Chapter 2 Questions

What information is needed to develop a make-to-stock production plan?

-Forecast by period for the planning horizon -Opening inventory -Desired ending inventory -Any past due customer orders (backorders)

In the short run, how can capacity be changed?

-Hiring / firing / layoffs. Overtime / short time. Shifts added / removed -Inventory can be built up in slack periods and sold in high demand periods -Subcontracting or lease extra equipment

What is a hybrid strategy? Why is it used?

-Hybrid strategy: using a combo of the 3 pure strategies: chase, level, and subcontracting. Used to essentially get the best of both worlds -Many possible combos with its own characteristics -Production management is responsible for finding the best combo that minimizes the sum of all costs involved, providing level of service required, and meeting financial and marketing objectives

What two changing conditions led to the development of ERP systems?

1. Computers and IT is faster, more reliable, and more powerful. People in companies understand the advantages in speed, accuracy, and capability of integrated computer based management systems. 2. Movement towards integration of knowledge and decision making in all aspects of direct and indirect functions and area that impact materials flow and materials management. Includes internal functions and upstream (supplier information) and downstream (distribution and delivery) activities. This integration is considered SCM.

What is the general procedure for developing a level production plan in a make-to-order environment?

1. Total the forecast demand for the planning horizon 2. Determine the opening backlog and the desired ending backlog 3. Calculate the total production required 4. Calculate the production required 5. Spread the existing backlog over the planning horizon according to due date per period

What are the steps in developing a make-to-stock production plan?

1. Total the forecast demand for the planning horizon 2. Determine the opening inventory and the desired ending inventory 3. Calculate total production 4. Calculate the production required each period 5. Calculate the ending inventory for each period

What are four questions a good planning system must answer?

1. What are we going to make or provide to customers? 2. What does it take to make it? 3. What do we have? 4. What do we need?

What kind of production environment would you expect to see if a company used a chase strategy? What if it uses a level strategy?

Chase strategy: producing the amounts demanded at any given time. Inventory remains stable, production varies to meet demand. Can hire, fire, add shifts, overtime, undertime, etc. (these all change costs) Ex: farmers, post office, restaurants Advantages: -inventories kept to a minimum, no stockpiles. -Avoids carrying inventory costs (these are typically high costs) Level strategy: continually producing an amount equal to the average demand. Sometimes inventories can build up, sometimes demand is greater than inventory. Uses resources at a uniform rate and produce the same amount each day. Amount produced each month (sometimes week) will vary though because the number of working days vary. Production leveling is sometimes necessary for production of seasonal demand because the costs of idle capacity, and workforce changes would be severe if a company employed a chase strategy Advantages: -Results in a smooth level of operation that avoids the costs of changing production levels -Do not need excess capacity to meet peak demand -Do not need to adjust workforce, can build a stable workforce Disadvantages: -Inventory will build up in low demand periods → high carrying costs -Not enough inventory in high demand periods

What is ERP?

Enterprise Resource Planning (ERP): A framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage. Includes applications for planning, scheduling, costing, etc. for all organization layers. Encompasses the total company, not just manufacturing like MRP and MRP II. ERP allows for tracking orders and other important planning and control info throughout the entire company. ERP is capable of allowing managers to share data between firms, meaning that these managers can potentially have visibility across the complete span of the supply chain.

What does the concept of "green production" mean? How will it potentially impact production planning?

Green Production: environmental impacts, energy conservation, material usages (i.e. waste reduction, reuse, recyclability, etc.), and scarcity of various resources. Conclusions from these discussions can help in the product and process design and may show the most effective use of production resources

What is the difference between make-to-order and assemble-to-order? Give an example of each.

Make-to-order: manufacturer does not start to make the product until a customer's order is received. Usually standard inputs but sometimes custom. Because there is little design time required and inventory is held as raw material delivery lead time just includes manufacture, assemble, and ship. Examples: hand tailored clothing, machinery, or anything customized Assemble-to-order: the product is made from standard materials that the manufacturer can inventory and assemble according to a customer order. Delivery lead time includes assemble and ship Examples: cars, computers

What is MRP II?

Manufacturing Resource Planning (MRP II): Fully integrated plan for all departments in the company. Provides coordination between marketing and production. Provides the mechanism for coordinating the efforts of marketing, finance, production, and other departments in the company. MRP II is a method for the effective planning of all the resources of a manufacturing company.

Describe the responsibilities and inputs of the marketing, production, finance, and engineering departments to the strategic business plan.

Marketing and Sales: responsible for analyzing the marketplace and deciding what markets to be served, the products supplied, desired levels of customer service, pricing, promotion strategies, etc. Finance: responsible for deciding the sources and uses of funds available to the firm, cash flows, profits, return on investment, and budgets Production: must satisfy demand → uses machines, equipment, labor, and materials effectively Engineering: responsible for research, development, and design of new products or modifications

Define capacity and priority. Why are they important in production planning?

Priority: relates to what, how much, and when the products are needed. That marketplace establishes priorities, manufacturing tries to meet that demand. Capacity: the capability of manufacturing to produce goods and services Long term capacity depends on resources (machines, labor, financial resources, and availability of resources) Short term capacity is the quantity of work that labor and equipment can perform in a given period Capacity (resources) and priority (demand) should be equal/balance

Material Requirements Plan Purpose? Planning Horizon? Level of Detail? Planning Cycle?

Purpose: Master Production Schedule (MPS): a plan for individual commodities to be produced in each time period such as production, staffing, inventory, etc. It is usually linked to manufacturing where the plan indicates when and how much of each product will be demanded. MPS drives the material requirements plan Maintain the desired level of customer service by maintaining finished goods inventory levels or by scheduling to meet customer delivery requirements. To make the best use of material, labor, and equipment To maintain inventory investment at the required levels MPS reconciles demand with the production plan and with the available resources to produce a plan that manufacturing can fulfill. MPS is concerned with what items will actually be built, in what quantities, and when, to meet expected demand. Planning Horizon: the longest cumulative or end-to-end lead time. Level of Detail: High (because it is developed for individual end items) Planning Cycle:

Production Activity Control Purpose? Planning Horizon? Level of Detail? Planning Cycle?

Purpose: Production activity control (PAC): represents the implementation and control phase of the production planning and control system. Production activity control (PAC) is responsible for planning and controlling the flow of work through the factory. Planning Horizon: short (day-month) Level of Detail: High (because it is concerned with individual components, workstations, and orders Planning Cycle: reviewed/revised daily

Production Plan Purpose? Planning Horizon? Level of Detail? Planning Cycle?

Purpose: Prime purpose: establish production rates that will accomplish the objectives of the strategic plan and the strategic business plan (inventory levels, backlogs, market demand, customer service, low-cost plant operation, labor relations, etc.) The production plan reconciles total forecast demand with available resources. It is intended to provide a framework in which detailed plans can be made in the MPS. The production plan represents a constraint on the total that can be produced for items in the family. Capacity is consistent with the production plan Planning Horizon: 6-18 months and reviewed monthly or quarterly. Level of Detail: Low Planning Cycle: reviewed monthly or quarterly.

Strategic Plan Purpose? Planning Horizon? Level of Detail? Planning Cycle?

Purpose: made by the senior management/board of directors it is statement of the major goals and objectives the company expects to achieve over the next 2 to 10 years or more. Makes a commitment to take various actions designed towards growth, defining and attracting customers, defining markets, and improving competitive and financial performance. Long-term. Planning Horizon: Level of Detail: Planning Cycle:

Business Plan Purpose? Planning Horizon? Level of Detail? Planning Cycle?

Purpose: the strategic plan that is in financial terms (including projected revenues, balance sheet, and income statement). Low level of detail because it is concerned with the general market and production requirements. Usually stated in dollars, not units. Usually reviewed every 6-12 months. Planning Horizon: Level of Detail: Low (because it is concerned with the general market and production requirements) Planning Cycle: reviewed every 6-12 months

What is a resource bill? At what level in the planning hierarchy is it used?

Resource bill: shows the quantity of critical resources (materials, labor, and bottleneck operations) needed to make one average unit of the product group. (used in resource planning). used in resource requirements planning. Here the resource bill is used for a single product.

What should a company's approach be to risks? What are some of the methods they can use to minimize the impact of negative risks?

Risk Management: establishes systems and measurements to try to quickly recognize risks and establish strategic mechanisms to minimize impacts from negative risks and take advantage of positive risks (opportunities)

Describe sustainability for production. What are some of the ways that a company can practice sustainability?

Sustainability: capability to continue (sustain) operations into the long term. Use less resources and produce less waste and, essentially, less cost -Recycling -Reusing -Remanufacturing (reverse logistics) -Reverse supply chain -Social Responsibility

What is Hoshin planning?

Tactical work plans are established for the visions to allow all parts of the organization to move systematically toward the overall goal. Developed by the Japanese. Steps of Hoshin Planning: 1. Making the plan for what you wish to improve or accomplish 2. Establishing subgoals 3. Communicating the plan in the organization 4. Measuring your results 5. Analyzing data from the measures and taking corrective action as needed