APICS

Horizontal and Vertical Dependency

Vertical - dependency of a component on its parent Horizontal - when components depend on each other

Four questions to be answered by a good planning system

What are we going to make; what does it take to make it; what do we have; what do we need

Available facilities

What plant, equipment, and labor will be available to process work

Hybrid strategy

demand is matched to some extent, production is partially smoothed and in the peak period some subcontracting takes place (one of many combinations)

Customer to supplier flow

design and demand information

Assemble-to-order MPS

easier when the production is planned at the component level.

MPS works with...

end items: It breaks down the production plan into the requirements for individual end items, in each family, by date and quantity. The production plan limits the MPS.

Materials Managemtn Objectives (2)

Maximize the use of the firms resources & Provide the required level of customer service

PAB formula for periods before demand time fence

PAB = prior period PAB or on-hand balance + MPS - customer orders

Product groups

establish product groups based on the similarity of manufacturing processes

three inputs to MRP systems

o Master production schedule o Inventory records o Bills of material

Parent-component relationship BOM

shows parent, components, amounts of each and their unique part numbers). An assembly is a parent. Items that comprise it are called its components.

PAC attributes

Short horizon, highest level of detail, reviewed and revised daily

If the cost of direct material is 60%, direct labor is 10%, and overhead is 25% of sales, what will be the improvement in profit if cost of direct material is reduced to 55%?

Start with 100% Revenue and subtract

Levels of the Manufacturing and control (MPC) system

Strategic business plan; Production plan; Master production schedule (Master Planning); Material requirements plan (Planning); Purchasing and production activity control (implementation)

Performance standard

- transforming company policies into objectives and specific goals; each goal should have target values

Three steps in preparing an MPS:

1. Develop a preliminary MPS. 2. Check the preliminary MPS against available capacity. 3. Resolve differences between the preliminary MPS and capacity availability.

Three general types of customer order errors occur:

1. Wrong product or specification. 2. Wrong amount (too little or too much). 3. Wrong shipping date (too early or too late).

MRP attributes

3-18 month horizon; high level of detail

MPS attributes

3-18 month horizon; higher level of detail, reviewed weekly or monthly

ATP calculation

ATP for period 1 = on hand - customer orders due before next MPS ATP for period 2 = MPS scheduled receipt - customer orders due before next MPS

Liquid zone.

Any change can be made to the MPS as long as it is within the limits set by the production plan. Changes are routine and are often made by the computer program without the need for input from the planner.

On average, a company has a 12-week production lead time and an annual cost of goods sold of $36 million. Assuming the company works 50 weeks per year: a. What is the dollar value of the WIP? b. If the lead time could be reduced to 5 weeks, and the annual cost of carrying inventory was 20% of the inventory value, what would be the annual savings?

COGs/50 , 12 x Weekly COGs x 1/2

Slushy zone

Capacity and material are committed to a less extent. Materials have been ordered and capacity established; these are difficult to change. However, changes in priorities are easier to change. Defined by the planning time fence.

Frozen zone

Capacity and materials are committed to specific orders, senior management's approval is usually required to make changes. Defined by demand time fence.

Four strategies for developing a production plan

Chase strategy Production leveling Subcontracting Hybrid strategy

Metrics offer

Control by superiors, reporting, learning, and improvement - link strategy to operations

Product tree Bill of Materials (BOM)

Convenient way to think about bills. Not used much except for teaching and testing.

Six major challenges to production control

Customer satisfaction; Large supply chains; Shortened product life cycles; Abundant data; Narrowing margins; Increasing alternatives

Chase strategy

Demand matching: producing the amounts demanded at any given time. Inventory levels remain stable while production varies to meet demand - the firm manufactures just enough at any one time to meet demand exactly. Low carrying costs, but volatile operating costs (ex. a restaurant)

Product description

Describes the components used to make the product, and the subassemblies at various stages of manufacture

Objectives of MRP

Determine Requirements and Keep priorities current

How might you alter the production plan?

Hire/fire or overtime/short time; build up inventory; subcontracting; lease new equipment

Production plan

How to satisfy demand & implement strategic business plan. Quantities that need to be produced; desired inventory levels; resources needed and their availability

Physical Supply & Distribution

Involves transportation, dist. inventory, warehousing, packaging, materials handling, and order entry

Strategic Business Plan attributes

Low level of detail; reviewed annually or biannually; based on long-range forecasts

Final assembly schedule MPS

Master production scheduling is done at the component level, for example, the base color and tint level. The final assembly takes place only when a customer order is received.

MRP: Determine Requirements

Must determine: what to order, how much to order, when to order, and when to schedule delivery.

Shift in supplier relations

Mutual analysis for cost reduction; product design; and enhanced info flow

Process specifications

Operations required to make the product, their sequence, necessary equipment and accessories, and standard time required to perform each operation

Bills of Material Structure

Overall design for arrangement of bills of material files. Though different departments use bills of materials for different purposes, there can only be one structure designed to satisfy most needs- although it can have different formats.

If MPS is not realistic...

Overload, poor delivery, high WIP inventory, poor customer service, and loss of credibility in planning system

PAB formula for periods after demand time fence

PAB = prior period PAB + MPS - greater of customer orders or forecast

5 Basic Inputs to the manufacturing planning & control system

Product description; Process specifications; Time needed; Available facilities; Quantities required

To get the most profit, a firm must...

Provide the best customer service; the lowest production costs, the lowest inventory investment, and the lowest distribution costs

How do MPC levels differ

Purpose; Horizon; Level of detail; and cycle/frequency. For each level, you must establish priorities, determine capacity, and decide how to balance the two

MPS judged by three criteria

Resource use, Customer service, & cost

Quantities required

This informaiton comes in the form of forecasts, customer orders, the the material requirements plan

Level Production Plan

Total production = total forecast + opening backlog - ending backlog

Inventory Records

Two kinds of information needed - (1) planning factors (order quantities, lead times, safety stock and scrap) - does not change often. (2) Status of each item - how much is available, how much is allocated, what is available for future demand - dynamic

Bills of Material

a listing of all the subassemblies, intermediates, part, and raw materials that go into making the parent assembly showing the quantities of each required to make an assembly - what is needed to make ONE unit, each part is defined by its form, fit, and function and is assigned a unique number

Master Production Schedule (MPS)

a plan for the production of individual end items - breaks down the production plan to show, for each period, the quantity of each end item to be made. Objective is to balance the demand set by the marketplace with the availability of materials, labor, and equipment of manufacturing.

Sales and Operation Planning (SOP)

a process for continually revising the strategic business plan and coordinating plans of the various departments. Cross-functional, the forum in which the production plan is developed, a plan for company resources that facilitates strategic plan

subcontracting

always producing at the level of minimum demand and meeting any additional demand through subcontracting. Lowers production costs but high purchase costs

Postponement

another application of assemble-to-order, described as "a product design strategy that shifts product differentiation closer to the consumer by postponing identity change to the last possible supply chain location" - think printer power cables

Projected available balance (PAB)

calculated based on whichever is greater: customer orders or forecast. Calculated in one of two ways, depending on whether the period is before or after the demand time fence.

rough-cut capacity planning

checks whether critical resources are available to support the preliminary master production schedules

Bill of material processor

computer software program that organizes and maintains the bills of material structures and their linkages.

Materials Management

concept of having one department responsible for the flow of materials, from supplier through production to consumer

Why "make-to-stock"

constant and predictable demand; few product options; short delivery times demanded by the marketplace; Product has a long shelf life

Production leveling

continually producing an amount equal to the average demand. Smooth level of operation, high carrying costs or possible shortages

The MPS is not a...

forecast of demand. The MPS must be realistic, achievable, and reflect a balance between required and available capacity. It is not meant to be rigid.

Enterprise resource planning (ERP)

framework for organizing, defining, and standardizing the business process necessary to effectively plan and control an organization - whole enterprise (not just prod.) taken into account

Inventory Management

inventories are materials and supplies carried on hand either for sale or to provide material or supplies to the production process - provide a buffer against the difference in demand and production

Work in process

inventory decouples an operation from succeeding operations. not only makes up a portion of the COGS but also has to be purchased at the beginning of production to be processed into finished goods - expected to be half the value, on average

demand time fence

is the number of periods, beginning with period 1, in which changes are not accepted due to excessive cost caused by schedule disruption

Production plan attributes

low level of detail, 6 to 18 month horizon, reviewed monthly or quarterly

manufacturing resources planning (MRP II)

manufacturing planning and control system is a master game plan for all departments in the company - it the fully integrated planning and control system that coordinates between marketing and production

Performance measure

must be both quantified and objective and contain at least two parameters

Independent demand

not related to the demand for any other product - must be forecast b/c not related to other demands

What do you need for a "make-to-stock" plan

o Forecast by period for planning horizon o Opening inventory o Desired ending inventory o Any past-due customer orders Goal: minimize carrying and backorder costs

What do you need for an assemble to order plan

o Forecast by period for the planning horizon o Opening backlog of customer orders o Desired ending backlog

Why "Make-to-order"

o Goods are produced to customer specification o The customer is willing to wait while the order is being made o The product is expensive to make and store o Several product options are offered

MPS major functions

plan capacity & material requirments; aid in making order promises, link production planning to manufacturing

Material Requirements Plan (MRP)

plan for the production and purchase of the components used in making the items in the MRP: qualities needed and when manufacturing intends to make of use them

Available to promise (ATP)

portion of a firm's inventory and planned production that is not already committed and is available to the customer. Calculated by adding scheduled receipts to the beginning inventory and then subtracting actual orders scheduled before the next scheduled receipt

Production planning

production must be able to meet the demand of the marketplace; involves forecasting, master planning, material requirements planning, and capacity planning

Supplier to customer flow

products or services

Dependent Demand

related to the demand for another product - can be calculated b/c directly related to demand for other assemblies or products.

Priority

relates to what products are needed, how many are needed, and when they are needed - the marketplace establishes priorities

Purchasing and Production Activity Control (PAC)

represent the implementation and control phase of the production planning and control system: Purchasing controls the flow of materials into the factory - PAC plans and controls those materials as they go through the factory

Implementation and control

responsible for putting into action and achieving the plans made by production planning

The MPS is the meeting ground for ...

sales and production. It provides a plan from which realistic delivery promises can be made to customers. If adjustments have to be made in deliveries or the booking of orders, they are done through the MPS.

Why assemble to order

several product options exist, and customer is not willing to wait until the product is made. Order is received from a customer they assemble the component parts from inventory according to the order. Company does not build an inventory of finished goods -instead it has a backlog of unfilled customer orders

Multilevel BOM

shows logical groupings of parts into subassemblies based on the way product is assembled. Shows same product as single level bill and product tree, but single-level components have been expanded to their components

Strategic Business Plan

statement of the broad direction of the firm and shows the kind of business the firm wants to do in the future. Includes markerting, finance, production, and engineering

Basic elements of the supply chain

supply, production, distribution

Engineer-to-order

the customer's specifications require unique engineering design or significant customization - Long delivery lead time

Make to order

the manufacturer does not start to make the product until a customer's order is received - less lead time because the product design is already established. Forward scheduling and finite loading best suited for this

Assemble to order

the product is made from standard components that the manufacturer can inventory and assemble according to a customer order - even less time

resource bill

the quantity of critical resources needed to make one average unit of the product group

Capacity

the quantity of work that labor and equipment can perform in a given period.

Make to stock

the supplier manufactures the goods and sells from a finished goods inventory (delivery lead time the shortest)

MRP: Keep Priorities Current

things change and MRP must be able to reorganize priorities and keep plans current.

MPS planning horizon

time span for which plans are made. It must cover a period at least equal to the time required to accomplish the plan

planning horizon

time span for which plans are made. It must cover a period at least equal to the time required to accomplish the plan

Make-to-stock MPS

usually a schedule of finished-goods items

Make-to-order MPS

usually a schedule of the actual customer orders

MRP & Other Manufacturing, Planning, and Control Functions

• MPS drives MRP • MRP is an input to production activity control (PAC) and purchasing. • MRP plans release and receipt dates for orders. PAC and purchasing must keep orders at due dates

What is needed for an MPS

● The production plan. ● Forecasts for individual end items. ● Actual orders received from customers and for stock replenishment. ● Inventory levels for individual end items. ● Capacity restraints.