Marketing: Supply Chain Chapter 6

demand time fence

(Firmed segment) A firmed planning segment that is used with the MRP application; it usually stretches from the current period to a period several weeks into the future

resource requirements planning

(RRP) A long range capacity planning that is used to check whether aggregate resources are capable of satisfying the aggregate production plan

planning time fence

(Tentative segment) A period typically stretching from the end of the firmed segment to several weeks farther into the future; also known as the tentative segment

Which of the following results from using the chase production strategy?

-The workforce fluctuates in response to the demand pattern -Finished goods inventories always remain constant

Two types of ERP implementation

1.Best-of-breed - pick the best application for each individual function. Disadvantage- software may not integrate well but this may not be a major issue in future 2.Single integrator solution - pick all the desired applications from a single vendor Implementation Problems: Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Incompatible system environment

Three basic methods of calculating the available-to-promise quantities

1.Discrete available-to-promise 2.Cumulative available-to-promise without look ahead, & 3.Cumulative available-to-promise with look ahead

implosion

???

planning factor

A calculation showing the number of units of a specific component required to make one unit of a higher-level part

electronic data interchange (edi)

A computer-to-computer exchange of business documents such as purchase orders, order status inquiries and reports, promotion announcements and shipping and billing notices

product family

A group consisting of different products that share similar characteristics, components or manufacturing processes

aggregate production plan

A long range production plan; it sets the aggregate output rate, workforce size, utilization, inventory and backlog levels for a plant

master production schedule

A medium range production plan that is more detailed than the aggregate production plan the production quantity to meet demand from all sources & is used for computing the requirements of all time-phased end items

rough cut capacity planning

A plan that is used to check the feasibility of the master production schedule

intermediate range planning horizon

A planning horizon that covers 6 to 18 months

long range planning horizon

A planning horizon that covers a year or more

chase production strategy

A production strategy that adjusts output to match the demand pattern during each production period •Generally produce one-of-a-kind, specialty products •Generally require highly skilled labor •Can be problematic when highly skilled workers are needed in a tight labor market

capacity requirements planning

A short range capacity planing technique that is used to check the feasibility of the material requirements plan

material requirements planning (MRP)

A software application that has been available since the 1970s; it performs an analysis of the firm's existing internal conditions and reports back what the production and purchase requirements are for a given finished product manufacturing schedule

distribution requirements planning

A time-phased finished goods inventory replenishment plan in a distribution network

Advantage of MRP Disadvantage of MRP

Advantage of MRP - provides production & planning information for entire planning horizon Disadvantage of MRP - loss of visibility, especially acute for products with a deep BOM, & ignores capacity & shop floor conditions.

Advantages & Disadvantages Of ERP Systems

Advantages Added visibility reduce supply chain inventories Helps to standardize manufacturing processes Measure performance & communicate via a standardized method Disadvantages Substantial time & capital investment Complexity Firms adapt processes to meet ERP system

bill of materials (bom)

An engineering document that shoes an inclusive listing of all component parts and assemblies making up the final product Dependent Demand -the internal demand for parts based on the demand of the final product in which the parts are used (e.g., subassemblies) Independent Demand -demand for final products affected by trends, seasonal patterns, & general market conditions Indented Bill of Materials -multilevel BOM which shows the parent-component relationships & the specific units of components known as the planning factor. Super Bill of Materials (AKA planning BOM, pseudo BOM, phantom BOM, or family BOM)enables the firm to forecast the total demand end products

A firm's labor and machine resources is know as______

Capacity

Short range capacity planning technique that is used to check the feasibility of MRP is known as

Capacity Requirements Planning

Name the 3 different types of production strategies

Chase production Level Mixed Production

Manufacturing resource planning (MRP II)

Combined MRP with master production scheduling, rough-cut capacity planning, capacity requirement planning, and other operations planning software modules

make to stock

Firms that typically emphasize immediate delivery of off-the-shelf, standard goods at relatively low prices compared to the chase strategy

Basic Production Strategies :

Mixed Production Strategy - Maintains stable core workforce while using other short-term means, such as overtime, subcontracting & part time helpers to manage short-term demand This strategy works well with firms producing multiple products (J&J, Proctor and Gamble) Master Production Schedule (MPS) -A detailed disaggregation of the aggregate production plan, listing the exact end items to be produced by a specific period. More detailed than APP & easier to plan under stable demand Planning horizon is shorter than APP, but longer than the lead time to produce the item. Note: For the service industry, the master production schedule may just be the appointment book, where capacity (e.g., skilled labor or professional service) is balanced with demand.

Master Production Schedule

Plan spans six to eighteen months. Shows the quantity & timing of end items

PRACTICE PROJECTED ON HAND INVENTORY ROW

Projected on hand Inventory = on hand inventory - gross requirements + scheduled receipts.

level production strategy

Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms Inventory carrying and stockout costs are major cost concerns This strategy works well when highly skilled workers are needed in a tight labor market

Which strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern?

The Level Production Strategy

planned order releases

The bottom line of an MRP part record. It designates when the specific quantity is to be ordered from the supplier or to begin being processed. These quantities also determine the gross requirements of the dependent or "children" parts going into this higher level part or product

independent demand

The demand for final products and service parts. It has a demand pattern that is affected by trends, seasonal patterns and general market conditions

Available-to-Promise (ATP) Quantity

The difference between confirmed customer orders & the quantity the firm planned to produce

MRP requires

The independent demand information Parent-component relationships from the BOM Inventory status of final product & components. Planned order releases (the most important output of the MRP system)

dependent demand

The internal demand for parts based on the demand of the final product in which the parts are used

capacity

The output capabilities of a firm's labor and machine resources

available to promise quantity

The uncommitted portion of a firm's planned production. It is used to promise new customer orders.

Match or tracking capacity strategy

a moderate strategy that adjusts capacity in small amounts in response to demand and changing market conditions

enterprise resource planning (erp)

a packaged business software system that lets a company automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real-time environment

make to order manufacturing firms

firms that make custom products based on orders from customers, resulting in long lead times and higher unit costs

Closed-loop MRP

incorporates the aggregate production plan, the master production schedule material requirements plan, & capacity requirements plan.

Resource Requirements Planning

is a long range capacity planning module, checks if aggregate resources are able to satisfy aggregate production. Gross labor hours and machine hours.

lag and lead capacity strategies

lag capacity strategies- A reactive approach that adjusts capacity in response to demand lead capacity strategies-A proactive approach that adds or subtracts capacity in anticipation of future market condition and demand

Projected on hand Inventory =

on hand inventory - gross requirements + scheduled receipts.

Components

parts demanded by a parent.

Short range MRP

plan covers a few days to a few weeks. Detailed planning process for components & parts to support the master production schedule

Hierarchical planning

process that translates annual business plans & demand forecasts into a production plan for a product family(products that share similar characteristics) in a plant or facility leading to the Aggregate Production Plan (APP) Planning horizon of APP is at least one year & is usually rolled forward by three months every quarter Costs relevant to the aggregate planning decision include inventory, setup, machine operation, hiring, firing, training, & overtime costs

System nervousness

small changes in the upper-level-production plan cause major changes in the lower-level production plan Firms use a time fence to deal with nervousness by separating the planning horizon into 2 segments (time fences))

Rough cut capacity planning

used to check feasibility of MPS. Converts MPS from production needed to capacity required, then compares it to capacity available

Long-range (Aggregate Production Plan) APP

usually covers a year or more, involves the construction of facilities & major equipment purchase

Terms used in MRP:

Gross requirement - A time-phased requirement prior to netting out on-hand inventory & lead-time Net requirement - The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory. Projected on-hand inventory - Projected closing inventory at end of period. Beginning inventory minus gross requirement, plus scheduled receipt & planned receipt & planned receipt from planned order releases. Planned order release - Specific order to be released to the shop or to the supplier. Time bucket - Time period used on the MRP. Days or weeks Explosion - Process of converting a parent item's planned order releases into component gross requirements Planning factor - Number of components needed to produce a unit of the parent item Firmed planned order - Planned order that the MRP computer logic system does not automatically change when conditions change to prevent system nervousness Pegging - Relates gross requirements for a part to the planned order releases Low-level coding - assigns the lowest level on BOM to all common components to avoid duplicate MRP computations Lot size - order size for MRP logic Safety Stock - Protects against uncertainties in demand supply, quality, & lead time

Parent

Item generating demand for lower-level components

Scheduled Receipt

MRP term that represents a committed order awaiting delivery for a specific period