Introduction to operations and supply chain management 3e bozarth chapter 12

 Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.. Planning and Control Planning and co

Managing Production across the

Supply Chain

Chapter 12

 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

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.

Top-Down Model of Manufacturing

Planning and Control Systems

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

Link between S&OP

Master Schedule Record

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)

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.

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.

Available to Promise (ATP)

 Calculating ATP for the first week of the master schedule record:

Available to Promise (ATP)

 Calculating ATP for any subsequent week in which MPS > 0:

Partial Master Schedule Record

(Snowblowers)

Figure 12.4

Calculating ATP

Figure 12.5

Calculating ATP

Figure 12.6

Complete Master Schedule Record

(Snowblowers)

Figure 12.7

MPS Example (Backpacks)

Now Calculate Projected Ending Inventory and

Figure 12.8

Calculations (Backpacks)

 Calculating Ending Inventory:

 Calculating ATP:

MPS Example (Backpacks)

with ATP

What are the implications of the Master Production Schedule?

Figure 12.9

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.

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

Material Requirements Planning

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

Product Structure Tree

Figure 12.13

Lead Time

Chair Assembly (1 week)

Week 5

Week 4

If final assembly takes

one week, then we

must start

the assembly at the

beginning

of Week 4

Lead Time

Chair Assembly

Back Assembly

Leg Assembly

(1 week)

(1 week) Seats (2 weeks)

Week 5 Week 4

Lead Time

Chair Assembly

Back Assembly

Leg Assembly

(1 week) (1 week)

Week 3 Week 2

Week 1

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.

Material Requirements Planning

to determine what should be ordered when,

and how much to order.

Material Requirements Planning

Calculating the MRP Record

for Seats

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 =

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 =

MRP Records for Level 1 Components

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.

Partial MRP Records

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:

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.

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.

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.

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:

• The job is going to be late unless something changes.

 Jobs with the lowest Critical Ratio are scheduled

to go first.

Job Sequencing – Example 12.7

Table 12.1

Job Sequencing – Example 12.7

First come, first served

From Table 12.2

Job Sequencing – Example 12.7

Earliest Due Date

From Table 12.2

Job Sequencing – Example 12.7

Critical Ratio

From Table 12.2

Synchronized Planning and Control

Figure 12.22

DRP Example

(Snowblowers)

Downstream Supply Chain

Figure 12.23

Impact of Forecast Changes

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.

Synchronizing Plans

in the Supply Chain

Managing Production

Case Study

The Realco Breadmaster

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