Supply Chain Chapter 3

2 Methods of time fencing

-Firmed time period -Planned time period

Key Elements Necessary for DRP

-Forecast demands by DC -Current inventory levels by DC -Target safety stock by DC -Recommended replenishment quantities -replenishment lead times

Change Inventory levels

-Increase inventories: build stock in advance of demand to use available capacity. -decrease inventories:temporarily reduce inventory below normal safety stock levels during peak demand periods to meet customer requirements.

Terms used in MRP

-Time bucket -parent -components -planning factor -explosion -pegging -lot size -safety stock -Gross requirement -net requirement -projected on-hand inventory -planned order release -firmed planned order -scheduled receipt

Change Capacity

-Vary production output through overtime or idle time. -Vary work force by size by hiring or layoff -Using part-time workers -Subcontracting

Advantages of ERP

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

Aggregate planning strategies- supply options

-change inventory levels -change capacity

Single Level Bill of Materials consists of:

-independent demand -dependent demand

Aggregate planning strategies- demand options

-influencing demand -backordering during high demand periods- accept demand greater than supply capacities -counter-seasonal product mixing- develop a product mix with seasonal trends that level the required production capacity

Implementation Problems

-lack of top management commitment -lack of adequate resources -lack of proper training -lack of communication -incompatible system environment

Disadvantages of ERP Systems

-substantial time and capital investment -complexity -firms adopt processes to meet ERP system

Two Types of Implementation for ERP

1. Best-of-breed 2. Single integrator solution

3 Basic Production Strategies

1. Level Production Strategy 2. Chase Production Strategy 3. Mixed production strategy

3 Types of Capacity Planning

1. Resource requirement planning (RRP) 2. Rough-Cut Capacity Planning (RCCP) 3. Capacity Requirement Planning (CRP)

3 major ERP providers are:

1. SAP 2. Oracle 3. Microsoft

Types of Bill of Materials

1. Single Level Bill of Materials 2. Multilevel Bill of Materials 3. Planning Bill of Materials

Goals of Aggregate Planning

1. meet demand 2. use capacity efficiently 3. meet inventory policy 4. minimize cost

Discrete Available-to-Promise

=(on hand + supply -ordered ) per period

Scheduled Receipt

A committed order awaiting delivery for a specific period.

Material Requirements Planning (MRP)

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.

Master Production Schedule

A detail 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. -planning horizon is shorter than APP; but longer than the lead time to produce the item. -inputs: forecasts, customer orders, beginning inventory -outputs: projected inventory, available-to-promise, master production schedule

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. -if a component is a subassembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts on raw materials. -exp: making a bike

Available-to-Promise

A function providing a response to customer order inquiries, based on resource availability. -produces available quantities of requested product, and delivery dates. -it is the uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer order promising.

Resource Requirement Planning (RCP)

A long-range capacity planning module used to check whether aggregate resources are capable of satisfying the aggregate production plan.

MRP 2 (manufacturing resource planning)

A system that creates detail production schedules using realtime data. -Coordinates arrival of materials with availability of machine and labor. -It is used by itself, also as a module of more extensive enterprise resources planning (ERP) systems.

Gross Requirement

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

Distribution Requirements Plan

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.

Backordering During High Demand Periods

Accept demand greater than supply capabilities.

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

Planning Bill of Materials

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

ERP (Enterprise Requirements Planning)

An extensions of MRP 2 and includes DRP which determines replenish needs of product inventory at branch warehouses, when multiple warehouses are in the network. -Typically implemented through a software platform of integrated modules sharing real-time info across multiple business functions necessary for the supply chain to operate efficiently and effectively.

Short-Range Planning

Detailed planning process for components and parts to support the master production schedule.

Capacity Planning

Determining the amount of capacity required to produce a good or service in the future. -organizations must balance the production plan with this.

Counter-Seasonal Product Mixing

Develop a product mix with seasonal trends that level the required production capacity.

Single Level Bill of Materials

Display of components that are directly used in a parent item, together with the quantity required of each component. -shows only the relationships one level down.

Bill of Materials (BOM)

Document that shows an inclusive listing of all component parts and assemblies making up the final products.

Firmed Time Period

From the current date out several weeks into future. -Established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system.

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.

Aggregate Production Plan (APP)

Hierarchical planning translating annual business, marketing plans, and demand forecasts into a production plan in a plant or facility. -planning period is at least one year and rolled forward by three months every quarter

Influencing Demand

In alignment with available production capacity: advertising, promotional plans, and pricing.

Enterprise Requirements Planning Systems (ERP)

Information systems 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 entries.

Parents

Item generating demand for lower-level components.

Time Fencing

MPS the plan that derives the business.

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.

Lot Size

Order size for MRP logic.

Components

Parts demanded by a parent.

Single integrator solution

Pick all of the desired applications from a single vendor.

Best-of-breed implementation

Pick the best application for each individual function. -Disadvantage: software may not integrate well but this may not be a major issue in future.

Long-Range Planning

Planning for actions such as construction of facilities and major equipment purchase. -the total picture -Aggregate Production Plan - 1-3 years

Supply Chain Planning

The element of SCM responsible of determining how best to satisfy the requirements created by the demand plan. -objective is to balance supply and demand -combination of all the planning processes

Independent demand

The external demand for an item that is unrelated to the demand for other items.

Dependent demand

The internal demand for items that are assembled or combined to make up the final product.

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 investment.

Time Bucket

Unit of time/time period used in MRP. -exp: days, weeks, months

Business Planning

With long-term focus, provides direction and objections for the next two to ten years. -plan states the company's objectives for profitability, growth rate, and return on investment. -starting point for the Production Plan or Aggregate Production Plan

Capacity Requirement Planning (CRP)

a short-range capacity module used to check the feasibility of the Materials Requirements Plan.

Appointment log or book

the MPS for the service industry where capacity is balanced with demand.

Rough-Cut Capacity Planning (RCCP)

A medium-range capacity planning module used to check the feasibility of the Master Production Plan. -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.

Sales and Operation Planning (S&OP)

A process bringing all the demand and supply plans for the business together, providing management with ability to strategically direct the business to achieve a competitive advantage.

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 this.

Planned Order Release

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

Projected On-Hand Inventory

Projected closing inventory at end of a period. -beginning inventory - gross requirements, + scheduled reciepts + planned receipts from planned order releases

Pegging

Relates to the gross requirements for a component part to the planned order releases or the parent item, so as to identify the sources of the item;s gross requirements. -can be thought of as active where-used information.

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

Intermediate-Range Planning

Shows quantity and timing of end items.

Closed Loop MRP (manufacturing resource planning)

Synchronizes purchasing and procurement plans with the master production schedule. -System feeds back information about manufacture and materials on hand to the MRP system, why, so plans can be adjusted according to capacity and other requirements. -The system includes a feedback feature!!!