Chapter 3-Supply Chain

Supply Chain Planning

the element of supply chain management responsible for determining how best to satisfy the requirements created by the demand plan

Supply Chain Planning Objective

balance supply and demand in a way that realizes the financial and service objectives of the company

Long Range

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

Intermediate Range

shows the quantity and timing of end items

Short Range

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

Aggregate Production Plan

Hierarchical planning process that translates annual business plans, marketing plans, and demand forecasts into a production plan for a product family in a plant of facility; at least one year and is usually rolled forward by 3 months every quarter; purpose is to establish production rates to achieve management’s objectives of satisfying customer demand by maintaining, raising, or lowering inventories

Influencing Demand

so that it aligns to available production capacity

Backordering during high demand periods

accept demand greater than supply capabilities

Counter Seasonal

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

Aggregate Production Planning Supply Adjustments

Change inventory levels & Change Capacity

Sales & Operations Planning

a process to develop tactical plans that provides management the ability to strategically direct the business to achieve a competitive advantage on a continuous basis by integrating customer focused marketing plans for new and existing products with the management of the supply chain; typically performed once a month

Master Production Scheduling

The master production schedule represents what the company plans to produce expressed in specific product configurations, quantities, and dates; the plan that drives the business

MPS represents what the business___ not necessarily what the customer wants

plans to achieve

Available to Promise

calculation that represents the uncommitted portion of a company’s projected available inventory to support customer order promising

Firmed Time Period

From the current date out several weeks into the future

Planned Time PEriod

From the end of the firmed time period to the end of the planning

The 3 Basic Production Strategies are

Level Production, Chase Production, and Hybrid Production

Level Production Strategy

maintains a constant production rate and allows inventory and backlog to vary according to fluctuating demand; works well to make to stock

Chase Production Strategy

Adjusts the production rate and capacity to exactly match demand; works well with make to orded

Hybrid Production Strategy

sets a baseline production rate based on a stable core workforce and then uses other short term means such as overtime, and part time labor to manage short term fluctuations in demand

Material Requirement Planning

a computer based materials management tool that calculates the exact quantities, need ideas and planned order releases for all the component parts and materials required to manufacture a product

Bill of Materials

document that shows an inclusive listing of all raw materials, components parts, and assemblies making up the final production

Single Level Bill of Materials

display of components that are directly used in a parent item, together with the quantity required of each component

Multi Level Bill of Rights

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 subassembly, blend, intermediate, all its components and all their components also will be exhibited, down to purchased parts and raw materials

Independent Demand

The external demand for an item that is unrelated to the demand for other items (Laptop)

Dependent Demand

the internal demand for items that are assembled to make up the final product (Keys on a Laptop)

Gross Requirement

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

Net requirement

the unsatisfied item requirement for a specific time period. Gross requirement for period minus current on hand inventory

Projected Available INventory

projected closing inventory at the end of a period. Beginning Inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases

Planned Order Release

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

Firmed Planned Order

a planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change. Established by the planner or supply chain manager to prevent system nervousness. This can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders

Scheduled Receipt

A committed order awaiting delivery for a specific period

Lead Time

The time it takes to process and prepare material produce the product and transport it the customer

Time Bucket

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

Parent

Item generating demand for lower level components

Planning Factor

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

MRP Expolosion

the process of converting a parent items planned order releases into component gross requirements

Pegging

Process of identifying dependencies between supply chain activities

Lot Size

order size for MRP logic

Safety Stock

a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. Over planning supply versus demand can be used to create safety stock

Capacity

The maximum amount of work that an organization is capable of completing in a given period

Capacity Planning

is the process of determining the amount of production capacity needed by an organization to produce the goods or services required by its customers

Organizations must balance the___.

production plan with capacity

Resource Requirement Planning

a long range capacity planning module used to check whether aggregate resources are capable of satisfying the Aggregate Production Plan

Rough Cut Capacity Planning

a medium range capacity planning module used to check the feasibly of the master production schedule. Convert mps from the production needed to the capacity required, then compares it to capacity available

Capacity Requirement Planning

a short range capacity planning module used to check the feasibility of the Material Requirements Plan

A time phased finished good____ in a distribution network

inventory replenishment plan

Information systems connecting all the _______ of an organization via common software infrastructure and database

functional areas and operations

Best of Breed

pick the best application for each individual function

Single Integrator Solution

pick all the desired applications from a single vendor

When a supply chain planner talks about using the BOM to do an MRP Explosion, they are talking about?

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

The Master Production Schedule (MPS) is the plan that drives the business.  Even small changes in the MPS can cause major changes in the detailed production schedule and the material plan, creating nervousness and instability throughout the organization.

True

The Chase Production Strategy sets a baseline production rate based on a stable core workforce, and then uses other short-term means, such as overtime, subcontracting and part-time labor to manage short-term fluctuations in demand.

False

Sales and Operations Planning (S&OP) is 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.

True

The detailed plan that shows the exact end items (i.e., finished products) to be produced in a specific time frame is known as what?

Master Production Schedule (MPS)

The Master Production Schedule (MPS) is the plan that drives the business.  Even small changes in the MPS can cause major changes in the detailed production schedule and the material plan, creating nervousness and instability throughout the organization.

True

To handle a fluctuating demand pattern, the Chase Production Strategy adjusts the production rate and capacity to exactly match demand.

True

Master Production Scheduling is 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.

False

The Master Production Schedule (MPS) represents what the company plans to produce expressed in specific product configurations, quantities, and dates.

True

The Chase Production Strategy relies on a constant output rate and capacity while varying inventory and backlog levels to handle the fluctuating demand pattern.

False