Marketing: Supply Chain Chapter 6
demand time fence
(Firmed segment) A firmed planning segment that is used with the MRP application; it usually stretches from the current period to a period several weeks into the future
resource requirements planning
(RRP) A long range capacity planning that is used to check whether aggregate resources are capable of satisfying the aggregate production plan
planning time fence
(Tentative segment) A period typically stretching from the end of the firmed segment to several weeks farther into the future; also known as the tentative segment
Which of the following results from using the chase production strategy?
-The workforce fluctuates in response to the demand pattern -Finished goods inventories always remain constant
Two types of ERP implementation
1.Best-of-breed - pick the best application for each individual function. Disadvantage- software may not integrate well but this may not be a major issue in future 2.Single integrator solution - pick all the desired applications from a single vendor Implementation Problems: Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Incompatible system environment
Three basic methods of calculating the available-to-promise quantities
1.Discrete available-to-promise 2.Cumulative available-to-promise without look ahead, & 3.Cumulative available-to-promise with look ahead
implosion
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planning factor
A calculation showing the number of units of a specific component required to make one unit of a higher-level part
electronic data interchange (edi)
A computer-to-computer exchange of business documents such as purchase orders, order status inquiries and reports, promotion announcements and shipping and billing notices
product family
A group consisting of different products that share similar characteristics, components or manufacturing processes
aggregate production plan
A long range production plan; it sets the aggregate output rate, workforce size, utilization, inventory and backlog levels for a plant
master production schedule
A medium range production plan that is more detailed than the aggregate production plan the production quantity to meet demand from all sources & is used for computing the requirements of all time-phased end items
rough cut capacity planning
A plan that is used to check the feasibility of the master production schedule
intermediate range planning horizon
A planning horizon that covers 6 to 18 months
long range planning horizon
A planning horizon that covers a year or more
chase production strategy
A production strategy that adjusts output to match the demand pattern during each production period •Generally produce one-of-a-kind, specialty products •Generally require highly skilled labor •Can be problematic when highly skilled workers are needed in a tight labor market
capacity requirements planning
A short range capacity planing technique that is used to check the feasibility of the material requirements plan
material requirements planning (MRP)
A software application that has been available since the 1970s; it performs an analysis of the firm's existing internal conditions and reports back what the production and purchase requirements are for a given finished product manufacturing schedule
distribution requirements planning
A time-phased finished goods inventory replenishment plan in a distribution network
Advantage of MRP Disadvantage of MRP
Advantage of MRP - provides production & planning information for entire planning horizon Disadvantage of MRP - loss of visibility, especially acute for products with a deep BOM, & ignores capacity & shop floor conditions.
Advantages & Disadvantages Of ERP Systems
Advantages Added visibility reduce supply chain inventories Helps to standardize manufacturing processes Measure performance & communicate via a standardized method Disadvantages Substantial time & capital investment Complexity Firms adapt processes to meet ERP system
bill of materials (bom)
An engineering document that shoes an inclusive listing of all component parts and assemblies making up the final product Dependent Demand -the internal demand for parts based on the demand of the final product in which the parts are used (e.g., subassemblies) Independent Demand -demand for final products affected by trends, seasonal patterns, & general market conditions Indented Bill of Materials -multilevel BOM which shows the parent-component relationships & the specific units of components known as the planning factor. Super Bill of Materials (AKA planning BOM, pseudo BOM, phantom BOM, or family BOM)enables the firm to forecast the total demand end products
A firm's labor and machine resources is know as______
Capacity
Short range capacity planning technique that is used to check the feasibility of MRP is known as
Capacity Requirements Planning
Name the 3 different types of production strategies
Chase production Level Mixed Production
Manufacturing resource planning (MRP II)
Combined MRP with master production scheduling, rough-cut capacity planning, capacity requirement planning, and other operations planning software modules
make to stock
Firms that typically emphasize immediate delivery of off-the-shelf, standard goods at relatively low prices compared to the chase strategy
Basic Production Strategies :
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 This strategy works well with firms producing multiple products (J&J, Proctor and Gamble) Master Production Schedule (MPS) -A detailed disaggregation of the aggregate production plan, listing the exact end 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. Note: For the service industry, the master production schedule may just be the appointment book, where capacity (e.g., skilled labor or professional service) is balanced with demand.
Master Production Schedule
Plan spans six to eighteen months. Shows the quantity & timing of end items
PRACTICE PROJECTED ON HAND INVENTORY ROW
Projected on hand Inventory = on hand inventory - gross requirements + scheduled receipts.
level production strategy
Relies on a constant output rate while varying inventory & backlog according to fluctuating demand. Firm relies on fluctuating finished goods & backlogs to meet demand. Works well for make-to-stock firms Inventory carrying and stockout costs are major cost concerns This strategy works well when highly skilled workers are needed in a tight labor market
Which strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern?
The Level Production Strategy
planned order releases
The bottom line of an MRP part record. It designates when the specific quantity is to be ordered from the supplier or to begin being processed. These quantities also determine the gross requirements of the dependent or "children" parts going into this higher level part or product
independent demand
The demand for final products and service parts. It has a demand pattern that is affected by trends, seasonal patterns and general market conditions
Available-to-Promise (ATP) Quantity
The difference between confirmed customer orders & the quantity the firm planned to produce
MRP requires
The independent demand information Parent-component relationships from the BOM Inventory status of final product & components. Planned order releases (the most important output of the MRP system)
dependent demand
The internal demand for parts based on the demand of the final product in which the parts are used
capacity
The output capabilities of a firm's labor and machine resources
available to promise quantity
The uncommitted portion of a firm's planned production. It is used to promise new customer orders.
Match or tracking capacity strategy
a moderate strategy that adjusts capacity in small amounts in response to demand and changing market conditions
enterprise resource planning (erp)
a packaged business software system that lets a company automate and integrate the majority of its business processes, share common data and practices across the enterprise and produce and access information in a real-time environment
make to order manufacturing firms
firms that make custom products based on orders from customers, resulting in long lead times and higher unit costs
Closed-loop MRP
incorporates the aggregate production plan, the master production schedule material requirements plan, & capacity requirements plan.
Resource Requirements Planning
is a long range capacity planning module, checks if aggregate resources are able to satisfy aggregate production. Gross labor hours and machine hours.
lag and lead capacity strategies
lag capacity strategies- A reactive approach that adjusts capacity in response to demand lead capacity strategies-A proactive approach that adds or subtracts capacity in anticipation of future market condition and demand
Projected on hand Inventory =
on hand inventory - gross requirements + scheduled receipts.
Components
parts demanded by a parent.
Short range MRP
plan covers a few days to a few weeks. Detailed planning process for components & parts to support the master production schedule
Hierarchical planning
process that translates annual business plans & demand forecasts into a production plan for a product family(products that share similar characteristics) in a plant or facility leading to the Aggregate Production Plan (APP) Planning horizon of APP is at least one year & is usually rolled forward by three months every quarter Costs relevant to the aggregate planning decision include inventory, setup, machine operation, hiring, firing, training, & overtime costs
System nervousness
small changes in the upper-level-production plan cause major changes in the lower-level production plan Firms use a time fence to deal with nervousness by separating the planning horizon into 2 segments (time fences))
Rough cut capacity planning
used to check feasibility of MPS. Converts MPS from production needed to capacity required, then compares it to capacity available
Long-range (Aggregate Production Plan) APP
usually covers a year or more, involves the construction of facilities & major equipment purchase
Terms used in MRP:
Gross requirement - A time-phased requirement prior to netting out on-hand inventory & lead-time Net requirement - The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory. Projected on-hand inventory - Projected closing inventory at end of period. Beginning inventory minus gross requirement, plus scheduled receipt & planned receipt & planned receipt from planned order releases. Planned order release - Specific order to be released to the shop or to the supplier. Time bucket - Time period used on the MRP. Days or weeks Explosion - Process of converting a parent item's planned order releases into component gross requirements Planning factor - Number of components needed to produce a unit of the parent item Firmed planned order - Planned order that the MRP computer logic system does not automatically change when conditions change to prevent system nervousness Pegging - Relates gross requirements for a part to the planned order releases Low-level coding - assigns the lowest level on BOM to all common components to avoid duplicate MRP computations Lot size - order size for MRP logic Safety Stock - Protects against uncertainties in demand supply, quality, & lead time
Parent
Item generating demand for lower-level components
Scheduled Receipt
MRP term that represents a committed order awaiting delivery for a specific period