CPIM - Master Planning
multilevel BOM
- 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 and raw materials
intrinsic forecast method
- a forecast based on internal factors, such as an average of past sales - uses internal information such as the organization's historical data on demand for a product family or individual products - this technique assumes that the near-term past is a good guide to the near-term future
indented BOM
- a form of multilevel bill of material - it exhibits the highest-level parents closest to the left margin, and all the components going into these parents are shown indented toward the right, all subsequent levels of components are indented farther to the right - if a component is used in more than one parent within a given product structure, it will appear more than once, under every subassembly in which it is used
summarized BOM
- a form of multilevel bill of material that lists all the parts and their quantities required in a given product structure - unlike the indented bill of material, it does not list the levels of manufacture and lists a component only once for the total quantity used
master schedule
- a format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to-promise, and the master production schedule - takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals
MPS (master production schedule)
- a line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler - the master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning - represents what the company plans to produce, expressed in specific configurations, quantities, and dates - it is not a sales item forecast that represents a statement of demand - it must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals
BOM (bill of materials)
- a listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly, showing the quantity of each required to make an assembly - used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released - a variety of display formats exists, including the single-level, indented, [and] modular (planning)
bill of resources
- a listing of the required capacity and key resources needed to manufacture one unit of a selected item or family - rough-cut capacity planning uses these bills to calculate the approximate capacity requirements of the master production schedule, resource planning may use a form of this bill
CRM (customer relationship management)
- a marketing philosophy based on putting the customer first - involves the collection and analysis of information designed for sales and marketing decision support (in contrast to enterprise resources planning information) to understand and support existing and potential customer needs - includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions
FPO (firm planned order)
- a planned order that can be frozen in quantity and time - the computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned - this technique can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders - the normal method of stating the master production schedule
time fence
- a policy or guideline established to note where various restrictions or changes in operating procedures take place - frozen zone (demand): based on customer orders and all capacity and materials are committed to specific orders - slushy zone (planning): changes can be made but some may be difficult since capacity is established and materials are ordered - liquid zone: changes can easily be made by the scheduling software or the master scheduler - ex: changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted; it can be used to define these points
seasonality
- a predictable repetitive pattern of demand measured within a year where demand grows and declines - these are calendar-related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly - key point: it repeats over the analysis period and thus can be isolated from other sources of variation and removed temporarily so that it will not influence forecasting
production planning
- a process to develop tactical plans based on setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan - the sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed - primary purpose is to establish production rates that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable - because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, human resources, etc.
S&OP (sales and operations planning)
- a process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain - the process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans - performed at least once a month and is reviewed by management at an aggregate (product family) level - the process must reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan - 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 - process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement
MRP (material requirements planning)
- a set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials - makes recommendations to release replenishment orders for material; further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase - time-phased process begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required - this is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times
planned order
- a suggested order quantity, release date, and due date created by the planning system's logic when it encounters net requirements in processing MRP; in some cases, it can also be created by a master scheduling module - created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change - at one level they will be exploded into gross requirements for components at the next level - it, along with released orders, serve as input to capacity requirements planning to show the total capacity requirements by work center in future time periods
sales plan
- a time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item - represents sales and marketing management's commitment to take all reasonable steps necessary to achieve this level of actual customer orders. - is a necessary input to the production planning process (or sales and operations planning process) - expressed in units identical to those used for the production plan (as well as in sales dollars)
planning BOM
- an artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning - it may include the historical average of demand expressed as a percentage of total demand for all options within a feature or for a specific end item within a product family, used as the quantity
forecast
- an estimate of future demand - can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors - techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend
resource planning
- capacity planning conducted at the business plan level - the process of establishing, measuring, and adjusting limits or levels of long-range capacity - normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan) - addresses those resources that take long periods of time to acquire - decisions always require top management approval
dependent demand
- demand that is directly related to or derived from the bill-of-material structure for other items or end products; such demands are therefore calculated and need not and should not be forecast. - a given inventory item may have both dependent and independent demand at any given time - ex: a part may simultaneously be the component of an assembly and sold as a service part
pegging
- in MRP and MPS, the ability to identify for a given item the sources of its gross requirements and/or allocations; can be thought of as active where-used information - lists just those parents that are currently in demand in the form of gross requirements (dependent demand prior to checking inventory levels) or allocations (inventory that has been allocated to a specific order) - useful if a material will arrive late, there are supply chain interruptions, or the material has increased in price significantly
pacemaker
- in lean, the resource that is scheduled based on the customer demand rate for that specific value stream; this resource performs an operation or process that governs the flow of materials along the value stream - its purpose is to maintain a smooth flow through the manufacturing plant - a larger buffer is provided for it than other resources so that it can maintain continuous operation
ATP (available to promise)
- in operations, the uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer-order promising - the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled - in the first period, it includes on-hand inventory less customer orders that are due and overdue
mixed model production
- making several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day - the mixed-model schedule governs the making and the delivery of component parts, including those provided by outside suppliers - the goal is to build every model every day, according to daily demand
documentation and reporting
- order management releases electronic or paper records, including shipping documentation, invoices, and sales orders - a sales order is used internally to authorize release of inventory or is sent to the master planner to authorize production planning (or design and engineering in some cases) - the customer also receives a copy of the sales order stating terms and conditions of acceptance - reporting includes information for sales history, customer service history, and accounting
master scheduler
- person responsible for managing, establishing, reviewing, and maintaining a master schedule for select items - need to be experts in the product, plant, production process, and market because failing to produce reliable schedules will have a severe impact on the stability and effectiveness of the production facility, on material and capacity planning, and on customer service
load leveling
- spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable - although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries)
production plan
- the agreed-upon plan that comes from the production planning (sales and operations planning) process—specifically, the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on) - various units of measurement (e.g., units, tonnage, standard hours, number of workers) can be used to express the plan - represents management's authorization for the master scheduler to convert it into a more detailed plan—that is, the master production schedule
planning horizon
- the amount of time a plan extends into the future - for a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and time for capacity changes of primary work centers or of key suppliers - for longer-term plans, it must be long enough to permit any needed additions to capacity
MAD (mean absolute deviation)
- the average of the absolute values of the deviations of observed values from some expected value - can be calculated based on observations and the arithmetic mean of those observations - an alternative is to calculate absolute deviations of actual sales data minus forecast data; this data can be averaged in the usual arithmetic way or with exponential smoothing
independent demand
- the demand for an item that is unrelated to the demand for other items - ex: demand for finished goods, parts required for destructive testing, and service parts requirements
priority planning
- the function of determining what material is needed and when - master production scheduling and material requirements planning are the elements used for the planning and replanning process to maintain proper due dates on required materials - simply stated as the setting and maintaining of these due dates over time
parent item
- the item produced from one or more components - above its children in the hierarchy, and can have as many children as needed - a child (or component) is one of the components or raw materials and a child can have only one in a particular bill - can have multiple, which results in a multilevel bill of material
break even point
- the level of production or the volume of sales at which operations are neither profitable nor unprofitable - the intersection of the total revenue and total cost curves
cumulative lead time
- the longest planned length of time to accomplish the activity in question - it is found by reviewing the lead time for each bill of material path below the item; defined by whichever path adds up to the greatest number
order entry
- the process of accepting and translating what a customer wants into terms used by the manufacturer or distributor - the commitment should be based on the available-to-promise (ATP) line in the master schedule - this can be as simple as creating shipping documents for finished goods in a make-to-stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order products
demand planning
- the process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers' raw materials to the consumer's needs - items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services - numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions - actual sales are compared to forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error
CTP (capable to promise)
- the process of committing orders against available capacity as well as inventory, this process may involve multiple manufacturing or distribution sites - used to determine when a new or unscheduled customer order can be delivered - employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered and includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies - the resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments - the objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises =
RCCP (rough cut capacity planning)
- the process of converting the master production schedule into requirements for key resources often including labor, machinery, warehouse space, suppliers' capabilities, and, in some cases, money - comparison to available or demonstrated capacity is usually done for each key resource; this comparison assists the master scheduler in establishing a feasible master production schedule - three approaches: the bill of labor (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach
order promising
- the process of making a delivery commitment (i.e., answering the question, "When can you ship?") - for make-to-order products, this usually involves a check of uncommitted material and availability of capacity, often as represented by the master schedule available-to-promise
master scheduling
- the process where the master schedule is generated and reviewed and adjustments are made to the master production schedule to ensure consistency with the production plan - the master production schedule (the line on the grid) is the primary input to the material requirements plan - the sum of the master production schedules for the items within the product family must equal the production plan for that family
order entry and tracking
- this needs to be accurate, and tracking should be available on demand by the customer - minimizing entry time directly reduces lead times
cycle
- wavelike patterns observed in the growth and recession trends of the economy over years - do not repeat over a predictable period of time, so this type of forecasting is left to economists. - ex: could influence a trend is a product's life cycle
batch
1) a quantity scheduled to be produced or in production 2) for discrete products, it is planned to be the standard quantity, but during production, the standard quantity may be broken into smaller lots 3) in nondiscrete products, it is a quantity that is planned to be produced in a given time period based on a formula or recipe that often is developed to produce a given number of end items 4) a type of manufacturing process used to produce items with similar designs; it also may cover a wide range of order volumes, typically, items ordered are of a repeat nature, and production may be for a specific customer order or for stock replenishment
open order (released order)
1) a released manufacturing order or purchase order 2) an unfilled customer order
total cost curve
1) in cost-volume-profit (breakeven) analysis, it is composed of total fixed and variable costs per unit multiplied by the number of units provided; breakeven quantity occurs where it intersects with the total sales revenue curve 2) in inventory theory, an inventory item is the sum of the costs of acquiring and carrying the item
level schedule
1) in traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible; finished goods inventories buffer the production system against seasonal demand 2) in JIT, a level schedule (usually constructed monthly) in which each day's customer demand is scheduled to be built on the day it will be shipped; it is the output of the load-leveling process
demand management
1) the function of recognizing all demands for goods and services to support the marketplace; it involves prioritizing demand when supply is lacking, facilitates the planning and use of resources for profitable business results 2) in marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs - three critical functions: marketing management, customer relationship management, and demand planning
bias
a consistent deviation from the mean in one direction (high or low), a normal property of a good forecast is that it is not biased
single level BOM
a display of components that are directly used in a parent item, it shows only the relationships one level down
extrinsic forecasting method
a forecast method using a correlated leading indicator; tend to be more useful for large aggregations, such as total company sales, than for individual product sales ex: estimating furniture sales based on housing starts
product family
a group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer; can be from different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning)
where used list
a listing of every parent item that calls for a given component, and the respective quantity required, from a bill-of-material file
time bucket
a number of days of data summarized into a columnar or row-wise display ex: a weekly time bucket contains all the relevant data for an entire week; weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP
chase production method
a production planning method that maintains a stable inventory level while varying production to meet demand - ex: seasonal ice cream shop
level production method
a production planning method that maintains a stable production rate while varying inventory levels to meet demand
delphi method
a qualitative forecasting technique where the opinions of experts are combined in a series of iterations; the results of each iteration are used to develop the next, so that convergence of the experts' opinions is obtained
lot
a quantity produced together and sharing the same production costs and specifications
planned order release
a row on an MRP table that is derived from planned order receipts by taking the planned receipt quantity and offsetting to the left by the appropriate lead time
four Ps
a set of marketing tools to direct the business offering to the customer - product, price, place, and promotion
leading indicators
a specific business activity index that indicates future trends ex: housing starts is a leading indicator for the industry that supplies builders' hardware
historical analogy
a technique based on identifying a sales history that is analogous to a present situation, such as the sales history of a similar product, and using that past pattern to predict future sales
lead time offset
a technique used in MRP where a planned order receipt in one time period requires the release of that order in an earlier time period based on the lead time for the item
backlog
all the customer orders received but not yet shipped, sometimes referred to as open orders or the order board
PAB (projected available balance)
an inventory balance projected into the future; it is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders
scheduled receipt
an open order that has an assigned due date
backorder
an unfilled customer order or commitment; an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand
trend
general upward or downward movement of a variable over time ex: demand, process attribute
net requirement
in MRP, requirements for a part or an assembly are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock; after being lot-sized and offset for lead time, net requirements become planned orders calculation: gross requirements - schedule receipts - prior projected available
uniform plant loading
in lean, the distribution of work between work stations so that the time required for each station to complete all tasks is as close to equal as possible
interplant demand
one plant's need for a part or product that is produced by another plant or division within the same organization; although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner
scheduling
the act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule
average inventory
the average can be calculated as an average of several inventory observations taken over several historical time periods; for example, 12-month ending inventories may be averaged
marketing strategy
the basic plan the marketing function expects to use to achieve its business and marketing objectives in a particular market, includes marketing expenditures, marketing mix, and marketing allocation
forecasting
the business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance important take-aways: 1) wrong most of the time 2) always be sure there is an estimate of reliability or error rates 3) more accurate for product families than for individual items 4) more accurate in the near term than in the long term
due date
the date when purchased material or production material is due to be available for use
forecast error
the difference between actual demand and forecast demand
available inventory
the on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems, often called beginning available balance
requirements explosion
the process of calculating the demand for the components of a parent item by multiplying the parent item requirements by the component usage quantity specified in the bill of material
BOM explosion
the process of determining component identities, quantities per assembly, and other parent-component relationship data for a parent item; may be single level, indented, or summarized
mixed model scheduling
the process of developing one or more schedules to enable mixed-model production; the goal is to achieve a day's production each day
planned order receipt
the quantity planned to be received at a future date as a result of a planned order release; differ from scheduled receipts in that they have not been released
on hand balance
the quantity shown in the inventory records as being physically in stock
tracking signals
the ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation, used to signal when the validity of the forecasting model might be in doubt
gross requirement
the total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts