Supply Chain Chapter 3

Rough cut capacity planning

A medium-range capacity planning module used to check the feasibility of the Master Production Schedule. Converts MPS from the production needed to the capacity required, then compares it to capacity available

Firmed planned order

A planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change. Established by the Planner or Supply Chain Manager to prevent system nervousness. This can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders

Planning bill of materials

An artificial grouping of items (e.g., a product family) in BOM format, used to facilitate master scheduling and material planning.

Single level bill of materials

Display of components that are directly used in a parent item, together with the quantity required of each component (i.e., the planning factor). Shows only the relationships one level down

Intermediate

examples of _____ range supply planning: Sales planning •Production planning •Setting employment, inventory, and subcontracting levels •Analyzing operating plans (operations middle management) 3-18 months

Long

examples of ______ range supply planing: R&D •New product plans •Capital expenses •Facility expansion (top management) over 1 year

Short

examples of ______ range supply planning: Job assignments •Job scheduling •Dispatching •Ordering (Operations managers, supervisors, foremen, etc) up to 3 months

Capacity

how to change _____ : Vary production output through overtime or idle time Vary work force size by hiring or layoff Using part-time workers Subcontracting

Single integrator solution

implementation of ERP system pick all the desired applications from a single vendor

Best of breed

implementation of ERP system pick the best application for each individual function. Disadvantage - software may not integrate well but this may not be a major issue in future

Demand

influencing _______ so that it aligns to available production capacity (e.g., airline and hotel weekend discounts, telecommunication companies' weekend rates): Advertising, Promotional plans, Pricing

Enterprise Requirements Planning Systems

information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database provides a means for supply chain members to share information so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories

Gross requirement

A time-phased requirement prior to netting out on-hand inventory and lead-time

Level, chase, mixed

3 basic production strategies:

SAP, Oracle, Microsoft

3 major ERP providers

Scheduled receipt

A committed order awaiting delivery for a specific period

Material Requirements Planning

A computer-based materials management system that calculates the exact quantities, need dates, and planned order releases for subassemblies, component parts and materials required to manufacture a final product. requires: 1.The independent demand information, i.e., finished product forecast 2.Parent-component relationships from BOM 3.Inventory status of final product and each of the components and materials. 4.Planned order releases (output) advantage- provides planning info disadvantage- loss of visibility (especially acute for products with a deep BOM), ignores capacity and ignores shop floor conditions

Master Production Schedule

A detailed disaggregation of the aggregate production plan (APP), listing the exact end items to be produced by a specific period More detailed than APP and easier to plan under stable demand. Planning horizon is shorter than APP, but longer than the lead time to produce the item

Multilevel bill of materials

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component (i.e., the planning factor). If a component is a subassembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts and raw materials

Resource requirement planning

A long-range capacity planning module used to check whether aggregate resources (i.e., labor and manpower) are capable of satisfying the Aggregate Production Plan

Sales and Operations Planning

A process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage It is the definitive statement of the company's plans for the near to intermediate term, covering a horizon sufficient to plan for resources, and to support the annual business planning process. It links the strategic plans for the business with its execution. It is performed at least once a month and is reviewed by management at an aggregate (product family) level includes resource requirements planning, aggregate production planning, and demand and supply management

Capacity Requirement Planning

A short-range capacity planning module used to check the feasibility of the Material Requirements Plan

Planned order release

A specific order for a specific item and quantity to be released to the shop or to the supplier

Distribution Requirements Planning

A time-phased finished good inventory replenishment plan in a distribution network. The function of determining the need to replenish inventory at branch warehouses a logical extension of the MRP system and ties physical distribution to the manufacturing planning and control system key elements needed: Forecast demands by DC Current inventory levels by DC Target safety stock by DC Recommended replenishment quantities Replenishment lead times

Available to promise

Business function that provides a response to customer order inquiries, based on resource availability. It generates available quantities of the requested product, and delivery due dates. It represents the uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer order promising discrete: on hand + supply - ordered cumulative: (on hand + supply -ordered) - all future ordered / forecast demand until next MPS quantity

Counter seasonal product mixing

Develop a product mix with antithetic (seasonal) trends that level the cumulative required production capacity (e.g., lawn mowers and snow blowers)

Aggregate Production Plan

Hierarchical planning process that translates annual business, marketing plans, and demand forecasts into a production plan for a product family in a plant or facility The planning horizon is at least one year and is usually rolled forward bythree months every quarter. Includes those costs relevant to aggregate planning decisions: —inventory, setup, machine operation, hiring, firing, training, and overtime costs.

Parent

Item generating demand for lower-level components

Manufacturing Resource Planning

MRP II A computer-based system that can create detail production schedules using realtime data. Coordinates the arrival of materials with the availability of machine and labor. Is used widely by itself, but also as a module of more extensive enterprise resource planning (ERP) systems.

Capacity planning

Organizations must balance the production plan with capacity. This directly impacts how effectively the organization deploys its resources in producing goods

Aggregate Planning

Primary purpose is to establish production rates that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable Goals: meet demand, use capacity efficiently, meet inventory policy, minimize costs (labor, inventory, plant and equipment, subcontract)

Projected on hand inventory

Projected closing inventory at end of a period. Beginning inventory minus gross requirements, plus scheduled receipts plusplanned receipts from planned order releases

Pegging

Relates the gross requirements for a component part to the planned order releases of the parent item, so as to identify the source(s) of the item's gross requirements. _____ can be thought of as active where-used information.

Closed loop MRP

Synchronizes the purchasing or materials procurement plans with the master production schedule. The system feeds back information about completed manufacture and materials on hand into the MRP system, so that these plans can be adjusted according to capacity and other requirements. The system is called this because of its feedback feature

Business plan

The _______ _______, with its long-term focus, provides the company's direction and objectives for the next two to ten years Management gathers input from the various organizational functions such as finance, marketing, operations, and engineering states the company's objectives for profitability, growth rate, and return on investment typically updated and reevaluated annually typically used as the starting point for developing the organization's Production Plan or Aggregate Production Plan

Independent demand

The external demand for an item that is unrelated to the demand for other items (e.g., finished product). The demand for these items is forecasted and can be affected by trends, seasonal patterns, and market conditions

Planning factor

The number/quantity of each component or material needed to produce a single unit of the parent item

Explosion

The process of converting a parent item's planned order releases into component gross requirements

Net requirement

The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory

Time fencing

To minimize the impact of changes in the MPS, many companies have adopted a _________ _______ policy separating the planning horizon into a firmed time period and a planned time period

Time bucket

Unit of time / time period used in MRP, e.g., days, weeks, months

Short

_____ range supply chain planning is detailed planning process for components and parts to support the master production schedule (ref., Materials Requirement Planning - MRP) Planner, 1st line Supervisor - 1,000 engines, 1,000 transmissions, seats, windows, etc. each week over the next 1-12 weeks

Chase

______ production strategy Adjusts capacity to match demand. Firm hires and lays off workers to match finished output to demand. Finished goods inventory remains constant. Works well for make-to-order firms ex: Airplane companies do this since training takes time. Union employees are sent back to the union hall, waiting to be recalled. They collect unemployment

Mixed

______ production strategy Maintains stable core workforce while using other short-term means, such as overtime, subcontracting and part time helpers to manage short-term demand.

Level

______ production strategy Relies on a constant output rate while varying inventory and backlog according to fluctuating demand. Firm relies on fluctuating finished goods and backlogs to meet demand. Works well for make-to-stock firms

Long

______ range supply chain planning involves planning for actions such as the construction of facilities and major equipment purchase (ref., Aggregate Production Plan - APP) Executive level - Ford Motor Company wants to grow the market by 3% (1 - 3 years)

Planned

______ time period: From the end of the Firmed Time Period to the end of the planning horizon The planning system is free to create or make changes to planned orders in this time period based on the data and planning logic determined by the company

Intermediate

_______ range supply chain planning shows the quantity and timing of end items (ref., Master Production Schedule -MPS) Mid-level - Ford Motor Company wants to make 1,000 F-150 pick up trucks/week for the next 3-18 months

Firmed

_______ time period: From the current date out several weeks into future is established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system. —Recommended changes must be reviewed and approved by the Master Production Scheduler or an authorized person(s).

Backordering

________ during high demand periods - accept demand greater than supply capabilities.

Implementation

________ of ERP problems: Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Incompatible system environment

Master production schedule

_________ is the plan that drives the business Even small changes in the __________ can cause major changes in the detailed production schedule and the material plan, creating nervousness and instability throughout the organization

Safety stock

a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. Over planning supply versus demand can be used to create

ERP

advantages of _______ systems: Added visibility leads to reduced supply chain inventories Helps to standardize manufacturing processes Measure performance and communicate via a standardized method

Influencing demand, backordering, counter seasonal product mixing

aggregate planning strategies demand options (3)

Change inventory levels, change capacity

aggregate planning strategies supply options (2)

Enterprise Requirements Planning

an extension MRPII and includes DRP which determines the need to replenish finished product inventory at branch warehouses, when there are multiple warehouses in the network. It is typically implemented through a software platform of integrated functional modules facilitating the sharing of real-time information and collaboration across multiple business functions necessary for the supply chain to operate efficiently and effectively.

Resource requirement, rough cut, capacity requirement

capacity planning tools: (3)

Aggregate Production Plan

developing the _________ ________ ________: 1.Determining the demand for each period covered by the aggregate planning horizon. 2.Determining the available capacity for each period covered by the aggregate planning horizon. 3.Identifying any constraints which may influence the plan. 4.Determining the direct labor and material costs and the indirect manufacturing costs for each product or product family covered by the aggregate production plan. 5.Identifying or developing strategies and contingency plans to manage the potential upside or downside in the market. 6.Agree on a plan that best meets the planning goals and objectives

ERP

disadvantages of ______ systems: Substantial time and capital investment Complexity Firms adapt processes to meet ____ system

Bill of Materials

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

Lot size

order size for MRP logic

Hierarchical

supply chain planning is usually _______ and can be divided into three broad categories; long range, intermediate range, and short range

Planning processes

the ________ ________ used in supply chain planning: Aggregate Production Planning Master Production Scheduling Materials Requirement Planning Distribution Requirements Planning Capacity Planning

Supply chain planning

the element of supply chain management responsible for determining how best to satisfy the requirements created by the Demand Plan

Dependent demand

the internal demand for items that are assembled or combined to make up the final product (e.g., component parts). Demand for these items is calculated based on the demand of the final product in which the parts are used, by using the planning factor

Financial, service

the objective of supply chain planning is to balance the supply and demand in a way that realizes the company's _______ and ________ objectives

Best of breed, single integrator solution

two types of implementation of ERP systems: