Module 3 Section B: Managing Supply from Internal Sources

Distribution requirements planning (DRP)

- DEF: function of determining the need to replenish inventory at branch warehouses (aka distribution centers)

Individual communications

- require numerous soft skills to gain acceptance and buy-in for requirements and priorities and to ensure that the concerns of all parties are considered. --LISTENING

Capacity planning

- DEF: determining the amount of capacity required to produce in the future --may be performed at an aggregate of product-line level (resource requirements planning), at the master scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning)

Concentrate on constraints

- "Goldratt's theory of constraints" - production process is no faster than its slowest function - Constraint - DEF: ay element or factor that prevents a system from achieving a higher level of performance with respect to its goal. Principles for handling the constraint in a system 1. Elevate the constraint - work to remove constraint 2. Put some inventory in a queue before the constraint as a time buffer. Make sure constraint always has inventory. 3. Control the rate of material feeding into the constraint. Need material coming in at the rate required to maintain the time buffer. 4. Improve the flow at the constraint in any way possible 5. Adjust loads to avoid the constraint when you can. "Throughput time" - DEF: length of time from when material enters a production facility until it exits. 6. Change the schedule - as the last resort

Capacity Management planning, and control

- "within the time allowed" is important. "Can we do it between now and the deadline?"

Push and pull elements in DRP

- Although orders originate downstream, they are evaluated at the supplying locations before being released to determine the actual need at the ordering location and the availability of goods at the sites receiving the order. This helps prevent shortages at supplying sites and overstock at ordering sites. DRP keeps inventory in balance around the network. - based on more accurate data, hybrid method should allow release of smaller, more frequent orders than straight pull or push arrangements.

Measuring capacity

- Available time - product of hours of operation and numbers of workers or equipment in use during those hours - Utilization - DEF: meaure of how intensively a resource is being used to produce a good or service. --percentage of available time that the work center is actually being used. - Efficiency - measurement of the actual output compared to the standard output expected. --standard hrs of work / Hours actually worked - standard hours or time refers to the amount of time average worker or piece of equipment is expected to need. --standard time allows for ordinary delays and rest periods.

Production activity control (PAC)

- Capacity control takes the form of input-output control and operations sequencing. --has the shortest horizon and takes place closest to the daily action of manufacturing.

COMMUNICATING REQUIREMENTS AND PRIORITIES

- Communicating requirements and priorities when managing supply from internal resources is critical to achieving the efficiencies possible in a well-designed operations planning and control process.

Communications KPIs

- Communications KPIs are specific communications goals that each company will set and periodically revise as progress is measured against goals.

CONTROLLING PRIORITIES

- Controlling priorities involves transforming the aggregate-level plan into a workable item-level plan that balances the needs of individual plants, work centers, and schedules against the agreed-upon production plan. --performing rough-cut capacity planning (RCCP)

Resource planning

- DEF: Capacity planning conducted at the business and production plan levels. 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. - aka resource requirements planning - takes the longest view of the system's capacity, typically going out 15-18 months but sometimes requiring much longer planning horizons for capital investments. - Duration of the planning horizon depend on the lead time of the needed resources. --capital expenditures in facilities or expensive equipment is an executive-level decision, while the resource planning that is based on the production plan is more likely to be a SCM decision.

CAPACITY

- DEF: ability of a system to perform its expected function. Ability of plant to produce output per time period.

Rough-cut capacity planning (RCCP)

- DEF: converting the master production schedule into requirement for key resources, including labor, machinery, warehouse space, supplier capabilities, and money. Establishing feasible master production schedule. 3 stages for MPS development process: 1. First draft of plan 2. RCCP to verify that production targets are feasible 3. Revisions to the plan by master scheduler - Rough-cut stage takes a medium-term look at the system. --bottleneck - Facility, function, department, or resource whose capacity is less than the demand placed.

Capacity management

- DEF: function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules. --Resource requirements planning --Rough-cut capacity planning --Capacity requirements planning --input/output control - goal is to keep demand and supply in harmony - ensure right amount of capacity in the right configuration

Master planning

- DEF: group of business processes that includes the following activities: --demand management --production and resource planning --master scheduling

Capacity control

- DEF: measuring production output and comparing it with the capacity plan, determining if the variance exceeds pre-established limits.

Push systems

- DEF: replenishing field warehouse inventories where replenishment decision making is centralized, usually at central supply facility --scheduled shipments --systemwide coordination of inventory management

Pull system

- DEF: system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant. --Determination of product requirements is done by a central planning organization and pushed out. --also known as serial autonomy - Benefit: freedom for independent balance of supply and demand. --ex: grocery or hardware franchise with good forecasting instincts - Negatives: does not take advantage of essential strengths of SCM. EX: collaboration and mutual decision making 3 drawbacks: 1. Orders likely to increase as they travel up the chain (bullwhip effect) 2. Company doing the ordering knows nothing about the needs and plans of the other chain partners 3. Order doesn't take into account the supplier's situation

DRP components

- DRP combines the following inputs: 1. Demand forecasts 2. Safety stock 3. Accurate lead time information 4. Overall knowledge of the distribution system.

Communications tools

- Dashboards - compile information for presenting production plans. - Social networks or e-mail can also be leveraged to communicate supply status --beneficial with team members are at different locations.

Finance contributions

- Financial feasibility and fit with business plan goals.

MATERIALS AND INVENTORY

- Finished goods and raw materials and components are interrelated.

Lot-for-lot or fixed order qty replenishment

- Inventory replenishment for safety stock doesnt affect dependent demand. There is no buffer necessary --any safety stock would only be a waste of money for storage space, handling, and production capacity. Reason for lot-for-lot replenishment technique. --lot-for-lot used whenever excess inventory is undesireable. - Fixed order qtys (FOQ) must be used rather than lot-for-lot for operations that require fixxed batch sizes and order qtys Lot for lot scheduling requirements: - Gross delivery required - Projected amounts on hand for delivery - Scheduled receipts - Net requirements - Lead time - orders released always equal the orders to be received.

Use visual signals

- Kanban - DEF: method of JIT production that uses standard containers or lot sizes with a single card that they wish to withdraw parts from work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers. --use display cards as the visual signal to tell a workstation to begin operations. --purpose is to keep the lot sizes as small as possible to optimize space and labor --an empty space can do for a signal to begin operations. - demand pull - DEF: triggering of material movement to a work center only when that work center is ready to begin the next job. It eliminates the queue from in front of a work center, but can cause a queue at the end of a previous work center

Develop pull partnerships and learn to be lean

- Kanban's visual signals are one example of a pull system of production control. - Developing lean thinking focuses on taking only the absolute minimum number of steps and using only bare minimum resources. --Reduce waste, reuse, and recycle.

Goals for RCCP for master production schedule output

- MPS is considered workable if master scheduler has verified that 1. Bottleneck capacity per item per time period is sufficient 2. Plan makes the best use of resources 3. Customer delivery promises are kept 4. Plan is still economical

Purposes of the MPS

- MPS serves as a contract between sales and operations - For sales force - the MPS provides assurance that they may make delivery commitments to customer based on the amount of product that will be available week by week. - For operations - the commitment of the sales force to meet its numbers provides assurance that they can avoid problems resulting from overproduction or an excess of orders. - Balance of supply and demand offer several benefits: 1. Low holding costs for inventory 2. Fewer stockouts 3. Efficient use of plant, labor, and equipment

Material requirements planning (MRP)

- MRP - DEF: set of techniques that uses BOM data, inventory data, and master production schedule to calculate requirements for materials - There can be independent and dependent demand for the same item --EX: component can be used in finished production but also sold independently as a repair part of upgrade item (Auto parts) - Dependent demand doesn't require estimation, only calculation.

Pull vs push distribution

- Manufacturing uses push and pull --pulled by actual demand (as in JIT) or pushed by forecast demand

MEASURING PERFORMANCE

- Measuring performance benefits: 1. Control of processes and employees 2. Reporting to managers and external sources 3. Communication of expectations and problems 4. Learning and continuous improvement - Performance measures should be objective, consistent, and quantified. --should measure at least 2 parameters - QTY and TIME --also require target values or standards.

Capacity requirements planning (CRP)

- determines the amount of labor and machinery required to carry out production tasks specified in the MRP. --CRP is the most detailed level of capacity planning. --see specifically how available capacity will, or will not, translate into the production necessary to meet demand. - to assign each facility, work center, and operation load and perform load leveling. - Load - Amount of planned work scheduled for and actual work released to a facility for a specific span of time. - 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. --material and labor are ideally level loaded.

S&OP process

- Monthly executive meeting - requires 2 weeks or more of team member preparations "Wallace and Stahl" 5 step S&OP process: 1. Data gathering - timing the S&OP process to begin after the best data are available each month. 2. Demand planning phase - Plan should be reviewed by sales and marketing execs (aka "marketing/sales handshake") 3. Supply planning phase (capacity) - Supply management team may alter the production plan and revise the S&OP data to meet the demand plan as closely as possible (aka "Operations handshake") --financial professionals review the demand plan and any alternative supply plans to determine financial feasibility. 4. Pre-meeting - Key players review the data and set agenda for final step. Identify the areas where consensus can be reached without needing executing input. 5. Exec meeting - Monthly meeting includes the CEO and VPs of Operations, sales, marketing, finance, and so on. --provide execs with broad understanding of supply and demnd issues. --execs will make decisions pertaining to each product family.

Control objectives

- PAC has 4 main objectives 1. Execute the master production schedule and the material requirements plan 2. best use of resources 3. Minimize WIP 4. Maintain customer service

SC managers as communications intermediaries

- SC managers are the communications link between the functional departments that make up the internal parts of the SC. --should be aware of the entire process. - when it come to executing these plans there is a risk of failing to communicate the results to the persons responsible for daily implementation of the plans. --success of your S&OP is only as good as your communications.

Action and exception messages

- Supply planning MRP systems create action and exception messages that planners find critical to managing production plans, master production schedules, and MRP priority plans - it is the planner's role to review the action and exception messages, make planned orders into firm planned orders or release them as open orders or scheduled receipts, change order qtys or qty requirements. When external issues occur: - Customer orders change - Suppliers experience shortages - Suppliers deliver materials late When internal issues occur: - Lower production yields or higher scrap factors occur. - Open orders are completed early or late - New capacity or resource constraints occur - Inventory inaccuracies - If any of above issues occur, planners can either maintain the plans but expedite or de-expedite certain items or components, with a goal of maintaining the scheduled production due dates. - Planner's responsibility to consult with managers on the demand side to get their input on priorities and to explain the issue so that the demand-side professionals can then explain the issue to affected customers.

Operations planning and control communications

- Supply planning communications related to MPS and MRP systems are prompted by action and exception messages. --these messages can be communicated to supply professionals through the computer system or over mobile devices

People, processes, and technology

- Technology is an enabler of hard work and decision making. --cannot make a poor business process become a good business process or make supply prioritization decisions for managers.

S&OP functions

- basic premise of S&OP is that there should be one plan to unite all the major functions - Sales, Operations, Finance. --assumes that key players, including execs, will agree to the unified plan and carry it out tactically. --"Thomas F Wallace" - S&OP is as much about institutionalizing communications throughout the org as it is anything else if you get all the facts on one sheet of paper. - all functional areas involved in S&OP hsould submit annual budgets for review by finance.

Communications using information systems

- benefit of ERP - system automatically routes the results of one decision in the system to all other affected parties and business functions --EX: ERP integrates MPS and MRP with inventory and other areas, tracks due dates in the MRP priority plan and keeps planners notified of the status of operations and materials. Perhaps using an Advanced Planning and Scheduling (APS) system. --ERP system automatically generates the PO - Automated communications increase the efficiency of each employee and allow many more transactions to occur. --Technology alone is not enough. --Communicating priorities requires complementary people, processes, and technology.

Measuring capacity

- capacity is NEVER measured in dollars.

Capacity requirements

- compare available capacity to the load to see if you have a match. --if you dont have the capacity at a work center to match or exceed the load, then there is a capacity constraint.

Bill of Material (BOM)

- complete list of components - can include anything that seems relevant to ensuring that your org uses the correct specified materials. - Multilevel Bill of material - DEF: display of all the components directly or indirectly used in a parent, together with the qty 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. - Parent item - DEF: item produced from one or more components.

Offsetting

- counting backward from a due date to accomodate lead time. - components are likely to have different lead times

Rough-cut capacity planning (RCCP)

- detailed, medium term look at production priorities as they are described in the MPS and determines whether or not capacity is available to carry out the scheduled activities. --if bottleneck points can generate sufficient capacity, non-bottleneck capacities and materials are normally also sufficient. - available capacity at gateway work centers, bottleneck work centers, and critical suppliers. --gateway work centers are points where operations are started at a particular site and therefore may rely on supplies from external sources. - bottleneck work center is one where an operation's throughput is contained by a particular components's fixed oven curing time --requires keeping steady supply of components ready to be cured (a buffer). --could be used to indicate a need for new ovens, the RCCP process works within current capacity limitations. These limits may be flexible, however. Master scheduler could add a 2nd shift to keep the ovens running longer each day. --if there is a gap, the master scheduler must specify what is required to bridge it. - RCCP has inputs for critical resources and standard resource capacities. - Bill of resources (Bill of capacity) - DEF: required capacity and key resources needed to manufacture one unit of a selected item. Rough-cut capacity planning uses these bills to calculate the approximate capacity requirements of the master production schedule.

Financial measures

- helps to show how efficiently assets are being utilized. Financial measures related to internal supply measurement: 1. Raw material inventory cost 2. WIP value 3. Variance between standard and actual for labor cost and overhead 4. Financial results of modifying capacity 5. Maintenance costs per period 6. Equipment downtime.

Interpersonal communications

- important to formalize to ensure that they occur, meaning that policy must dictate, for example, with whom the planner must communicate if a new constraint endangers meeting production schedules.

Team communications

- important to staff teams with persons who can collaborate without harming the group dynamic. - Team leaders process to good communication: 1. Setting goals clearly 2. Organizing 3. Communicating and directing work 4. Resolving conflicts and taking corrective action

Sales and operations planning (S&OP)

- intended to be a planning and controlling tool not just for manufacturing but also for the entire enterprise.

Resource planning

- longest term type of capacity planning. --long-range assessment of capacity requirements at an aggregate level. --create enough supply to match that demand one, two, or even five years into the future. - identify the number of labor hours required quarterly to meet operations goals. - generating business cases for capital expenditures such as infrastructure improvements, winning approval for them at the executive level, and producing project plans and performing project management to build or acquire the resources needed for long term strategic business development. - resource profile - DEF: standard hours of load placed on a resource by time period. --rather than using standard hours, a resource profile could specify measures specific to a given operation such as standard milliliters of a chemical, standard hours of drying time, or standard kilograms of raw material.

Routing file

- manufacturing steps required, sequence of steps, and the time required. - Router maps the journey of a component from work center to work center, specifying all the operations it undergoes on the way to completion.

Master scheduling

- master schedule - DEF: schedule 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, production plan, other important considerations such as backlog, availability of material, capacity, and management policies and goals. - separating product family data into number of individual products --process is typically facilitated by IT such as an ERP system.

Weekly dates for specific products

- master scheduling also determines weekly production dates.

Staging capacity investments

- may be necessary to build a new facility to accommodate types of work you aren't doing for current projects or to purchase expensive equipment --develop excess capacity and risk that demand will eventually catch up. - choice between staying a little ahead, behind, or a little of each. 4 ways to stage growth capacity: 1. One-step lead strategy: expanding all at once ahead of demand 2. Stepwise lead strategy: expanding in steps ahead of demand 3. Stepwise lag strategy: expanding in steps behind demand 4. Stepwise overlapping strategy: expanding in steps that are sometimes ahead of and sometimes behind forecast demand. - resource management - DEF: planning and validation of all org resources. --effective identification, planning, scheduling, execution, and control of all organizational resources to produce a good/service --emerging field of study emphasizing the systems perspective, encompassing both the product and process life cycles. Focusing on the integration of organizational resources toward the effective realization of organizational goals.

Operational measures

- operational performance measurements - DEF: In theory of constraints, performance measurements that link causally to organizational performance measurements. --ex: throughput, inventory, operating expense - traditional management - related to machine, worker, or department efficiency or utilization. Poorly correlated with organizational performance. Key operational measures: 1. Percent MPS completed 2. Number of time fence violations 3. Production yield 4. Quality metrics 5. Inventory turnover

IMPLEMENTATION OF THE SALES AND OPERATIONS PLAN

- org's sales and operations plan is implemented on the supply side of the org through a production plan. --12-18 months. --projections are made by product family and generally stated as a rate of production.

Strategic and business plans and their objectives

- org's strategic and business plans are the foundation for the org's sales and operations planning and resulting production plan. --Strategic plan is long-term - 5-10 years or more which clearly identifies the company's mission, goals, and objectives. --Although set for long term, it is updated periodically in response to the org's strengths and weaknesses and the opportunities and threats - org's business plan states organizational strategy in more specific terms and sets goals for achieving the strategy over the next 1 to 3 years or more. --specifies HOW value will be created for both customers and owners. - Objective for business planning is to create an actively used, relevant business plan by annually updating the plan to reflect changes in strategy and by using the disciplined sales and operations planning (S&OP) process on a monthly basis to evaluate progress against the business plan and make adjustments and needed.

Contributions to S&OP

- product family - DEF: group of end items whose similarity of design and manufacture facilitates their being planned in aggregate, whose sales performance is monitored together, and , occasionally, whose cost is aggregated at this level. - mission of S&OP is to keep supply and demand in balance.

Hybrid systems

- push system used to a particular SC level or echelon, and then pull distribution after this particular echelon. - can increase centralized control or increase decentralized control

Managing MRP: Feedback loops and system nervousness

- regular feedback in S&OP meetings (ex: change in product design). Too frequent change can be frusterating - establish time fences in master schedule so that changes are not allowed. - pegging - DEF: capability to identify for a given item the sources of its gross requirements and/or allocations. --pegging each component to its parent in the BOM to mitigate nervousness. --active "where used" information --easily check to see what happened to its parent. - Nervousnes can make a sound system costly and inefficient. can lead to excessive reprioritizing.

Business Planning

- the business plan is a thorough and disciplined preview of what the company hopes to accomplish with its products and services over the long term, with emphasis on the plan year. --typically stated in dollars and grouped by product family. Business plan should do the following things: 1. Clarify strategy by stating an explicit vision for the business 2. Provide a point of reference for developing the sales and operations plan 3. Describe long-term strategies that will be used to guide shorter term tactical plans for producing and selling the product.

Managing MRP

- there is a degree of inflexibility of MRP due to fixed leadtimes. Creates tension when MRP is combined with lean or Just-in-time approaches to moving physical items through the SC. --combination can be complementary at the end of the day.

DRP logic

- translates DC demand into forecasts for use in factory master scheduling. --typically uses time-phased netting of requirements.

Capacity communications tools

- vital supply side communication that enables production activity control to flow smoother --Communicating capacity early results in shorter production lead times, better utilization, and better capacity planning. - Shop calendar - Shows working days and non working days. --each week is also sequentially numbered. - load profile - shows the load for a work center over a certain period --can help illustrate for CRP how much of a work center's capacity is used by the load generated by the planned and released orders per time period.

Steps in CRP

1. Check open order file - contains all active shop orders, with qtys, operations, and due dates. --orders tell you how much capacity is already scheduled at the work center. 2. Check planned order releases - will be released on the release dates planned by MRP --all operations still need to be performed and taken into account 3. Check the routing file - follows each component's progress through the center or centers. --Operations to be performed --Sequence of operations ---Work centers --Alternate work centers --Tooling needed for each operation --Standard times - Planned order releases plus the routing file provide the information necessary to calculate the amount of time in the schedule for any work center --includes the operation descriptions, work centers, and other requirements. --Add open orders and the planned order releases, and you have the total commitment of time for the work center. 4. Check the work center file - provides capacity information. --file contains all the information needed to calculate the amount of manufacturing lead time to complete one order at the work center --file will contain data on queue time, wait time, and move time. - Manufacturing lead time - DEF: time required to manufacture an item, exclusive of lower level purchasing lead time. --for make to order products, it is the length of time between the release of an order to the production process and shipment to the final customer. --for make to stock products, it is the length of time between the release of an order to the production process and receipt into inventory. Wait time can be summarized as follows: 1. Order prep time is the administrative time spent processing an order 2. Queue time - time spent waiting for an operation to start 3. Setup time - preparing work for different operations. 4. Run time - time spent performing an operation 5. Wait time - time spent at work center before going to the next center 6. Move time - time spent physically moving items among work centers 7. Inspection time - time spent on quality assurance 8. Put-away time - time spent moving the item to its storage location.

Product and brand management, marketing, and sales contributions

1. Demand forecasts 2. Demand plan commitments - implementing realistic strategies and tactics to achieve the goals and revenue objectives for the near and medium term. 3. Demand plan numbers and assumptions - demand org contributes estimates of the results of their efforts expressed both in the units and the revenue dollar equivalents, along with all underlying assumptions. 4. Market analysis - Marketing contributes research and analysis of marketing opportunities, selection of target market segments, development of strategies for capturing a share of those markets.

Line items of Master scheduling grid

1. Forecast - per period demand plan for individual item 2. Customer orders - actual demand 3. Projected available balance (PAB) - inventory balance projected into the future 4. Available-to-promise (ATP) - uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer-order promising. 5. Master production schedule (MPS) - line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. --becomes a set of planning numbers that drives material requirements planning. --interplant demand - DEF: plant's need for a part or product that is produced by another plant or division within the same org.

S&OP is all of the following

1. Link between business planning and tactics - S&OP forms a link between the vision in the strategic and business plans 2. Provides opportunities to be proactive rather than reactive - Monthly meeting is a chance for executives to respond to changes in economic and market conditions. 3. Definitive short to medium-term plan - 12-18 months 4. Unified, cross-functional plan and process - form a planning team that reconciles all of the functional business plans. 5. Bridge between customer value and SC efficiency - there is an inherent tension between the needs of the customer and the evolving quality standards of the SC. --cheaper and faster is not always good if quality suffers. 6. Incentive to engage in continuous improvement - Monthly meetings incorporate replanning from prior months.

Evolution of MRP software

1. MRP software - based on BOM, component leadtimes, and incoming orders to schedule manufacturing dates. --negatives: software's assumption that all work centers in the chain have infinite capacity 2. Closed-loop MRP - refinement of basic MRP software - incorporates feedback on available capacity. Calculates impact of each order on the work center that is scheduled to complete the order. if there is too little capacity, it may change the order date. --also leverages feedback from the execution functions to the planning functions to ensure that replanning occurs. --maintenence of valid plans and schedules 3. Manufacturing resource planning (MRP II) - DEF: method for the effective planning of all resources of a manufacturing company. Addresses operational planning in units, financial planning in dollars, and simulation capability to answer what-if questions. --first upgrade of MRP software that includes requirements planning from other functions, such as sales and finance. --includes finance --provides visibility of material and capacity requirements --provides detailed activity information --suggests ways to bring activities back into line --integrates long-term planning

Operations contributions

1. Output resources - products grouped into families during the 12-18 month planning horizon - Overall level of manufacturing output - inventory levels - make to stock - Backlog levels - customer orders received but not yet shipped ("Open orders") - Required plant, equipment, labor, and material resources for each period in the plan. 2. Product families - basis of similar operations capacity requirements - "Like capacity" items are grouped together so that production plan can be used directly by operations. 3. Operations constraints - evaluating whether there is sufficient capacity over the planning horizon to meet the plan for each product family. --Constraints can sometimes be alleviated by operating above or below optimal capacity or by altering operations strategies or supply-demand strategies. 4. Operations strategies - level production strategy - DEF: production planning method that maintains a stable production rate while varying inventory levels to meet demand. Predictable, simple, potential stockouts - Chase production method - DEF: production planning method that maintains a stable inventory level while varying production to meet demand. Results in demand matching. Reduction of inventory costs, increase in costs for overtime during high demand, layoffs during low demand. - hybrid strategy - plant running near full capacity for part of the cycle. Popular method. 5. Supply-demand strategies - make to stock - stable demand, mass-market strategy, risk of inventory buildup, obsolesecence - make-to-order - engineer to order - products that require unique engineering design, significant customization, or new purchased materials. - assemble to order - package-to-order - mass customization, limited number of modular components. 6. Actual results and other data for performance metrics

Control functions

1. Plan - ensure resources are available and scheduling start and completion dates 2. Execute - gathering relevant information for the shop order and releasing the orders 3. Control - establishing and maintaining order priority - Tracking actual performance - Monitoring and controlling WIP, lead times, run times, and queues - reporting work center performance - PAC can engage in continuous improvement by adopting techniques associated with six sigma, kanban, lean manufacturing, and other tried and true systems

MRP process specifications

1. Planned order receipts - qty planned to be received at a future date as a result of a planned order release. Not yet released. 2. planned order releases - row on an MRP table that is derived from planned order receipts by taking the planned receipt qty and offsetting to the left by the appropriate lead time. - release of make orders - release of buy orders 3. Exception report - items that deviate from the plan. - When the planning system calculates net requirements in MRP, it generates a set of planned order, which are subject to change until orders are either made into firm planned orders (FPOs) by the planner or are released to become open orders or scheduled receipts.

Reconciling Just-in-time or lean with MRP

1. Small bucket or bucketless systems (System of timing orders) - Reducing bucket size from a week to a day or even less speeds up the flow. - In bucketless systems, orders can move through the work area on a JIT basis. --Inventory balances are tehn reduced by backflushing, using BOM to deduct component qtys from inventory as soon as the unit has been completed. 2. Balanced flow (combining MRP and JIT) - used in repetitive work centers such as assembly lines. MRP takes care of the scheduling and planning for delivery of parts to the line in small lots. JIT pulls the materials through the facility with visual signals such as kanban cards or empty bins

Capacity objectives

1. Too little capacity - need to add capacity if possible, shift work elsewhere, or endure stock outs and broken orders. 2. Too much capacity - results in high inventory. if capacity is reduced to actual demand levels, space are wasted. 3. Just the right amount - staying on plan

Operations planning and control steps

Basic steps in operations planning and control: 1. Demand history data are gathered and cleansed. A statistical forecast is run and analyzed for events or outliers that are not expected to repeat in the future. 2. Statistical forecast with associated errors is reviewed with the product management, marketing and sales teams. 3. Demand plan is finalized and passed to supply 4. Supply team reviews demand plan with capacity 5. Supply and demand review with finance and execs 6. Executive S&OP meeting is held - single plan is made. Sales team sells to the plan, Supply produces to the plan. 7. Output of S&OP is the production plan - provides the rate of production at the family level. 8. Production plan is the input to master scheduling and its output, the master production schedule. The MPS is typically a weekly plan at the item level with an evaluation of capacity through rough-cut capacity planning. 9. Materials requirement planning uses the BOL data, inventory data, and the master production schedule to calculate requirements for materials, resulting in planned production and POs. 10. Production activity control receives the output of MRP and detail planning.

When load and capacity are out of balance

Change capacity to match the load: 1. Add or reduce work hours (using overtime hours) 2. Hire or lay off workers - This is inefficient way to handle a short term problem 3. Shift the workforce - move workers with compatible skills 4. Change the routings 5. Subcontract extra work to a 3rd party or hire temps. Change the load to match capacity: 1. Change lot sizes - Lot size - DEF: amount of a particular item that is ordered from the plant or supplier or issued as a standard qty to the production process 2. Change the schedule

Demonstrated capacity

Demonstrated capacity = Output for X periods / X

MRP inputs and outputs

Master production schedule: 1. Planned orders - suggested order qty, release date, and due date created by the planning system's logic when it encounters net requirements in processing MRP. - created by the computer, exist only within the computer or MRP software, and may be changed or deleted by the computer during subsequent processing if conditions change. 2. Firm planned orders (FPOs) - planned orders that can be frozen in qty and time. - Open order - released manufacturing order or purchase order - Scheduled receipt - open order with assigned due date. 3. Inventory status 4. BOM - product tree 5. Planning factors - ex: safety stock concerns and lead times.

Rated capacity

Rated capacity = available time X Utilization X Efficiency

Operations planning and control

Supply side output: - production plan - based on consensus demand plan, is developed to guide master scheduling (MS), which produces a master production schedule (MPS) and plans for the necessary raw materials in material requirements planning (MRP) and for controlling production and scheduling assembly (PAC and FAS) - Distribution requirements planning (DRP) process involves determining the inventory replenishment needs at branch warehouses.