The bill of material (BOM) Backward Scheduling Explosion of the bill of material

24 Bill of Material for Chair
Bill of material (BOM) – A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. © 2010 APICS Dictionary Figure 12.12

25 Product Structure Tree
Figure 12.13 Planning Lead Time – The time from when a component is ordered until it arrives and is ready to use.

26 Lead Time If final assembly takes one week, then we must start
the assembly at the beginning of Week Chair Assembly (1 week)

27 Lead Time Which means that the major subassemblies and seats must be
Week 2 Week 3 Week 4 Week 5 Which means that the major subassemblies and seats must be done by the beginning of Week 4 ... Back Assembly (1 week) Chair Assembly Seats (2 weeks) (1 week) Leg Assembly (1 week)

28 Lead Time Week 1 Week 2 Week 3 Week 4 Week 5 Back Slats (2 weeks)
Side Rails (2 weeks) Back Assembly Crossbar (2 weeks) (1 week) Chair Assembly Seats (2 weeks) (1 week) Leg Assembly Legs (2 weeks) Crossbar (2 weeks) (1 week)

29 Lead-Time Key Points To have finished chairs at the beginning of Week 5 with no work in progress or finished inventory, we must begin production and order materials in Week 1. “Exploding” the bill of materials tells us when to order things and how many to order.

30 Material Requirements Planning (MRP)
Requires: Bill of material (BOM) Inventory record Master schedule to determine what should be ordered when, and how much to order.

31 Material Requirements Planning (MRP)
Gross Requirements Scheduled Receipts Projected Ending Inventory Net Requirements Planned Receipts Planned Orders

32 Calculating the MRP Record for Seats
Figure 12.16

33 Calculating the MRP Record for Seats (Key)
A: Mgmt needs 500 chairs at the beginning of week 5. B: Because the planning lead time is 1 week, the workers need to start assembling the chairs in week 4. C: The Gross Requirement for weeks 1-3 is zero because no chairs need to be assembled in those weeks. D: The Gross Requirement for week 4 is 500 from the MPS Start quantity in week 4. E: The Net Requirements for week 4 =

34 Calculating the MRP Record for Seats (Key)
F: Managers should plan on ordering enough to meet the net requirement in week 4. G: There is a two-week planning lead time, so they must release the order for seats in week 2. H: Ending Inventory for week 4 =

35 MRP Records for Level 1 Components
Figure 12.17

36 Calculating the MRP Record Quantities (Key)
I: There are 25 leg assemblies in inventory beginning in week 1. J: An order for 1000 is placed even though the net requirements are 475 units because 1000 is the minimum order quantity. K: No order is placed because there is more inventory (525) than the gross requirements (400) in week 5. L: There is a scheduled receipt for 250 units in week 1.

37 Partial MRP Records From Figure 12.18

38 Calculating the MRP Record Quantities (Key)
M: Because each leg assembly requires two legs, the gross requirements for legs in week 3 is 2,000 legs. N: Each back assembly requires two side rails. Therefore, there is a planned order for 300 back assemblies in week 5 that results in a gross requirement of 600 side rails in the same week. Crossbar Gross Requirements:

39 Advantages of MRP MRP is directly tied to the master production schedule and indicates the exact timing and quantity of orders for all components. MRP allows managers to trace every order for lower-level items through all the levels of the BOM, up to the Master Production schedule. MRP tells a firm and its suppliers precisely what needs to be made when.

40 Special Considerations
Organizational discipline Accurate information Uncertainty MRP nervousness – A term used to refer to the observation that any change, even a small one, in the requirements for items at the top of the bill of material can have drastic effects on items further down the bill of material.

41 Production Activity Control and Vendor Order Management
Emphasis shifts from planning to execution with capabilities to: Route and prioritize jobs going through the supply chain. Coordinate the flow of goods and materials between a facility and other supply chain partners. Provide supply chain partners with performance data on operations and supply chain activities.

42 Job Sequencing Job sequencing rules – Rules used to determine the order in which jobs should be processed when resources are limited and multiple jobs are waiting to be done. First come, first served Earliest due date Critical ratio Calculated as:

43 Job Sequencing Critical Ratio – One way to determine the order in which jobs should be sequenced. Critical Ratio = 1 Amount of task time equals the amount of time left. Critical Ratio < 1 The job is going to be late unless something changes. Jobs with the lowest Critical Ratio are scheduled to go first.

44 Job Sequencing – Example 12.7
Table 12.1

45 Job Sequencing – Example 12.7
First come, first served From Table 12.2

46 Job Sequencing – Example 12.7
Earliest Due Date From Table 12.2

47 Job Sequencing – Example 12.7
Critical Ratio From Table 12.2

48 Distribution Requirements Planning (DRP)
Distribution requirements planning (DRP) – A time-phased planning approach similar to MRP that uses planned orders at the point of demand (customer, warehouse, etc.) to determine forecasted demand at the source level (often a plant).

49 Synchronized Planning and Control
Figure 12.22

50 DRP Example (Snowblowers)
Figure 12.24

51 Downstream Supply Chain
Figure 12.23

52 DRP Example (Snowblowers)
Records are almost identical to MRP records with one exception: Instead of gross requirements, they show forecasted demand. Forecasted demand – the number of snowblowers each center expects to ship to retail customers each week. Activities at distribution centers are synchronized when the total weekly planned orders become forecasted demand in the factory’s master schedule.

53 Impact of Forecast Changes
Figure 12.25

54 Impact of Forecast Changes
When forecasted demand changes, managers will need to increase the master production schedules accordingly. DRP quickly translates downstream demand into upstream production decisions.

55 Synchronizing Plans in the Supply Chain
Figure 12.26

56 Managing Production Case Study
The Realco Breadmaster

57 Printed in the United States of America.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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