CHAPTER 2

What is MRP II

MRP II stands for the manufacturing resource planning. It is a computer based system that provides a detail production schedules. MRP II is fully integrated planning and control system that works from top to bottom and contains feedback from bottom to up. Main purpose of this system is to centralize, integrate and process all the available information for accomplishment of the organization objectives.

Difference between make to order and assemble order?

Make to order do not start manufacturing until orders are received. Assemble to order, components are built and into inventory. Are assembled when an order comes in.

What are 4 questions a good planning system must answer?

What is the product a firm is going to produce? What are the necessary resources? What does the firm have? What is required?

What is a resource bill? what level in the planning hierarchy is it used?

list of critical resources needed to produce 1 complete unit of a product group Firms use the bill in capacity planning to prioritize and schedule their business operations. Critical part for MRP II and ERP

What should a company approach be to risks? What are some of the methods they can use to minimize the impact of negative risks?

*Business Risk* - refers to the possibility that the company experiences when they achieve profits less than the anticipated profits. Influenced by numerous factors such as sales volume, input costs, competition and government regulation. *Positive Risk* - refers to the upside opportunity for an individual or a corporate entity. *Negative Risk* - on the other hand arise from some sort of system failure, people or external events. These external generally results in the loss of money, productivity, legal problems and reduction in the probability of successful implementation of the strategic plan. * Identify risk as the earliest* - basically seen that every project risk is a choice between many options or several path. *Review the existing system or internal controls* - another method to minimize business risks is to analyze the existing systems of internal controls that provide checks and balances for every aspect of a company. *Develop a risk management plan* - companies can plan to have sufficient insurance to protect against losses. Another proactive step that can be adopted by companies is to cross-train employees so that any other EE can perform the task. *Hire an external control consultant* - an external consultant can play a vital role in investigating weaknesses in a company's processes. Besides that, an outsider who is unconnected to a company's daily operation can evaluate the situation more objectively and more readily identify areas in need of improvement.

Describe some of the possible advantages of a company developing a reverse supply chain

*Reverse on Investment* when the business plans to purchase equipment or remanufacture equipment, its an investment. Over a period of time, the profitability of the equipment improves. When the time comes to get rid of the equipment, business owners employ reverse logistics practices to reap a second return on investment from the equipment. *Increase in Public Perception* - society has become more educated about the benefits of environment and its impact. Now environment friendly business have routinely witness an increase in customer satisfaction and public perception. So in such case, a firm that takes keen interest in reuse and recycling can take advantage of the mass following of the Green Movement. *Refuse motivates competition in Manufacturing*- the firms competes with one another for a greater share of the market and this is generally a positive occurrence and keeps the prices of products affordable. Each non recycled electron contains items that could have been reused in merchandises and electronic. So if a firm engaged in recycling of end of life computers and equipment, it would help; them keeping in expenses low.

What information is needed to develop a make-to-order production plan? How does this differ from that needed for a make-to-stock plan?

- forecasting based on the time period for the purpose of planning -list of opening backlog -desired level of closing backlog

What are five typical characteristics of the production planning problem?

1. 12 months time horizon with monthly or quarterly updates. 2. Production demand involves some common unites of product families. 3. Seasonal demand 4. Fixed plant and equipment for specific time period. 5. So many objectives to achieve.

What are the steps in developing a make-to-stock production plan?

1. First step is to calculate the sum total of the forecasted demand for the planning horizon. 2. The second step is to calculate the opening amount of inventory and the desired level of closing inventory. 3. next step, determine the require level of total production. With formula: TP = TF+BO+CI-OI 4. Calculate the production required for each period. = total production/ number of periods 5. determine the closing inventory for each period.

What information is needed to develop a make-to-stock production plan?

1. Forecasting based on the time period of the purpose of planning. 2. Opening amount of inventory 3. Desired level of closing inventory 4. List of back orders

What is the general procedure for developing a level production plan in a make-to-order environment?

1. calculate the sum total of the forecasted demand for the planning horizon 2. calculate the opening amount of backlog and desired level of closing backlog 3. determine required level of total production. TP= total forecast + opening backlog - ending backlog 4. calculate the production required for each period. = total production / number of periods 5. spread out the available backlog over the production plan based on the due date per period.

4 basic strategies that can be used in developing a production plan. What are pros and cons.

Chase ( demand matching) Pro: Min level of inventory Low carrying cost of inventory Availability of free cash Less backlogs Cons: Lower productivity Lower quality Higher premium for overtime work Less efficient workforce Production Leveling ( leveled): continuously produce quantity equal to the average demand to maintain the average production level. Pros: Steady workforce Cost reduction Higher productivity Smoother Operations Cons: High inventory High carrying cost of inventory More backlogs Subcontracting: Organizations produce at the minimum demand level and meet extra demand by purchasing extra quantity from outside party or reducing the additional demand for their good. Pros: Low production capacity cost Zero production changing cost Cons: Higher purchasing costs Higher Transportation costs Higher inspection costs

What kind of production environment would you expect to see if a company uses a chase strategy? What if it uses a level strategy?

Chase: just enough is purchased to meet demand in each period. Inventory level in the organization remains stable but level of production fluctuates according to demand. Level: continuously produce quantity equal to the average demand to maintain the average production level.

What is a hybrid strategy? Why is it used?

Combination of one or more strategy. Combined features of all the strategies. Each single strategy in a combination has its own costs. Responsibility of production manager to determine the best possible combination of strategies that minimizes the total costs.

What is ERP?

Enterprise Resource Planning it organizes, defines, and standardizes the business process in a manner, so that an organization can take external advantages with the help of internal knowledge. The scope of ERP system is very large. Allows manaagers to share ata between the firms.

On what basis should product groups (families) be established?

Firms that manufacture a single product can easily measure their total output with the help of total number of units they produce. There is no need to establish a product family. But, firms that manufacture large number of different products find it difficult to measure the total output. Hence to resolve this problem, firms should establish product families based on the manufacturing processes.

Describe 4 conditions under which a firm would make-to-stock or make-to-order

Make to stock condition 1. demand for product is stable or easily predictable 2. delivery time is shorter than the manufacturing time 3. product can be kept into shelf for a long-time 4. Narrow line of product options Make to order 1. Customized product 2. Long delivery period 3. High manufacturing and storing costs 4. Large range of product options

What is Hosin Planning?

Policy development that aims to ensure that the strategic goals of a company drive progress and action at every level within the company

Define capacity and priority. Why are they important in production planning?

Priority is related to the firms product. it explains various things like, required products, quantity of products that are required and the most important factor time. Capacity represents the firms manufacturing capacity to produce the products. Firms manufacturing capability is based on the resources that a firm has a the availability of raw materials of semi finished goods from the suppliers. A firm needs to balance both

When making a production plan, why is it necessary to select a common unit or to establish product families?

Production plan is concerned with the production level, inventory level, requirements of resources to produce the goods and services, and the avilability of resources. The purpose of production plan is to satisfy the customers demand within the available resources. Firms that manufacture large number of different products find it difficult to measure the total output. Hence to resolve this problem, they need to establish product families or product groups based on the manufacturing processes.

Describe the relationship among the production plan, the master production schedule and the material requirements plan

Production plan works as an input for the master production schedule. Master production schedule is a decomposition of the production plan. Production plan provides the basis to develop a plan for individual end items. In other words, we can say that master production schedule is a plan developed by the firm for production purposes. Master production schedule is an important level of the manufacturing planning and control system. MPS works as an input to create a material requirement plan. Material requirement plan ensures the availability of components required to produce individual end items in the master production schedule.

Describe sustainability for production. What are some of the ways that a company can practice sustainability?

Refers to the promotion of resource and energy efficiency, sustainable infrastructure and providing access to basic services. The aim of sustainable production is doing more and better with less and increasing net welfare gains from economic activities by minimizing resource use, degradation and pollution along with the whole lifecycle.

What 2 changing conditions led to the development of ERP system?

Reliability on computers and information technology has been increased and become very powerful. Now people are aware of benefits like, accuracy, speed, capability of highly integrated management systems. Development of supply chain management, where integration involves all the upstream activities of supplier and downstream activities of product distribution along with the internal functions of the organization

What is the difference between strategic business planning and sales and operating planning (SOP). What are the major benefits of SOP?

Strategic plans are revised annually. Sales and Ops plans are updated very frequently, or on a monthly basis.

What does the concept of "green production" mean? How will it potentially impact production planning?

a firm focuses on environment friendly processes. - affects production due to firms having to focus on the green production schedule accordingly.

Describe each plan, their purpose, planning horizon, level of detail and planning cycle

a. *Strategic business plan*: Purpose: strategic plans to direct and coordinate plans like marketing, finance, production and engineering Planning horizon: 2-10 years Level of detail: very little Planning Cycle: 6 months to a year *Production Plan*: Purpose: satisfy customer demand within available resources Planning Horizon: 6-18 months Level of detail: low Planning cycle: Monthly or Quarterly *Master production schedule*: Purpose: master production schedule is to develop a plan for the production of individual products Planning Horizon: 3-18 months Level of detail: higher than production plan Planning cycle: weekly or monthly *Material requirements Plan*: Purpose: ensure the availability of finished goods, material and semi finished goods at the right time in the right quantity Planning horizon: 3-18 months Level of detail: high Planning cycle: weekly or daily