intro to supply chain Taitt chapter 3

Supply Chain Planning

Responsible for determining how best to satisfy the requirements created by the demand plan

It's objective is to balance supply and demand in a way that realizes the financial and service objectives of the company

Usually hierarchal and can be divided into 3 broad categories: Long range, intermediate range, short range

Long Range supply chain planning

involves planning for actions such as the construction of facilities and major equipment purchase

executive level

Intermediate Range Supply Chain Planning

Shows the quantity and timing of end items

Mid levels

Short Range Supply Chain Planning

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

Planner, 1st line supervisor

Closed Loop MRP

Synchronizes the purchasing with the master production schedule

System feeds back info about completed manufacture and materials on hand into the MRP system

Called a closed loop MRP because of its feedback feature

Manufacturing Resource Planning (MRPII)

A computer based system that can create detailed production schedules using realtime data

Coordinates the arrival of materials with the availability of machine and labor

Used as a module for more extensive ERP

Enterprising Requirements Planning ERP

An extension MRPII and includes DRP which determines the need to replenish finished product inventory at branch warehouses

Typically implemented through a software platform of integrated functional modules, facilitating the sharing of real time info and collaboration across multiple business functions necessary for the supply chain to operate efficiently and effectively

Business Plan

Provides the company's direction and objectives for the next 2 to 10 years

It is updated and reevaluated annually

Sales and Operations Planning (S&OP)

A process that brings all the demand and supply plans for the business (sales, marketing, development, production, sourcing, and finance) together to provide management with the ability to strategically direct the business to achieve a competitive advantage

Definitive statement of the company's plans for the near to intermediate term

Aggregate Production Plan (APP)

Hierarchical planning process that translates annual business, marketing plans, and demand forecasts into a production plan for a product family* in a plant or facility

the planning horizon of APP is at least one year and is usually rolled forward by 3 months every quarter

Product Family= products that share similar characteristics

Primary purpose is to establish production rates that will achieve management's objective of satisfying customer demand by maintaining, raising, or lowering inventories, while attempting to keep the workforce relatively stable

Developing an Aggregate Production Plan

Determining the demand for each period covered by the aggregate planning horizon

Determining the available capacity for each period covered by the aggregate planning horizon

ID any constraints which may influence the plan

Determining the direct labor and material costs and the indirect manufacturing costs for each product

ID or developing strategies and contingency plans to manage the potential upside or downside in the market

Agree on a plan that best meets the planning goals and objectives

Aggregate Planning Strategies- Demand Options

Influencing Demand

Backordering during high demand periods

Counter seasonal product mixing

Influencing Demand

APP strategy- demand options

make sure it aligns to available production capacity

-advertising
-promotional planning
-pricing

Backordering during high demand periods

APP strategy- demand options

accept demand greater than supply capabilities

Counter Seasonal product mixing

APP strategy- demand options

Develop a product mix with antithetic (seasonal) trends that level the cumulative required production capacity

ex) lawnmowers and snowblowers

Aggregate Planning Strategies- Supply Options

Change inventory levels

Change Capacity

Change Inventory Levels

APP strategy- Supply Options

increase inventory lvls--> build stock in advance of demand in order to use available capacity

Decrease Inventory lvls--> temporarily reduce inventory below safety stock levels during peak demand periods to meet customer requirements

Change Capacity

APP strategy- Supply Options

Vary production output through overtime or idle time

Vary workforce size by hiring or layoff

Using part time workers

Subcontracting

Master Production Schedule (MPS)

a detailed disaggregation of the APP, listing the exact end items to be produced by a specific period

More detailed than APP and easier to plan under stable conditions

Planning horizon is shorter than APP, but longer than the lead time to produce the item

Available to Promise (ATP)

A calculation to provide a response to customer order inquiries, based on product availability

Represents the uncommitted portion of a company's projected available inventory to support customer order promising

Methods of calculating:
-discrete ATP= (on hand + supply - ordered) per period
- Cumulative ATP= current period - all future ordered/ forecast demand until next mps quantity

Time Fencing

Used to minimize the impact of changes in the MPS

Firmed Time Period

Planned Time Period

Firmed Time Period

Time Fencing

From the current date out several weeks into the future
-Established at the outer limit of this period to signify when changes can no longer be made automatically by the planning system
-Recommended changes must be reviewed and approved by the MPSer or an authorized person

Planned Time Period

Time Fencing

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

Basic Production Strategies

Level Production Strategy

Case Production Strategy

Mixed Production Strategy

Level Production Strategy

Basic 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

Case Production Strategy

Basic Production Strategy

Adjusts capacity to meet 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

Airplane companies do this

Mixed Production strategy

Basic 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

EX) construction companies/retail stores at holiday seasons

The Bill of Materials (BOM)

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

Single BOM

Multilevel BOM

Single BOM

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

Independent:
-The external demand for an item that is unrelated to the demand for other items
-The demand for these items is forecasted and can be affected by trends, seasonal patterns, and market conditions

Dependent:
-The internal demand for items that are assembled or combined to make up the final product
-Demand for these items is based on the demand of the final product in which the parts are used, by using the planning factor

Multilevel BOM

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component

Planning BOM

An artificial grouping of items or events in BOM format used to facilitate master scheduling and material planning

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

Requires:
1-the independent demand info (finished product forecast)
2-parent-component relationships form BOM
3-Inventory status of final product and each of components and materials
4-Planned order releases (output of MRP)

Advantages/ Disadvantages of MRP

Advantage:
-Provides planning information

Disadvantage:
-Loss of visibility
-ignores capacity and ignores shop floor conditions

Terms Used in MRP

Gross Requirement

Net Requirement

Projected On-Hand Inventory

Planned Order Release

Firmed Planned Order

Scheduled Receipt

Time Bucket

Parent

Components

Planning Factor

MRP Explosion

Pegging

Lot Size

Safety Stock

Gross Requirement

MRP Term

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

Net Requirement

MRP Term

The unsatisfied item requirement for a specific time period

Gross requirement for period minus current on hand inventory

Projected On hand inventory

MRP Term

Projected closing inventory at end of a period

Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts form planned order releases

Planned Order Release

MRP Term

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

Firmed Planned Order

MRP Term

A planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change

Scheduled Receipt

MRP Term

A committed order awaiting delivery for a specific period

Time Bucket

MRP Term

Unit of time/ time period used in MRP (days, weeks, months)

Parent

MRP Term

Item generating demand for lower level components

Components

MRP Term

Parts demanded by a parent

Planning Factor

MRP Term

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

MRP Explosions

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

Pegging

MRP Term

Relates the gross requirements for a component part to the planned order releases of the parent item, so as to ID the sources of the item's gross requirements

Lot Size

MRP Term

Order size for MRP Logic

Safety Stock

MRP Term

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 safety stock

Capacity Planning

Organizations must balance the production with capacity

Directly impacts how effectively the organization deploys its resources in producing goods

Major Capacity Planning Tools:
-Resource Requirement Planning
-Rough Cut Capacity Planning
-Capacity Requirement Planning

Resource Requirement Planning RRP

Major Capacity Planning Tool

A long range capacity planning module used to check whether aggregate resources (labor & manpower) are capable of satisfying the APP

Rough Cut Capacity Planning RCCP

Major Capacity Planning Tool

A mid range capacity planning module used to check the feasibility of the master production schedule

Converts MPS from the production needed to the capacity required, then compares it to capacity available

Capacity Requirement Planning CRP

Major Capacity Planning Tool

A short range capacity planning module used to check the feasibility of the Material Requirements Plan (MRP)

Distribution Requirement Plan DRP

A time phased inventory requirements in a distribution network

The function of determining the need to replenish inventory at branch warehouse

A logical extension of the MRP system and ties physical distribution to the manufacturing planning and control system

Enterprise Requirement Planning System ERP

Information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database

Provides a mean for supply chain members to share info so that scarce resources can be fully utilized to meet demand, while minimizing supply chain inventories

Implementing ERP systems

1) Best of Breed

2) Single Integrator Solution

Best of Breed

Implementation of ERP system

Pick the best application for each individual function

Disadvantage- software may not integrate well but may not be a major issue in the future

Single Integration Solutions

Implementation of ERP System

Pick all the desired applications from a single vendor

the 3 major ERP Providers

SAP

Oracle

Microsoft