CPIM Execution and Control of Operations
zone location
a stock location system in which items are assigned to a particular area of a warehouse, but not assigned a specific place inside of that area
floating (random) location
a stock location system in which items are stored randomly in order to better utilize space
fixed (preasigned) location system
a stock location system in which the items are always stored in the same place
input/output control
a technique for capacity control where planned and actual inputs, and planned and actual outputs, are monitored
operations sequencing
a technique for short-term planning of actual jobs to be run in each work center based upon capacity and priorities
manufacturing overhead
all other manufacturing costs (indirect materials, indirect labor, factory utilities, and depreciation of factory buildings, equipment, and technology)
manufacturing overhead for job-order costing
allocated to each job based allocation base (usually direct labor hours) multiplied by a predetermined overhead rate; if predetermined overhead rate is $25 an hour, overhead for job which requires 4 hours is $100
predetermined overhead rate
allocates overhead costs to product or jobs (i.e. $25 per direct labor hour); allows manufacturing to value completed jobs before the end of the accounting period
nonmanufacturing costs
also known as selling, general, and administrative costs (SG&A)
ABC classification
an inventory classification system in which items are given A, B, or C item status
cycle counting
an inventory count that takes place on a daily basis on a few parts, done to improve inventory management and control
MRP-based scheduling
applies to batch processing and batch flow processing; work orders are released to push materials through production based on pre-established schedules; transaction intensive
activity-based costing (ABC costing)
assigns nonmanufacturing costs if possible to products rather than to general and administrative expenses; not used for financial reporting; exludes some overhead costs, such as security system costs and clerical supplies, as they are not easily assigned to products; uses multiple cost pools based on particular design or marketing costs; gives a truer picture on individual product profitability
shop packet
contains the work order as well as other information useful to manufacturing (drawings, manufacturing instructions, BOMs, routing information, material issue tickets, tool requisition authorizations)
absorption costing
costing method that allocates fixed factory overhead to products; costs are not expensed as cost of goods sold until a product is sold; often used exclusively for external financial reporting
predetermined overhead rate calculation
(estimated total manufacturing overhead costs) / estimated total amount of allocation base)
quality control purposes
- meet standards consistently - maintain improvement gains - promote analysis of process variation - enable workers to achieve self control
MRP-based scheduling elements
- operations necessary to complete item - sequence and routing of operations - start and finish dates of each operation - time estimates for each operation - work centers where operations are performed
key elements and goals of Lean systems
- sufficient volume in a repetitive environment - production rate goals - reduction in WIP - level production schedules - mixed-model production
TOC scheduling steps
1) create network diagram 2) form product network 3) assess capacity utilization 4) schedule bottleneck resources 5) schedule non-bottleneck resources
steps for authorizing order releases in MRP-based scheduling
1) receive authorization to release order 2) check tooling and material availability 3) check capacity requirements and availability 4) release order
managing steps for TOC scheduling
1) scheduling the drum 2) exploiting the drum 3) material release, or rope 4) proactive management of buffers (have the right amount of WIP) 5) elevate the drum (increase capaciity)
re-engineering lead times
1) separate lead time into queue and non-queue time 2) convert non-queue time to days 3) assign queue time based on routing distance to next work center 4) calculate lead time as sum of queue and non-queue times
constraint/bottleneck management (five focusing steps)
1. identify the constraint 2. exploit the constraint 3. subordinate everything else to the constraints 4. elevate the constraint (make it more productive) 5. start over when a new constraint emerges
drum-buffer-rope
a planning and control system that regulates the flow of work-in-process materials at the bottleneck or the capacity constrained resource (CCR) in a productive system; the drum is the bottleneck and sets the pace; a buffer of inventory is placed at the bottleneck; as work is done at the bottleneck, the same rate of material is released to the floor (rope)
critical ratio
a priority work order dispatching rule based on the ratio of time remaining until the due date to the time needed to complete the remaining work
manufacturing planning and control (MPC)
a closed-loop information system that includes the tactical and operational planning functions of production planning (S&OP), master production scheduling, material requirements planning, and capacity requirements planning
bottleneck
a facility, function, department, or resource whose capacity is less than the demand placed on it; a constraint
Gantt chart
a form of bar chart which lists tasks and shows the time scale to which they should be completed, as well as actual progress of each task; in manufacturing, helpful to show and resolve conflicts between work stations
kanban
a method of just-in-time production that uses standard containers or lot sizes with a single card attached to each; when the container is empty, the card is used to signal that a new lot must be ordered or manufactured
heijunka
a scheduling method in which production is level in both quantity and mix; for every 5 As, produce 1 B, etc.
predictive maintenance
based on nondestructive testing and statistical analysis; objective is to predict when required maintenance should be scheduled before a machine breaks down, and perform maintenance in a way that minimized interference with machine availability
variable costing
costing method that separates fixed factory overhead from variable manufacturing overhead costs (indirect labor and materials); FFO costs are reported as period costs; goods sold from inventory do not include FFO; used for management tool, not for financial reporting
product costs
costs allocated to product units upons receipt into inventory; expensed (costs released from inventory) when product is sold
job-order costing
costs are assigned to specific jobs, as in job shop environments; high variation
selling costs
costs necessary to secure and deliver customer orders (sales salaries, commissions, travel, advertising, shipping, depreciation of delivery equipment, finished goods warehouses)
process costing
costs of an operation or department are accumulated and averaged across all units during a period; also used for homogenous high-volume cellular and flow products; low variation
period costs
costs that are expensed in the current period; usually selling and administrative costs
pull system (Lean)
demand is pulled from customer orders only; demand is leveled so work may proceed smoothly; processes are linked to customer demand through visual tools; flexibility of people and machines is maximized
slack time
due date - present date - total operation time remaining
administrative costs
executive, organizational, and clerical costs
operation setback chart
graphical display that uses product structure, routing, and lead time data to show all of the operations needed to make a part and the time phasing of load on work centers
takt time
in Lean systems, it is the rate of customer demand
pacemaker
in Lean, the pacemaker resource is the scheduling point for all processes in a line or cell; sets a pace of production that maintains takt time
store (supermarket)
in Lean, the stockroom of raw materials, subassemblies. or finished goods
preventative maintenance
includes activities such as adjustments, replacements, and basic cleanliness; objective is to prevent machine breakdowns and lost time, maintain machine productivity and consistency of output, and prolong the life of machines
resource planning
intermediate-term planning function in which the overall level of required resources is determined; evaluates the feasibility of the production plan developed during S&OP
point-of-use inventory
inventory placed in the production process near where it is used
direct labor costs
labor that can be traced to a product
functional layout
layout is determined by process, i.e. drills in one area, lathes in another, etc.; used in intermittent / job shop production
vertical loading
loading method in which all work centers must be using all of their capacity at all times
horizontal loading
loading method in which the highest priority production order is scheduled on all of its work centers, then the job with the next highest priority, etc.
infinite loading
loading technique which assumes capacity is infinite at any work center
finite loading
loading technique which assumes there is a definite limit to capacity at any work center
product layout
location of equipment and workers accommodates the flow of product in a high volume operation; used in repetitive and flow environments
business planning
long-term planning related to the strategic plan; translates the strategic objectives into more quantifiable objectives and goals, usually in monetary terms; bridges the strategic plan with planning at the master planning of resources level
flow process
machines and operators handle a standard and usually uninterrupted material flow; layout is assembled to facilitate flow production; scheduling is rate based; includes batch flow (beer, pharmaceuticals), repetitive production (discrete units), and continuous production (gasoline, steel, fertilizer, etc.)
cell layout
machines and work areas are positioned together in order to form a work cell for a particular product or item
batch processing
manufacturing technique in which parts are accumulated and processed together in a lot
direct material costs
material that can be traced to a product
operation overlapping
operation 20 begins before the entire lot is finished with operation 10
meaningful identification (part numbers)
part number conveys information about the identified item
non-meaningful identification (part numbers)
part number does not convey information; often short and sequential
distribution planning
process that provides two types of support to S&OP and master scheduling: 1) planning of inventory levels at distributed stocking points at the product family and end item levels, and 2) providing inputs on distribution resources necessary to support the S&OP and MPS through logistics resource requirements planning
fixed-position layout
product is stationary, and people and tools move to the product; used in ETO / project manufacturing
intermittent / job shop production
production process in which product is moved from station to station to different functional departments (sanding, drilling, etc.) in lots; a wide variety of routings are used; often associated with MTO environment
logistics resource requirements planning (LRRP)
provides inputs to S&OP plan regarding distribution resource adequacy; basically, a capacity check for distribution at the S&OP level to make sure adequate resources are in place to distribute the inventory that is planned; LRRP checks resource availability for inventory investment, transportation, warehouse space, and labor and equipment
Juran trilogy
quality planning, quality control, and quality improvement
components of manufacturing lead time
queue set up run wait move
backward scheduling
scheduling technique in which activities are scheduled back from the due date
forward scheduling
scheduling technique in which activities are scheduled through a known start date through the finish date
synchronous scheduling
scheduling that focuses all operations to the constraint of the system
batch production
similar to intermittent production, but variety of product is lower and volume is higher; manufacturing technique in which parts are accumulated and processed together in a lot; with large batches, shares some similarity to mass production processes
slack time per operation
slack time / number of operations remaining
advanced planning and scheduling (APS)
software used to optimize planning of demand for products and supply for resources; determines whether the MPS is optimal
push system
system in which orders are planned ahead of time and released according to schedule; uses standard MPC systems to plan and execute production
dispatching
the act of production activity control releasing work orders to production
demand management
the analysis of demand using demand forecasts, order management, and customer relationship management
operations scheduling
the assignment of starting or completion dates to operations to show when these operations must be done if the order is to be completed on time
allocation base (cost accounting)
the basis upon which an entity allocates its overhead costs; takes the form of a quantity, often direct labor hours, but also can be machine hours used, kilowatt hours consumed, or square footage occupied
cost accounting
the branch of accounting concerned with recording and reporting business costs by departments, activities, and products
execution and control of operations (ECO)
the closed-loop monitoring of daily operations; includes production activity control (PAC), input/output control, and order sequencing
visual control
the control of authorized levels of activities and inventories in a way that is instantly and visibly obvious
priority planning
the function of determining what material is needed and when
master planning of resources (MPR)
the intermediate-level planning functions of MRC which include S&OP, master scheduling, and resource planning and rough-cut capacity planning
dispatch list
the listing of manufacturing orders in priority sequence
lot splitting
the lot is split into two lots, and the operation runs concurrently on two machines or work stations
strategic planning
the planning related to long-term direction-setting objectives relating to products, customers, and markets; asks "Who do we want to be?"
master scheduling
the process for which the master schedule is generated; establishes due dates for end items
priority control
the process of communicating start and completion dates to manufacturing departments in order to execute a plan
transfer batch
the quantity of an item moved between sequential work centers during production
detailed scheduling and planning (DSP)
the short-term planning functions including material requirements planning (MRP) and capacity requirements planning (CRP)
cycle time
the time between the completion of two discrete units
planning time fence
the time fence which delineates when planning and purchasing have started on the master schedule; as it is inside the lead time of the item, the master production schedule can be changed but flexibility is somewhat limited
demand time fence
the time fence which delineates when production would have started on the master schedule; changes to the master production schedule are very difficult to make inside this time fence
sales and operations planning (S&OP)
translates the strategic and business plans into production rates that meet company goals; planning is done at the family level
manufacturing overhead for process costing
used predetermined overhead rate based on number of units flowing through department
cost control
using procedures to monitor the progress of operations against preauthorized budgets and taking action to minimize costs
rough-cut capacity planning (RCCP)
validates resource availability for the master production schedule
vendor managed inventory (VMI)
vendor managed inventory (VMI) a purchasing/inventory management system in which the supplier has access to inventory management records in order to manage the supply of inventory for the customer