Chapter 4

Benefits of : ERP system and collaborative planning

1. Paper reduction 2. savings in time 3. other efficiency improvements -Requires the company to open it records to its suppliers

Three important principles for production planning:

1. Work from sales forecast and current inventory levels to create an "aggregate" ("combined") production plan for all products 2. Break down aggregate plan into more specific production plans for individual products and smaller time intervals 3. Use production plan to determine raw material requirements (Material Requirements Planning MRP)

Standard costs

1. normal costs of manufacturing a product, standard costs are calculated from historical data, factoring in any changes in manufacturing that have occurred since the collection of the historical data. Note: usually always outdated, based on historical information

3 reasons why ERP fails

1. workers are not properly trained 2. doesn't consider the cultural environment 3.

rough-cut planning

A common term in manufacturing for aggregate planning.

repetitive manufacturing

A manufacturing environment in which production lines are switched from one product to another similar product.

on-time performance

A measure of how often a supplier meets agreed-upon delivery dates (used in supply-chain management metrics).

supply chain

All of the activities that occur between the growing or mining of raw materials and the appearance of finished products on the store shelf.

Perfomance measurements

Metrics - show the effects of better supply chain management

Capacity

The amount of an item that can be produced. ex: maximum amount of bars that can be produced

lead time

The cumulative time required for a supplier to receive and process an order, take the material out of stock, package it, load it on a truck, and deliver it to the manufacturer.

vertical integration

The extent to which a company produces the components and assemblies used in the products it manufactures.

MRP record

The standard way of showing the materials requirements planning (MRP) process on paper. 1. shows results of MRP calculations 2. Creates planned orders to meet dependent requirements

initial order lead time

The time needed for the supplier to fill an order (used in supply-chain management metrics).

cash-to-cash cycle time

The time that elapses from when suppliers are paid for raw materials to cash is collected from the customer (used in supply- chain management metrics).

Purchasing orders

create purchasing orders and transmitted to qualified suppliers

materials management planning (MRP)

determines the amount and timing of raw material orders.

lot sizing

determining production quantities and order quantities

aggregate planning

disaggregated to generate detailed production schedules

production planners

employees who interact with the inventory system and the sales forecast to determine how much to produce, they also aggregate products into product groups to reduce the number of variables they must consider when developing a production plan

Make-to-order: (2nd general approach to production)

item produced to fill specific customer orders - made or configured to customer specifications (suits, airplanes) Ex: customization for a customer - nike ID

Make-to-stock: (1st general approach to production)

items made for inventory (the "stock") in anticipation of sales orders - most consumer products (cameras, books, canned food) (note): most consumer products are made this way

Assemble-to-order: (3rd general approach to production)

items produced using a combination of make-to-stock and make-to-order processes (computers, kitchen cabinets),the final product is assembled for a specific order from a selection of make-to-stock components. Ex.For example, computers are a typical assemble-to-order product

bill of material (BOM)

list of the materials (including quantities) needed to make a product Ex: BOM can be used to calculate how much of each raw materials is required to produce a finished product. (must be broken down into the smallest units possible-(individual products)

Production

manage daily operations 1. What should we be producing? 2. What staffing do we need?

initial fill rate

the percentage of an order that the supplier provided in the first shipment.

sales and operations planning (SOP)

the process of determining what the company will produce. Inventory levels are inputs to this process.

sales forecasting

the process of predicting future demand for a company's products. ex: how much did we sell last year?

what is the goal of production planning?

to schedule production planning ,economically so a company can ship goods, meet the delivery date, in a cost effective manner.

Repetitive manufacturing

typically have production lines that are switched from one product to another similar product. (note): production lines are scheduled for a period of time, rather than for a specific number of items, although it is possible to estimate the number of items that will be produced over a period of time.

Detailed Scheduling

Detailed plan of what is to be produced, considering machine capacity and available labor 1. a key decision in detailed production scheduling is determining how long the production runs for each product should be Ex: one product to another - NRG A to NRG B