CPIM Part 2: Detailed Scheduling & Planning

What are the assumptions needed for the EOQ method to work? What is the formula?

Assumptions: - Demand is constant, known demand - Lot and batch production - Inventory costs are constant and known - Replenishment all at once Formula: SQRT of [ (2 x Annual Usage in Units x Order Cost) / (Annual Carrying Cost per Unit)]

Describe inventory in the service industry

Takes the form of goods that facilitate the delivery of the service to customers

Describe the Work Breakdown Structure (WBS):

A hierarchical description of a project in which each lower level is more detailed - Decomposed into the lowest level of tasks practical for tracking - Each task is assigned a unique code

Describe what Risk Pooling is, the effects and risks of each

A method often associated with the management of inventory risk. Manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product The assumption is that when demand is unexpectedly high in one location, it will rarely be high in other locations as well. Has the effect of reducing variability in demand Helps avoid having the wrong stocks in the wrong place Effects: Decreased inventory, decreased chances of stock outs, decreased carrying costs Risks: Longer customer lead time, higher transportation costs

What is the Processor-Dominated Scheduling Approach (PDS)

A method that schedules equipment (processor) before materials and facilitates scheduling in economic run lengths and the use of low-cost production sequences 4 steps: 1.) Prepare a finite capacity schedule for the process, using finite forward scheduling and production capacity 2.) Check the projected inventory to see if it is within the target minimum and maximum inventory levels 3.) Revise the production schedule (Revise forecast or accept forecast will not be met) 4.) Schedule the raw materials to meet the capacity schedule

Define MRP:

A set of techniques using BOM data, inventory data, and the MPS to calculate the requirements for materials. It makes recommendations to release and reschedule orders as needed Allows a firm to: - Ensure the availability of goods for production and customers - Reduce inventory costs and allow investments in competitive industries

Describe Transaction Management:

Accuracy of inventory records depends on a well-designed and executed transaction management system that has mapped all the transaction points in the flow of inventory where inventory records must be updated. Transactions may occur at: - Receipt - Returns - Put away - WIP Transactions - Transfer of FG's - Picking - Shipping - Customer returns

What are the short-term solutions to increasing capacity?

Add shifts Schedule overtime or weekends Increase workforce Cross-train employees Assign work to subcontractors Outsource Using equipment to increase capacity (adding another machine) Taking a lean approach, eliminate wasteful actions

What are the advantages and limitations of CRP

Advantages: - Reveals potential load imbalances - Verifies RCCP - Simulates effect of changes in planning factors - More detailed than MRP - Supports lead time leveling Limitations: - Not intended for daily operations - Requires extensive data - Provides approximations - Is subject to changes in the MPS - Assumes infinite loading

What are the 3 operations involved in an MRP Process?

BOM Explosion Lead Time Offsetting Calculation of gross and net requirements

What are the 3 challenges of inventory storage?

Capacity Utilization: Efficient rack and shelf systems Protection of Inventory from Damage or Theft: Designated areas for vulnerable stock Balancing accessibility with control: Centralized or decentralized location

Review the following capacity terminology:

Capacity: Capability of a worker, machine, work center, plant or organization to produce output per time period Capacity Planning: Process of determining amount of capacity required for future production; performed at an aggregate or product-line level (resource requirements planning), the master scheduling level (rough-cut capacity planning), and the material requirements planning level (capacity requirements planning) Capacity management: Establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules; executed at four levels: resource requirements planning, rough cut capacity planning, capacity requirements planning, and input/output control Capacity control: Measuring the production output and comparing it with the capacity plan and taking corrective actions to get back on plan if the limits are exceeded Theoretical capacity: The maximum output capability, allowing no adjustments for preventive maintenance, unplanned downtime, shutdown, and so forth Required capacity: (or capacity required) The capacity of a system or resource needed to produce a desired output in a particular time period Budgeted capacity: The volume/mix of throughput on which financial budgets were set and overhead/burden absorption rates established

What are the 3 goals project management is designed to meet?

Complete deliverables on time and within budget Produce deliverables that meet customer specifications and are accepted Use organizational resources effectively and efficiently

What does the project plan do?

Documents assumptions, facilitates communication, and documents the approved budget and schedule. Can affect overall project cost if done well. Scope baseline - Project scope statement - Work breakdown structure Project schedule Project Budget

ABC classification can use various different criteria. List some examples:

Dollar usage Criticality to processes or customers Potential for stock outs Quality Shelf Life

What is safety lead time?

Extending delivery timing Increases amount of inventory but it is held for a shorter time Ex: Product has a 2 week lead time and is needed in period 4. World normally be released in week 2, but with a 1 week safety time, release in week 1

Describe transactions in Lean Production Environments (Frontflushing, backflushing)

Frontflushing or pre-deduct processing: - Materials are removed from inventory, charged to the job, and then tracked from that point Backflushing or post-deduct Processing: - Materials are removed from inventory only after the finished good is completed - Number of transactions is reduced - Requires a very accurate BOM

List the most basic inputs and outputs of MRP. Also describe how MRP is implemented

Inputs: -MPS -BOM -Inventory Data -Planning Factors Outputs: -Planned Orders -Action Messages MRP is implemented through software, either stand-alone applications or processes integrated into manufacturing resource planning (MRP II) or ERP applications.

Inventory Turns, Average Age, and Days of Supply are 3 metrics used in aggregate inventory management. List the formulas for each:

Inventory Turns: Shows how quickly inventory investment is converted into revenue COGS / Average Inventory in $ Average Age: May point to inventory retention that risks obsolescence and loss of value 365 / Inventory Turnover Days of Supply: Shows how many days existing inventory will last Inventory OH / Average Daily Usage

What are ways to improve the MRP Performance?

Invest in educating employees about the MRP system - Encourage users to think beyond operations. How does the MRP system help the organization meet its strategic goals - Improve knowledge of MRP functionality to get full use of the investment - Emphasize and explain the need for accuracy in data input

Inventory costs are a key factor in determining how an item is purchased or manufactured. What are the costs that make up total inventory cost.

Item Cost: Unit price plus shipping and taxes Carrying Cost: Cost of capital (opportunity costs), storage, and risk Ordering Cost: Administrative tasks, receiving, checking, handling, setup and teardown Stock out Cost: Lost revenue and damaged perception

How is inventory accuracy maintained?

Item Records, Inventory Auditing (periodic and cycle),

Management Tasks in Detailed Scheduling and Planning

Keep materials flowing into, through, and out of operations processes Maintaining priorities under changing conditions - Changes in the MPS - Changes to WIP - Actions by suppliers

Describe load and what the inputs of load are:

Load is measured in standard units, hours, or output units Load comes from: - Open Orders - MRP Planned Orders - Other Sources

What are some of the MRP Performance Measures?

Orders released on time Shortage-caused downtime Excess Inventory Changes to PO's Orders released w/o materials Trends in action messages - It is important to consider factors outside the planners control when evaluating

Capacity Planning Performance Indicators include: -Performance to Schedule -Customer Service Ratings -Unbudgeted increases in costs -Orders declined due to lack of capacity -Quality problems -Inventory metrics -Stockouts -Excessive utilization levels Define all

Performance to Schedule: Deviations from schedule due to poor planning can affect the operation's performance objective. For example, having too little buffer inventory may leave a work center idle Customer Service Ratings: If more valuable customers have to wait, this can affect the entire business's financial performance. If low-value orders are given higher priority, this can also waste operational resources Unbudgeted increases in labor or shipping costs: This may indicate excessive use of overtime, temporary work, or expedited delivery to manage load imbalances Number of orders declined: due to lack of capacity Quality Problems: e.g., high levels of scrap or rework - due perhaps to overworked employees or equipment worked at its limits without routine maintenance Stockouts: of key products at peak demand times Inventory metrics: such as days of supply, inventory on hand, or inventory turns Excessive levels of utilization: signaled by high employee turnover rates and accidents and frequent equipment failure

A Responsibility Chart can be used to define specific roles and responsibilities of the project team. Describe a RACI matrix

R - who is Responsible for task completion A - who is Accountable for outcome C - who is Consulted I - who is Informed of progress

Describe capacity planning in repetitive manufacturing environments:

Repetitive manufacturing takes place in production lines, assembly lines, and work cells. Material-dominated planning approach. Designed to minimize WIP inventory, lead time, waste, and support new product introductions Line Balancing: Used in repetitive environment to manage capacity. Involves balancing of the assignment of tasks to workstations in a manner that minimizes the number of workstations and minimized the total amount of idle time for a give level. Line Balancing requires: - Establishing a takt time or pace of production - Setting a target rate less than the takt time (usually 90%) -Supporting the process by eliminating waste and improving work cell efficiency

What is the Project Manager Role?

Responsible for directing, coordinating, and controlling project work performed by teams, sub-teams, and contractors Communicate upwards to management, laterally to stakeholders and functional managers, and downward to project team members Project manager is the focal point for communication between management, stakeholders, and team members. - Management or sponsors must be kept informed of project progress and must approve critical changes and additional resources - Stakeholders are interested in project outcomes. They may be project funders, future users, key customers, or community members. Understanding and managing their expectations is critical to ensuring that the project's results will be accepted. Project managers also make sure that stakeholders are engaged in the project, which can increase stakeholder ownership in the outcomes and their willingness to champion any resulting changes -Functional managers: may provide staff for the team - Project team members: who rely on the project manager for information, support, and resolution skills

Describe MRP Planning Horizon Time Buckets:

Should be at least as long as the cumulative lead time for an end item Time buckets contain a defined number of days of data

How to determine load

The CRP system simulates the load, comparing the projected load against the available capacity to determine if there is enough capacity to meet the scheduled priorities. Uses reverse scheduling, taking into account all the work centers through which the order must pass, the sequence in which they may pass (operations sequencing), the order's lead time, the required load, and the available capacity at the work centers The output is a work center load profile: A display of future capacity requirements based on released and/or planned orders over a given span of time

How do the MPS and BOM connect to provide MRP inputs?

The MPS (a line on the master schedule) reflects the anticipated build of finished goods across a number of periods (the planning horizon) The BOM provides information about where items are used in the manufacturing process

Statement of Work

The first project planning document that should be prepared. It describes the purpose, history, deliverables, and measurable success indicators for a project. It capture the support required form the customer and identities the contingency plans for events that could through the project off course. Because the project must be validated for management, staff, and review groups, the statement of work should be a PERSUASIVE DOCUMENT. Progressively elaborated during the planning phase as the project team learns more about the tasks and responds to unfolding outcomes

The 3 methods used to calculate safety stock are: statistical method, time period, fixed. Describe what types of demand these are used for:

The statistical method is primarily used for finished goods, goods w/ independent demand The time period approach is used with dependent demand inventory subject to fluctuating demand and allows safety stock level to change with demand The Time Period and Fixed Approaches can be used with independent demand, but may create excess inventory

How to calculate the safety stock using the time period and fixed order:

Time Period Method: Time Period SS = Forecast Monthly Usage x Safety Stock Time Period (Ex: 25 units = 50 units x 0.5 months) Fixed Order Method: Used when parts are transitioning into or out of the system and special oversight is requires

What are the requirements for the alternative strategies of managing inventory?

Trust between customer and vendor Aligned business processes Good communication policies Clear service level agreements Electronic commerce capability

Describe the goals of item numbering and the difference between significant and non-significant numbers

Uniformity across the organization Free of confusion Few errors Expandable Significant Part Numbers: Convey some information about a part, other than its number. (ex: U-GU-15-L-O = Umbrella, golf umbrella, model 15, Large, Orange) Nonsignificant Part Number: Contains randomly generated numbers that serve only to identify, not describe (ex: 513551)

How to redistribute the load?

Use alternate workstations (less efficient or more costly usually, but still shifts overloaded to underloaded) Use alternate routings Modify operation priorities (adjust operation start dates forward or backward in time) Revise MPS or lot sizes (may actually aggregate the load imbalance after MRP and CRP return) Run overlapping operations or use lot splitting - Lot splitting: dividing a lot into tow or more sublots and simultaneously processing each sublot on identical (or very similar) facilities as separate lots, usually to compress lead time or to expedite a small quantity - Operation Overlapping: A method of production in which completed pieces of a production lot are processed at one or more succeeding stations while remaining pieces continue to be processed at the original workstation. See: overlapped schedule.

What is demonstrated capacity:

Used when historical data is limited -- an observation of capacity only Sum of standard hours of work produced for n weeks and divided by n

What are the benefits of total productive maintenance (TPM)

- Quality and productivity - Asset protection - Resilience - Extending life of equipment and protecting the organization's capital investments - Safety - Greater Employee Involvement - Reduced Downtime and Greater Dependability

4 Lean Production Tools

- Value Stream Mapping A continuous improvement tool that visualizes the flow of the value stream, the process steps from raw material to finished goods (or delivery of service to the customer) - Pull System Improves the efficiency of inventory use by matching demand to supply. The factory produces only what its customers use. Each work station produces only enough to supply what the next work station in the process requires A synchronous pull system controls the velocity of flow through processes by using takt time - Reducing Setup/Changeover Time Time required to convert from production of last good piece of item A to the first good piece of item B - Total Productive Maintenance (TPM) Preventive maintenance and continuing efforts to increase flexibility, reduce material handling, and promote continuous flow Proactive strategy aimed at both threats and opportunities

Describe continuous (flow) manufacturing

-Characteristics - Divergent product structure (Ex: A single raw material like oil in a large number of different products) - Capacity planned first (Production is scheduled to meet a forecast demand) - Continuous flow (Most economical production approach is long runs, high capacity utilization rates, and few setups, which can be expensive) - Perspectives on Efficiency - Focus is on capacity vs how other environments are focused on efficient use of materials and inventory

What are the steps to calculating standard deviation, a statistical approach to calculating safety stock:

1. ) Add and average the actual demand for the chosen number of periods 2.) Subtract the actual demand from the average of the actual demand for each period 3.) Square the results for each period 4.) Divide by (n-1) for mean squared deviations 6.) Calculate the square root to get the standard deviation Multiply the standard deviation by the item's service level factor (z-score). This becomes the amount of safety stock for the desired service level

Describe the MRP logic

1.) Calculate end item gross requirements based on MPS 2.) Calculate net requirements using netting process at level 0: On-hand balance (previous period proj. available) + Scheduled Receipts + Safety Stock - Gross Requirements 3.) If net requirement exists, create planned order, applying lead time offsetting 4.) Post net requirements as gross requirements for level 1 and repeat process through lowest BOM level

What are the steps to calculating RMSE or Root Mean Squared Error, a statistical method to calculating safety stock

1.) Calculate the error, which is the difference between forecast and actual demand for a given number of periods 2.) Square each of the errors 3.) Sum the squared errors 4.) Calculate the mean (average) of the squared erros 5.) Find the square root of the mean squared errors Multiply the RMSE by the item's service level factor (z-score) (ex. 90% customer service level = 1.28). This becomes the amount of safety stock for the desired service level

What are the stages of the project life cycle?

1.) Initiating 2.) Planning 3.) Executing 4.) Monitoring and Control 5.) Closing Defined: In project management, a set of project phases (objectives definition, requirements definition, external and internal design, construction, system test, and implementation and maintenance), whose definition is determined by the needs of those controlling the project.

Describe the statistical method to calculating safety stock:

2 methods: Standard Deviations and Root Mean Squared Error (RMSE) RMSE is considered preferable, because it acknowledges that using well-performed planning (forecasts) as the basis for the safety stock analysis has more value than using recent demand data. Standard Deviation measures the volatility of demand rather than the reliability of forecasts

Like MRP, CRP is an automated system. Describe the steps it takes.

A.) Determine load on resources over a period of time B.) Simulate scheduling of load at work centers by period C.) Create work center load repairs D.) Resolve load-capacity imbalances E.) Prepare operating plan for execution

To improve efficiency and better manage inventory, operations can aim at increasing inventories. On the other hand, some techniques to reduce WIP and lead time (while still efficiently managing inventory) derive from lean manufacturing. How does lean reduce WIP and lead time?

Aligning production with actual demand and creating continuous flow (takt time) Capping finished goods to demand needs Improving flexibility of processes and decreasing changeover times (These are all accomplished using the 4 lean production tools)

What is a project?

An endeavor with specific objective to be met within predetermined time and dollar limitations that has been assigned for definition and execution - One-time (rather than repeated), time-phased activities - Producing a unique set of deliverable that meet specific customer requirements - Planned, executed and controlled through defined methods Often used in ETO and MTO environments

Analogy, parametric estimates, bottom-up budgeting, adding reserves are all basic approaches to creating a project budget. Explain:

Analogy: using historical figures from previous, similar projects Parametric estimates: Standard estimates for a task or expense based on experience or professional associations Bottom-up Budgeting: Estimating costs for each work package (the lowest level in the WBS) and then aggregating them. Estimates can use PERT methods Adding reserves: to accommodate risk

Purposes of Inventory

Better Customer Service - To internal and external customers by supporting availability of raw materials, components, and finished goods Improve operating efficiency - Provide buffer inventory between operations to accommodate different output rates and unexpected interruptions. Called WIP Allow longer production runs - Decreases the need for switch overs and the costs of setups and lost productivity Volume Discounts - Accommodates buying inventory in larger amounts to take advantage of volume discounts

How to increase load?

Bring work back in house (requires a make or buy analysis) Revise orders for earlier release Increase lot sizes by using firm planned orders Increase the MPS (least desirable) Take on additional work from other operations

What the functions of inventory?

Buffer: quantity of materials awaiting further processing. In theory of constraints, buffer inventory may be raw materials or semi-finished items that are maintained at the constraint, convergent points (with a constraint point), divergent points, and shipping points Anticipation Inventory: Refers to buffer inventory that is accumulated in anticipation of an increase in demand Safety stock: Used to manage fluctuations in supply and demand as a known event -- either consumer demand or demand for materials or components by a succeeding process in manufacturing Hedge: Speculates on future demand or savings. Represents inventory for an event that may or may not happen Lot size: Uses volume discounts in purchasing.

Explain capacity planning in service industries and tactics to adjust capacity:

Change the workforce level Cross-train Increase customer participation Use automation Extend hours of operation

Leading a team requires a project manager to have cross-cutting skills. What are some of these skills?

Communication - to listen and to communicate the right content in the right way to the right people at the right time Emotional Intelligence - the ability to understand one's own and others' emotions and use them to improve interactions and build relationships Leadership - the ability to build trust, setting a model for ethical behavior, and empowering others to achieve Group facilitation skills - necessary to conduct effective and productive team meetings, to gather ideas and reach consensus on necessary actions Conflict resolution and negotiation skills - to lead sides in a disagreement to a conclusion that benefits the project and satisfies both sides

What inventory data is needed for MRP?

Current Inventory Status - On - hand (the net available for planning at all locations) - Allocated (The classification of resources or item quantities that have been assigned to specific orders but have not yet been released from the stockroom to production... an 'uncashed' stockroom requisition - Scheduled receipts (Open orders for items expected to be received or produced in a specific period. A scheduled receipt indicates both the quantity expected and the delivery date) Historical demand and storage

Marketing, operations, and finance will have conflicts related to inventory and various conventional objectives (how they prioritize the objectives -- inventory supports these). Explain:

Customer service: Marketing (high) Operations (low) Finance (high) Production Efficiency: Marketing (low) Operations (high) Finance (high) Inventory Investment: Marketing (high) Operations (high) Finance (low)

What factors affect safety stock?

Degree of variability in demand Order frequency Service Levels Lead Time

Process Flow Scheduling

Designed to meet the needs of a flow environment 3 Principles: - Scheduling is based on the process structure - Processor-dominated or material-dominated scheduling - Process trains can be scheduled w/ forward, reverse, or mixed flow scheduling

What is the last step in priority planning before orders are passed to suppliers and/or the production floor?

Detailed Capacity Planning

What does aggregate inventory policy focus on?

Establishing the overall ($ value) of inventory desired and implementing controls to achieve this goal

Explain the various tools used to determine how much to order.

Fixed Order Quantity (FOQ): - Orders are made for the same, fixed number of units, although the timing of the order may vary - Can cause excess levels of demand - Order quantity may be based on EOQ and modified by other factors, such as shipping economy, inventory characteristics, or storage space Lot for Lot (L4L) - Order quantity is directly related to demand; there is no un-used lot size inventory - Used to: - Plan and fulfill time-phased requirements for dependent demand and independent demand items - Control investments in experience and/or perishable inventory - Control waste in lean environments Order (n) periods: - Planners order enough inventory to meet needs for a specific number - n - of periods - The most cost effective number of periods is the period order quantity POQ = EOQ / Average Weekly Usage

Fixed location, random location, and zoned location are the 3 warehouse layout principles. Describe each:

Fixed location: An SKU is assigned to a specific spot and no other item can be stored there. This method is clear, but because slots (assigned locations) can be near empty or empty as inventory id depleted, fixed location is not efficient in terms of its cube utilization -- the amount of storage space that is being used. It is also not flexible. Design changes may affect usage rates for certain parts, and rarely used parts can end up with prime locations in terms of accessibility Random or Floating Location: When an order arrives, storage location is assigned to the nearest spot with necessary space and characteristics. SKU location is tracked by an information system. A single item may have multiple locations. This greatly improves cube utilization, but any errors in entering item numbers or location into the system can cause an item to be lost in a large warehouse Zoned storage: This combines aspects of fixed and random plans. Zones are designated for similar items and then stored randomly within that defined area. Cube utilization is still good, but items are easier to find without consulting a computer system. This plan also facilitates the picking process: pickers are assigned to retrieve items in only the zoned area, thus cutting their travel time

What are some possible impacts of ABC classification:

Frequency of counting Frequency of forecast reviews Re-engineering of products Amount of safety stock or safety lead time Where an item is stored How it is controlled and replenished

What are some examples of how items may be grouped by in a warehouse?

Function Rate of Turnover Common Storage Needs Working vs Reserve Stock (Equipment requirements may also affect layout)

What are the components of an MRP Grid?

Gross Requirements: The total independent and dependent demand before netting out inventory on hand and scheduled receipts Scheduled Receipts: Orders that were placed with a supplier or factory work center but not received before this planning period starts Projected Available: Inventory required by the higher BOM level that is on hand or scheduled for receipt (sometimes referred to projected available balance or PAB) Net requirements: Gross requirements less scheduled receipts and projected available Planned Order Receipts: An anticipated receipt as the result of a released order Planned Order Releases: A quantity that will be released to fill an order

What environments is MRP used in?

Has traditionally be used in: - push, rather than pull, environments - For items with dependent, rather than independent, demand Today's ERP systems can incorporate functionality of both MRP and Lean

What is the process used for reducing setup/changeover time?

Identify internal and external changeover tasks: Internal tasks must be performed while a machine is stopped (idle time); external preparation tasks can be performed while the machine is till running Convert internal tasks to external: For example, organize tools and materials for setup while the machine is still running a batch Streamline internal setup: For example, find ways to reduce the time it takes to fasten equipment in place Eliminating adjustments: Documenting the proper adjustments for different materials helps eliminate wasteful trial and error, as adjustments are repeated until the machine produces an "in spec" product Minimize external (preparation) time: Since small batch processes may not provide enough time to prepare for the changeover

MRP planning factors include: Lot size or order quantity Lead time Safety stock Scrap Explain each

Lot size or order quantity: The standard amount of an item ordered. Lot size is determined by the policy adopted by planners for the quantity to be planned at the end item or component level. The policy can be lot-for-lot to meet the exact quantity needed or a quantity based on economic order quantity or other factors Lead time: The lead time required for released work orders or purchase orders so that an item is received when it is required. Lead times for work orders can be based on an engineering estimate or historical knowledge of the time needed to complete a component. Lead time for purchase orders can be based on an estimate or an historical average of the delivery lead time Safety stock: The amount of extra inventory deemed necessary to prevent a stock out due to natural fluctuations in demand or supply or to protect against forecast errors Scrap: Material outside of specifications, that is not practical to rework. When a process produces scrap, MRP increases the planned order release amount by a scrap or yield factor to account for this

What is the process MRP follows as far as planning and then releasing orders?

MRP --> Planned Orders --> Planned orders as needed by MRP ---> Firm Planned Order (Planner overrides MRP changes) --> Order Released --> Scheduled Delivery Date Added

Explain the processing involved in MRP?

MRP systems must be regenerated (updated or refreshed) at intervals to reflect changes in data and maintain the currency of the plan. More frequent processing identifies issues sooner so the planner can act. The tradeoff for having current data is slowing the system down during the regeneration process. This impact can be decreased by scheduling regeneration during low-activity times or regenerating in parts - net change processing - with total regeneration only at longer intervals Frequent updating can result in "system nervousness." Changes in higher level MRP plans cause timing and quantity changes at the lower levels and disrupt planners, suppliers, and the shop floor.

What may capacity available depend on / be determined by?

May depend on: - Product specifications - Product mix - Number and output of equipment - Workforce rate of output May be determined by: - Rated capacity (utilization, efficiency, and available time) - Demonstrated capacity

What are the goals of Capacity Planning?

Meet operation performance objectives by? - Increasing productive capacity - Reducing idle capacity Goals of capacity planning are similar to those of material planning and align w/ the operations performance objectives: - Speed: Decrease lead times, prevent bottlenecks, and cut wait times - Dependability: Meet due dates more reliably - Flexibility: Develop resources and processes to respond more flexibly to changing conditions - Quality: Provide accurate and detailed in both directions of the value chain -- to S&OP and master planners and to shop floor supervisors - Cost: Maximize return on investment in resources, keep WIP levels low, and minimize administrative and labor time

Goals of Inventory Management

Optimize inventory investment Support performance objectives related to customer service Align with organization's sustainability goals

When-to-order is another important question. What are the systems used to answer this question?

Order point system Order point system under uncertain conditions Periodic Review or Fixed Order Interval Order Point Triggers

Describe each of the methods used to determine when to order

Order point system: - An order is placed when inventory falls below a specific level, the order point - Order point is determined based on forecast demand during lead time - Assumptions: Past demand is an accurate indicator of future demand, demand is continuous and fairly level, replenishment lead time is constant and predictable and replenishment happens all at once, order lot sizes will be consistent Order Point System Under Uncertain Conditions: - Uncertainties in demand and resupply require the inclusion of safety stock in the OP formula - OP = DDLT + SS - Demand does not always follow forecasts, it can be lumpy Periodic Review or Fixed Order Interval: - An order is placed at regular intervals - The order point is not an inventory amount but a defined date. At the designated interval, an order is placed (In this way, periodic review is the opposite of order point) - The order quantity may vary in the periodic review system, since it is the amount of inventory that is required to bring the total inventory to a maximum or target inventory level - Q (Quantity to Order) = Target Inventory - Inventory On Hand Order Point Triggers - Visual Review (two-bin system) - Typically lower-valued "C" items - Kanban

The components of lead time are: Order preparation time, queue time, setup, run, wait, move. Define each:

Order preparation time: required to analyze requirements and open orders and to create a purchase or production order Queue time: The time a job waits at a work center before setup or work is performed on the job Setup: The time required to prepare a machine or line for a process, to change a machine or line over from making the last item of the previous job to the first item of the current job, or to tear it down from the previous job Run: The time required to process an item Wait: The time an item waits at a work center after it is completed before it is moved to the next operation Move: The time an item spends in transit from one operation to another

When to use PDS or MDS?

PDS is preferable when: - Capacity is relatively expensive - The process unit is a bottleneck - Setups are expensive MDS is preferable when: - Materials are relatively expensive - There is excess capacity - Setup costs are low - The stage containing the unit operates as a job shop

Describe the 3 Popular Scheduling Methodologies: PERT, Critical Path Method, and Gantt Chart

PERT -Program Evaluation and Review (PERT) is a network planning tool in which each activity is assigned a pessimistic, most likely, and optimistic estimate of its duration. The critical path method is then applied using a weighted average of these times for each node: Expected Time = [Most optimistic + (4 * most likely) + Most Pessimistic] / 6 Example if time estimates are 8,12,9 [8 + (4*9) + 12]/6 = 9.3 days Critical Path Method (CPM) -Finds the longest duration of a project, using constraints implied in logical sequencing of tasks Gantt Chart -Designed to show graphically the relationship between planned performance and actual performance over time - Visualize conflicts and simulate alternatives - Control project work against the schedule

What does and item record (for inventory accuracy) maintain?

Parts description or number Location Control Values Inventory status, orders, prices

Describe the two types of inventory auditing

Periodic Inventory: - All items tagged and counted at one time - Requires many trained personnel - Requires shutting down operations for the duration Cycle Counting: - Individual items are counted on a pre-determined schedule - Smaller auditing team - Less disruptive - Less subject to human error - Supports continuous improvement of process Cycle Counting Techniques: - Assign frequency of count by ABC classification - Count in zones - Check by a certain number of random stock locations - Combine count w/ put-away or when stock is low or at zero

Describe itemized inventory policy

Places constraints on the upper and lower limit's of an item's inventory amount Upper limit: aims at controlling costs of inventory investment and carrying costs Lower limit: aims at preventing stock out costs and far lower cost items, decreasing ordering costs by discouraging frequent, low-volume orders However, there are modifiers to the upper and lower limits (limits still take precedence) Modifiers: - Supplier lot-size requirements - Volume price breaks - Supply for entire period - Scrap or yield adjustments

What are the functions of MRP?

Plan and control inventories Plan and control order releases Provide accurate input into the capacity planning process

Planned Orders, Firm Planned Orders, Action Messages, and Exceptions are all MRP Outputs. Describe each:

Planned Orders: Includes a suggested order quantity, a release date, and a due date. The order is created using the logic of system and the input data. - Orders can be released automatically or are placed in an action bucket for the planner to release them - The planned orders are dynamic and can be changed if conditions change before the order is released - A planner can opt to change quantities and dates as needs dictate Firm Planned Orders: Are "One Off." The planner, can override the MRP's ability to change the planned order. This may be in response to a known material or capacity issue Action Messages: System alerts planner to the need to take action to keep the system updated (Ex: Release Order, cancel, expedite, de-expedite) Exceptions: Codes are generated during the processing of data. They may be related by invalid or incongruous data (e.g. impossible parts number) or two conflicts that have been created by changes (e.g. planned order releases that conflict with the required lead times)

What does Capacity Requirements Planning do?

Plans materials first and then checks against capacity. Validates the MRP

What are some alternative approaches to managing inventory?

Rapid Replenishment: Supplier uses customer POS data to align its own production schedule. Orders still used but lead time decreases. Continuous Replenishment: Supplier tracks inventory levels and replenishes to agreed level w/o orders. Supplier uses customer's demand patterns to lower its inventory level Vendor-Managed Inventory: Vendor creates item inventory policy based on shared demand data. Vendor is responsible for tracking and replenishing stock w/o orders Consignment Inventory: Vendor owns items even though it is in the customer's inventory. Ownership is transferred when the item is used or sold Benefits: Reduces cost of purchasing inventory, reduces risk of obsolete inventory

Explain how rated capacity is calculated:

Rated Capacity: the expected output capability of a resource or system. Traditionally calculated form such data as planned orders, efficiency, and utilization. Rated Capacity = Available Time x Utilization x Efficiency Available Time: The number of hours a work center can be used, based on management decisions regarding shift structure, extra shifts, regular time, overtime, observance of weekends, public holidays, shutdowns, etc. = (Scheduled Time - Down Time) / Scheduled Time Utilization: A measure of how intensively a resource is being used relative to its available time - the actual time a resource is used compared to its available = Actual Hours Worked / Available Time in Hours Efficiency: A measurement (usually expressed as a percentage) of the actual output relative to the standard output expected. (Not the same as productivity. Productivity measures output for a given resource. Efficiency measures against a standard based on historical experience.) = Standard Hours Produced / Hours Actually Worked

List the two types of inventory valuation recording intervals and the types of valuation used:

Recording intervals: - Perpetual - Periodic Types of Valuation: - Actual Costs - Average costs - First in, first out (FIFO) - Last in, last out - Specific Identification - Standard costs - Transfer Pricing

How to reduce load and capacity if necessary?

Reducing load: - Reduce lot size (but add future runs) - Revise the MPS Reducing Capacity: - Reduce workforce size - Shorten or eliminate shifts - Invest in future productivity by training workers - Realize the benefits of cross-training by assigning workers to other tasks, including equipment maintenance

What is the Planners role in MRP?

Releasing orders from the action bucket Rescheduling open orders as needed' Analyzing and revising planning factors Reconciling errors and inconsistencies Proactive problem solving Creative problem solving within the system of material shortages Improving the process

What are inputs of capacity planning?

Routing Data: The operations to be performed, their sequence, the various work centers involved, and the standards (standard times) for set up and run Work Center Data: Can include items such as the number of work days per period (which can be provided through the job shop calendar), the number of shifts and hours per shift, and work center utilization and efficiency factors Lead Time Capacity

What are the 3 components that make up 100% capacity?

Safety Capacity + Productive Capacity + Excess Capacity

What is safety capacity

Safety capacity is planned amount by which available capacity exceeds current productive capacity

What is a Material-Dominated Scheduling Approach (MDS)

Schedules materials before processors (equipment or capacity) to facilitate the efficient use of materials. When inventory drops below a set minimum, production is scheduled to build to a target or maximum level 4 Steps: 1.) Create a time-phased record of material balances, using a technique similar to that for calculating gross requirements and net requirements 2.) Add a lot when inventory falls below target 3.) Compile a load profile for the unit 4.) Analyze and reconcile incompatibilities

Describe the differences between forward-flow scheduling, reverse-flow scheduling, and mixed-model scheduling

Scheduling the process train can use forward-flow, reversed-flow, or mixed-flow scheduling techniques. Forward-flow scheduling is used rarely, usually when an operator knows a material is in very short supply Mixed-flow is used when there is a known constraint. The bottleneck stage will be scheduled first, then the following stages. When inventory is reconciled, the stages before the bottleneck are scheduled Forward-flow scheduling: A scheduling technique where the scheduler proceeds from a known start date and computes the completion date for an order, usually proceeding from the first operation to the last. Dates generated by this technique are generally the earliest start dates for operations. See: forward pass. Ant: back scheduling. Backward Scheduling: A technique for calculating operation start dates and due dates. The schedule is computed starting with the due date for the order and working backward to determine the required start date and/ or due dates for each operation. Syn: backward scheduling. Ant: forward scheduling. Mixed-Model Scheduling: A procedure used in some process industries for building process train schedules that start at an initial stage and work toward the terminal process stages. This procedure is effective for scheduling where several bottleneck stages may exist. Detailed scheduling is done at each bottleneck stage

Explain the process of inventory in the supply and value chain

Suppliers: Hold raw materials or components Manufacturer or Fabricator: Raw materials, WIP, and FG DC: Packaged goods & parts Retail Outlet: Packaged Goods In-Transit or Pipeline: Transfers inventory from each location

How to determine standard time?

Total Standard Time = Setup Time + Run Time (Run Time = Run Time per Piece x # of pieces)

Two inventory tracking methods are bar codes and RFID. Explain each:

Two-dimensional codes such as UPC bar codes or QR codes: Are inexpensive and can be created to specifications, but they are subject to damage that deters their reading by handheld or mounted scanners. They must be scanned close up, which may be difficult in some cases Radio Frequency Identification (RFID) "tags": have computer chips containing identification data and other information that are read by receivers. Some tags are passive and simply respond when a receiver pings them. Some are active and send out a radio signal to the receiver. They can also be read-only or rewriteable, which increases their usefulness. They can be read from considerable distances and the information sent by satellite, cell, or local scanners to a firm's information systems

What are the challenges of scheduling? What are tools to manage scheduling changes?

Unrealistic estimates of task and resource requirements Imbalances in resource requirements Continuous changes to scope Unanticipated events that create bottlenecks on the critical path Tools to manage scheduling changes? - Critical chain: inserts buffers between activities on the critical path to manage constraints on resources or risks. It lengthens the critical path and the project's duration - Resource smoothing: Uses slack time between tasks to accommodate constraints. This assumes there is slack, which is often not the case - Resource leveling: Adjusts the schedule to accommodate resource constraints. If an affected task is on the critical path, this affects the project's duration - Crashing: Manages constraints by adding internal or external resources to increase capacity. This increases the project costs and threatens the budget if there are not sufficient reserves to absorb the added costs - Fast - Tracking: Performs some activities in parallel to shorten the critical path. This increases project risks, because problems in one task cannot be detected before they have already affected the other task