Supply Chain Management Chapter 3

Two types of Implementation

1. Best-of-breed: pick up the best application for each individual function. Disadvantage: software may not integrate well but this may not be a major issue in the future. 2. Single integrator solution: pick all desired applications from a single vendor.

Three basic production strategies:

1. Chase strategy; 2. Level strategy; 3. Mixed production strategy.

major capacity planning tools

-Resource Requirement Planning (RRP): a long-range capacity planning module, checks whether aggregate resources are capable of satisfying the Aggregate Production Plan(APP). Resources considered include gross labor hours and machine hours. -Rough-Cut Capacity Plan (RCCP): or medium-range capacity planning, is used to check the feasibility of the Master Production Schedule (MPS). Converts MPS from the production needed to the capacity required, then compares it ti capacity available. -Capacity Requirement Planning (CRP): a short-range capacity planning technique that is used to check feasibility of the Material Requirements Plan (MRP).

Advantages of ERP Systems

-added visibility leads to reduced supply chain inventories -helps to standardize manufacturing processed -measure performance and communicate via a standardized method

Disadvantages of ERP Systems

-substantial time and capital investment -complexity -firms adapt processed to meet ERP system

MRP requires:

-the independent demand information, i.e. finished product forecast -parent-component relationships from the BOM -inventory status of final product &each of the components and materials -planned order releases (the output of the MRP system)

Discrete Available-to-Promise

Add beginning inventory to the MPS for period 1, subtracting the Committed Customer Orders (CCO's) from period 1 up to but not including the period of the next scheduled MPS.

operation planning can be divided into three broad categories

Long-Range(Aggregate Production Plan-APP)-planning for actions (Executive level); Intermediate(Master Production Schedule-MPS)-quantity&timing( Mid-level); Short-Range(Material Requirement Planning-MRP)-components&parts (Planner, 1st line supervisor).

Material Requirement Planning (MRP)

a computer-based materials management system that calculate the exact quantities, need dates, & planed order releases for subassemblies, component parts & materials required to manufacture a final product.

Master Production Schedule (MPS)

a detailed disaggregation of aggregation production plan, listing the exact 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.

Distribution Requirements Planning (DRP)

a time-phased finished good inventory replenishment plan in a distribution network.

Chase Strategy

adjusts capacity to match demand. Firms hires & lays off workers to match finished output to demand. Finished goods inventory remains constant. Works well for make-to-order firms.

Independent Demand

demand for final products affected by trends, seasonal patterns, &general market conditions.

Distribution Requirement Planning (DRP)

describes the time-phased net requirements from warehouse &distribution centers customer demand minus any on hand in-transit inventories.

Bill of Materials (BOM)

document that shows an inclusive listing of all components parts & assemblies making up the final product.

Aggregate Production Plan (APP)

hierarchical planning process that translates annual business & marketing plans & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility.

Closed-loop MRP

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

Manufacturing Resource Planning (MRP II)

incorporates the business & sales plans with closed-loop MRP system.

Enterprise Resource Planning Systems (ERP)

information system connecting all functional areas & operations of an organization and in some cases, suppliers and customers via common software infrastructure and database

Enterprise Requirement Planning (ERP)

is an extension of MRP-II.

Disadvantage of MRP

loss visibility, ignores capacity and ignores shop floor condistions

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.

Advantage of MRP

provide planning information

Level Strategy

relies on constant output rate while varying inventory & backlog according to fluctuating demand. Firms relies on fluctuating finished goods & backlogs to meet demand. Works for make-to-stock firms.

Available-to-Promise (ATP) Quantity

the difference between confirmed customer order & the quantity that firm planned to produce, i.e.,what we planned to make verses what our customer have actually ordered.

Dependent Demand

the internal demand for parts based on the demand of the final product in which the parts are used (e.g. raw materials, component parts, packaging materials, subassemblies, etc.)