intro to supply chain Taitt chapter 3

Rough Cut Capacity Planning RCCP

Major Capacity Planning Tool A mid range capacity planning module used to check the feasibility of the master production schedule Converts MPS from the production needed to the capacity required, then compares it to capacity available

Capacity Requirement Planning CRP

Major Capacity Planning Tool A short range capacity planning module used to check the feasibility of the Material Requirements Plan (MRP)

Resource Requirement Planning RRP

Major Capacity Planning Tool A long range capacity planning module used to check whether aggregate resources (labor & manpower) are capable of satisfying the APP

Multilevel BOM

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component

Distribution Requirement Plan DRP

A time phased inventory requirements in a distribution network The function of determining the need to replenish inventory at branch warehouse A logical extension of the MRP system and ties physical distribution to the manufacturing planning and control system

Planning BOM

An artificial grouping of items or events in BOM format used to facilitate master scheduling and material planning

Case Production Strategy

Basic Production Strategy Adjusts capacity to meet demand Firm hires and lays off workers to match finished output to demand Finished goods inventory remains constant Works well for make to order firms Airplane companies do this

Mixed Production strategy

Basic Production Strategy Maintains stable core workforce while using other short term means, such as overtime, subcontracting and part time helpers to manage short term demand EX) construction companies/retail stores at holiday seasons

Aggregate Planning Strategies- Supply Options

Change inventory levels Change Capacity

Long Range supply chain planning

involves planning for actions such as the construction of facilities and major equipment purchase executive level

Short Range Supply Chain Planning

Detailed planning process for components and parts to support the master production schedule Planner, 1st line supervisor

Developing an Aggregate Production Plan

Determining the demand for each period covered by the aggregate planning horizon Determining the available capacity for each period covered by the aggregate planning horizon ID any constraints which may influence the plan Determining the direct labor and material costs and the indirect manufacturing costs for each product ID or developing strategies and contingency plans to manage the potential upside or downside in the market Agree on a plan that best meets the planning goals and objectives

Terms Used in MRP

Gross Requirement Net Requirement Projected On-Hand Inventory Planned Order Release Firmed Planned Order Scheduled Receipt Time Bucket Parent Components Planning Factor MRP Explosion Pegging Lot Size Safety Stock

Aggregate Production Plan (APP)

Hierarchical planning process that translates annual business, marketing plans, and demand forecasts into a production plan for a product family* in a plant or facility the planning horizon of APP is at least one year and is usually rolled forward by 3 months every quarter Product Family= products that share similar characteristics Primary purpose is to establish production rates that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable

Single Integration Solutions

Implementation of ERP System Pick all the desired applications from a single vendor

Best of Breed

Implementation of ERP system Pick the best application for each individual function Disadvantage- software may not integrate well but may not be a major issue in the future

Aggregate Planning Strategies- Demand Options

Influencing Demand Backordering during high demand periods Counter seasonal product mixing

Enterprise Requirement Planning System ERP

Information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database Provides a mean for supply chain members to share info so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories

Supply Chain Planning

Responsible for determining how best to satisfy the requirements created by the demand plan It's objective is to balance supply and demand in a way that realizes the financial and service objectives of the company Usually hierarchal and can be divided into 3 broad categories: Long range, intermediate range, short range

the 3 major ERP Providers

SAP Oracle Microsoft

Intermediate Range Supply Chain Planning

Shows the quantity and timing of end items Mid levels

Closed Loop MRP

Synchronizes the purchasing with the master production schedule System feeds back info about completed manufacture and materials on hand into the MRP system Called a closed loop MRP because of its feedback feature

Master Production Schedule (MPS)

a detailed disaggregation of the APP, listing the exact end items to be produced by a specific period More detailed than APP and easier to plan under stable conditions Planning horizon is shorter than APP, but longer than the lead time to produce the item

MRP Explosions

The process of converting a parent item's planned order releases into component gross requirements

Planned Time Period

Time Fencing From the end of the firmed time period to the end of the planning horizon -the planning system is free to create or make changes to planned orders in this time period based on the data and planning logic determined by the company

Firmed Time Period

Time Fencing From the current date out several weeks into the future -Established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system -Recommended changes must be reviewed and approved by the MPSer or an authorized person

Time Fencing

Used to minimize the impact of changes in the MPS Firmed Time Period Planned Time Period

Implementing ERP systems

1) Best of Breed 2) Single Integrator Solution

Available to Promise (ATP)

A calculation to provide a response to customer order inquiries, based on product availability Represents the uncommitted portion of a company's projected available inventory to support customer order promising Methods of calculating: -discrete ATP= (on hand + supply - ordered) per period - Cumulative ATP= current period - all future ordered/ forecast demand until next mps quantity

Material Requirements Planning (MRP)

A computer based materials management system that calculates the exact quantities, need dates, and planned order releases for subassemblies, component parts and materials required to manufacture a final product Requires: 1-the independent demand info (finished product forecast) 2-parent-component relationships form BOM 3-Inventory status of final product and each of components and materials 4-Planned order releases (output of MRP)

Manufacturing Resource Planning (MRPII)

A computer based system that can create detailed production schedules using realtime data Coordinates the arrival of materials with the availability of machine and labor Used as a module for more extensive ERP

Sales and Operations Planning (S&OP)

A process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage Definitive statement of the company's plans for the near to intermediate term

Change Capacity

APP strategy- Supply Options Vary production output through overtime or idle time Vary workforce size by hiring or layoff Using part time workers Subcontracting

Change Inventory Levels

APP strategy- Supply Options increase inventory lvls--> build stock in advance of demand in order to use available capacity Decrease Inventory lvls--> temporarily reduce inventory below safety stock levels during peak demand periods to meet customer requirements

Counter Seasonal product mixing

APP strategy- demand options Develop a product mix with antithetic (seasonal) trends that level the cumulative required production capacity ex) lawnmowers and snowblowers

Backordering during high demand periods

APP strategy- demand options accept demand greater than supply capabilities

Influencing Demand

APP strategy- demand options make sure it aligns to available production capacity -advertising -promotional planning -pricing

Advantages/ Disadvantages of MRP

Advantage: -Provides planning information Disadvantage: -Loss of visibility -ignores capacity and ignores shop floor conditions

Enterprising Requirements Planning ERP

An extension MRPII and includes DRP which determines the need to replenish finished product inventory at branch warehouses Typically implemented through a software platform of integrated functional modules, facilitating the sharing of real time info and collaboration across multiple business functions necessary for the supply chain to operate efficiently and effectively

Level Production Strategy

Basic Production Strategy Relies on a constant output rate while varying inventory and backlog according to fluctuating demand Firm relies on fluctuating finished goods and backlogs to meet demand Works well for make to stock firms

Single BOM

Display of components that are directly used in a parent item, together with the quantity required of each component Shows only the relationships one level down Independent: -The external demand for an item that is unrelated to the demand for other items -The demand for these items is forecasted and can be affected by trends, seasonal patterns, and market conditions Dependent: -The internal demand for items that are assembled or combined to make up the final product -Demand for these items is based on the demand of the final product in which the parts are used, by using the planning factor

The Bill of Materials (BOM)

Document that shows an inclusive listing of all component parts and assemblies making up the final product Single BOM Multilevel BOM

Basic Production Strategies

Level Production Strategy Case Production Strategy Mixed Production Strategy

Scheduled Receipt

MRP Term A committed order awaiting delivery for a specific period

Firmed Planned Order

MRP Term A planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change

Safety Stock

MRP Term A quantity of stock planned to be in inventory to protect against fluctuations in demand or supply Over planning supply versus demand can be used to create safety stock

Planned Order Release

MRP Term A specific order for a specific item and quantity to be released to the shop or to the supplier

Gross Requirement

MRP Term A time phased requirement prior to netting out on hand inventory and lead time

Parent

MRP Term Item generating demand for lower level components

Lot Size

MRP Term Order size for MRP Logic

Components

MRP Term Parts demanded by a parent

Projected On hand inventory

MRP Term Projected closing inventory at end of a period Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts form planned order releases

Pegging

MRP Term Relates the gross requirements for a component part to the planned order releases of the parent item, so as to ID the sources of the item's gross requirements

Planning Factor

MRP Term The number or quantity of each component or material needed to produce a single unit of the parent item

Net Requirement

MRP Term The unsatisfied item requirement for a specific time period Gross requirement for period minus current on hand inventory

Time Bucket

MRP Term Unit of time/ time period used in MRP (days, weeks, months)

Capacity Planning

Organizations must balance the production with capacity Directly impacts how effectively the organization deploys its resources in producing goods Major Capacity Planning Tools: -Resource Requirement Planning -Rough Cut Capacity Planning -Capacity Requirement Planning

Business Plan

Provides the company's direction and objectives for the next 2 to 10 years It is updated and reevaluated annually