Chapter 6 Intro to Supply Chain

Firmed Segment

(demand time fence) -from current period to several weeks into future -determined by component and resource lead times and can only be altered by senior management due to impact on profitability

Tentative Segment

(planning time fence) -from end of firmed segment to several weeks into the future -determined by long lead time components, capacity, and demand planning

Operational Planning Cycles

-Long-range -Intermediate - Short-range

Chase Strategy

-adjusts capacity to match demand -firm hires and lays off workers to match demand -finished goods inventory remains constant *works well for make-to-order firms

Challenge of Resources

-balancing capacity vs output requirements -operations managers are continuously involved in balancing capacity and output

Enterprise Resource Planning (ERP)

-business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services, and human resources -al applications work from common database -all areas are updated simultaneously as data is updated -ELIMINATES duplicated data entry and inconsistent info across an organization -now a key enabler to efficient operations, access to critical info, speed and flexibility

Short Range Operational Planning Cycles

-daily, weekly, monthly -Detailed planning process for components and parts to support the planned production schedule -execution

Long Range Operational Planning Cycles

-normally >1 year (TYPICALLY 3-5) -strategic plans (investment in facilities and major equipment) -multi-year business plans

Output from the MRP system

-planned order releases (purchase and produce) -relies on info provided and ignored capacity and shop floor conditions (Utopian plan)

Intermediate Operational Planning Cycles

-quarterly (up to 18 months) -business plans (financial, operational, roadmap) -shows the quantity and timing of end items produced -impacted by lead times

Level Strategy

-relies on a constant output rate while varying inventory and backlog according to fluctuating demand -production = the average of the demand for all periods firm relies on fluctuating goods and backlog to meet demand *works well for make-to-stock firms

Distribution Requirements Planning (DRP)

-ties physical distribution to manufacturing planning and control system by determining the time phased net requirements of the finished goods -ties to the independent demand of the finished good -establish requirements for the distribution network and balances warehouse capacity with production plans

Production (Materials) Planning

APP- aggregate production plan MPS- master production schedule ATP- available-to-promise MRP-material requirements plan

Which of the following is an engineering document that shows an inclusive listing of all the component parts and assemblies making up the final product?

Bill of Materials

Production Strategies

Chase, Level, and Mixed Production Strategy

ERP stands for:

Enterprise Resource Planning

The Chase Production Strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern

False; Level Production Strategy

The Available to Promise calculation determines how much product needs to be produced to promise delivery to a customer

False; MRP

Gross Requirement and Net Requirement

GR- a time-phased requirement prior to netting out on-hand inventory and lead-time NR- the unsatisfied item requirement for a specific time period; gross requirement for period MINUS current on-hand inventory

The Planning Factor is:

Number of components needed to produce a unit of the parent item

Terms used in MRP:

Parent Components Gross Requirement Net Requirement Scheduled Receipt Projected-on-Hand-Inventory Planned Order Releases Time Bucket Explosion Planning Factor Firmed Planned Order Pegging Low-level Coding Lot Size Safety Stock

Parent and Components

Parent- item generating demand for lower-level components Components- parts demanded by parent

Types of Capacity Planning

Resource Requirement Plan (RRP) Rough-cut Capacity Plan (RCCP) Capacity Requirement Plan (CRP)

The medium-range capacity planning technique used to check the feasibility of the Master Production Schedule (MPS) is called:

Rough-cut Capacity Planning (RCCP)

Time Bucket and Explosion

TB- time period used on the MRP (days/weeks) Explosion- process of converting a parent item's planned order releases into component gross requirements

The Resource Requirement Plan is:

The long range capacity plan

Production Capacity

The maximum amount an organization can complete in a given period of time based on the resources available -excess or insufficient capacity prevents firm from taking advantage of the efficiency of manufacturing planning and control system

Capacity

The maximum amount or number that can be received or contained

The Material Requirements Plan is:

The short range production plan

Production Capacity is the maximum amount an organization can complete in a given period of time based on the resources available.

True

The challenge for resource and operations planning professionals is to balance capacity and output.

True

Scheduled Receipt

a committed order awaiting delivery for a specific period

Capacity Requirement Plan (CRP)

a short-range capacity plan that is used to check the feasibility of the material requirements plan -execution decision

System Nervousness

a small change in the upper-level-production plan which causes major changes in the lower-level-production plan

Resource

a source of supply, support, or aid, especially one that can be readily drawn upon when needed

Low-level Coding

assigns the lowest level on the BOM to all common components to avoid duplicate MRP computations

Independent Demand

demand for the final products affected by trends, seasonal patterns, and general market conditions

Bill of Materials

document that shows an inclusive listing of all component parts and assemblies making up the final product

Mixed Production Strategy

maintains table core workforce while using other short-term means, such as overtime, subcontracting and part time helpers to mange short-term demand

Planning Factor

number of components needed to produce a unit of the parent item

Lot Size

order size for MRP logic

Firmed Planned Order

planned order that the MRP computer logistic system cannot automatically change when conditions change

Projected-on-Hand-Inventory

projected closing inventory at the end of period; = (BI - GR) + Scheduled Receipt and any planned receipt from planned order released

Pegging

relates gross requirements for a part to the planned order releases that created the requirement; ties the receipt to committed demand

Multilevel Bill of Materials

shows the parent-component relationships and the specific units of components known as the planning factor

Planned Order Release

specific order to be released to the shop or to the supplier to ensure availability when needed

Available-to-Promise (ATP)

the difference between confirmed customer orders and the quantity the firm planned to produce (amount available to other orders) Need to know: -Beginning Inventory -Production Schedule (firm and tentative) -Confirmed Customer Orders

Dependent Demand

the internal demand for parts based on the demand of the final product in which the parts are used (e.g., subassembly)

Resource Requirement Plan (RRP)

the long-range capacity plan that checks whether aggregate resources are capable of satisfying the aggregate production -strategic decision

Aggregate Production Plan (AAP)

the long-range(strategic decision) plan that translates annual business and marketing plans and demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant of facility -planning horizon of APP is at least one year and is usually rolled froward by 3 months every quarter Sets the production output requirements, workforce needs and inventory plans; enables firm to see its capacity requirements DETERMINES the production strategy the firm will use

Rough-cut Capacity Plan (RCCP)

the medium range capacity plan used to check the feasibility of the Master Production Schedule (MPS) -converts MPS from production needed to capacity required, then compares it to capacity available -tactical decision

Master Production Schedule (MPS)

the medium-range (tactical decision) plan that provides a detailed breakdown of the aggregate production plan, listing the exact end items to be produced by a specific period *MORE detailed than APP and easier to plan under stable demand; breaks down months into weeks/days -planning horizon is shorter than APP, but longer than the lead time to produce the item so product is completed within the plan

Safety Stock

the minimum projected on hand inventory to protect against uncertainties in demand, supply, quality, and lead time

Resource Planning

the process of determining the required resources to effectively and efficiently produce the output required. The aggregation of all resources committed to production (space, equipment, personnel) DETERMINES the capacity to meet demand.

Material Requirement Plan (MRP)

the short-range (execution decision) plan from a computer-based materials management system that calculates the exact quantities. need dates, and planned order released for subassemblies and materials required to manufacture a final product Requires the following info: -the independent demand info -parent-component relationships from the Bill of Materials -inventory status of final product and components -lead time for each component (buy) time required for each process step (make)

Solution to System Nervousness

time-fence system which separates the planning horizon into: Firmed and Tentative Segments

Common component

used in more than one subassembly