Intro to Supply Chain Chapter 03: Supply Chain Planning

Supply Chain Planning

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

• balance supply and demand and understand company goals

Long Range Top Management Responsibilities

• Research and Development

• New Product Plans

• Capital Expenses

• Facility Expansion

Immediate Range Operations Middle-Management Responsibilities

• Sales Planning

• Production Planning

• Setting employment, inventory, and subcontracting levels

• Analyze operation plans

Short Range Operations Responsibilities (Managers, Supervisors)

• Job assignment

• Job scheduling

• Dispatching

• Ordering

Aggregate Production Planning (APP)

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

• Once a year and is usually rolled forward by 3 months every quarter.

  • Inventory, set up, machine operation

  • Hiring, Firing, Training

Purpose of APP

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.

• Meet demand

• Use capacity efficiently

• Inventory policy

• Minimize costs

APP impacts on customer’s demand (Influencing Demand)

changing demand to align with production capacity

• airline and hotel weekend discounts

• weekend rates, happy hour

  • advertising, promotional planning, pricing

Backordering

During high demand period, accept the fact that demand is greater than supply capabilities… temporary shortage

Counter-seasonal product mixing

Develop a product with seasonal trends that level production capacity (snowblowers and lawnmowers produced by same ppl)

Changing Inventory Levels (APP Supply Strat)

• Increase inventories, build stock in advance of demand

• Decrease inventories, temporarily reduce inventory below during peak to only maintain customer requirements. (just enough for customers)

Changing Capacity Levels (APP Supply Strat)

• Vary production over-time

• Hire more or lay off

• part-time workers

• sub-contracting (third-party does the work)

Monthly S&OP Cycle

S&OP Meeting, Demand Management Meeting, Supply Management Meeting, Supply and Demand Reconciliation Meeting

Master Production Schedule

MPS represents what the company plans to produce (3-18 months), expressed in specific product configurations, quantities, and dates often through an appointment book.

• plan

• detailed break down of APP

• planning numbers that provide input for material requirements

• considers backlogging, inventory materials, capacity, and management goals/policies

• updated regularly

• planning horizon must exceed the time to produce the item.

Projected Available Balance Formula

Projected Available Balance (pervious) - Customer Orders/Forecast + MPS Quantity = Projected Available Balance

Total Capacity Hours Required Formula

Final Assembly Labor + Quality Inspection Labor + Packaging Labor

Total Capacity Hours Available Formula

Hours per shift x hours per day x days per week x # manufacturer lines

Firmed Time Period

Current date out several weeks into the future

• Up front time period signifying that changes now cannot be made

• changes must be approved by authorized ppl and on the MPS to change

Planned Time Period

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

• free to create or make changes to planned orders in this time period based on the data and planning by the company.

Level Production Strategy

• Constant rate of production

• allows inventory and backlog to vary according to the fluctuating demand

• no increase or decrease in labor, materials, or resources

• used when cost of terminating people is high (highly skilled work, hard to replace)

• works well for make-to-stock items

Chase Production Strategy

Adjusts the production rate to match demand

• company increases or decreases labor, materials, and resources as needed

• no backlogs, productions cost fluctuate

• works well for make-to-order items

Hybrid Production Stage

• Baseline production rate

• core workforce

• short-term means

  • part time labor

  • overtime

  • subcontracting

• minimize costs while meeting demand

• no backlogs, productions cost fluctuate

all to manage short-term fluctuations

Material Requirements Planning (MRP)

calculates the exact quantities, need dates, and planned order releases for all the parts and materials required.

adv:

• on-time availability of the right materials

• lower inventory levels (still good on customer demand tho)

• optimize the use of products and lowers costs

dis:

• ignores capacity, focuses on what is needed

• loss of visibility

• works well for make-to-stock, but not as much for make-to-order

MRP Requirements

• Finished plan of production from the MPS

• Bill of Materials (BOM) data, including the parent-component relationships

• Item master data for each of the components and materials

• Inventory status of each component

• planned or scheduled receipts for any components and materials needed.

Bill of Materials

A document that shows an inclusive list of raw materials, component parts, and assemblies making up the final product.

Single Level BOM

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

• just one component to part relationship

Multilevel BOM

A display of all the components directly or indirectly used in a parent, together with the quantity required for each component. If a competent is a subassembly, blend, intermediate, etc, all its components and all their components will also be exhibited, down to purchase parts and raw materials.

• all component to parent relationships, even the components of the component.

Time Bucket

Unit of time/period used in MRP, e.g., days, weeks, months

Parent

Item generating demand for lower-level components.

Components

parts demanded by a parent.

Planning Factor

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

MRP Explosion

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

Pegging

Relates the gross requirements for a component part to the planned order releases of the parent item to identify the source(s) of the item’s gross requirements. Pegging can be thought of as active where-used information.

Lot Size

order size for MPR Logic (dozen of eggs, pair of shoes)

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

• backup

Capacity

maximum amount of work an organization can complete in a given time.

Capacity Planning

determine the production capacity needed by an organization to produce the goods or services its customers require.

• organizations must balance the production plan.. effectively deploy its resources to produce goods

• helps find the time frames and staff needed to handle demand and operational costs.

Resource Requirement Planning (RRP)

Long-range capacity planning module used to check whether aggregate resources (labor) are capable of satisfying the APP.

Rough Cut Capacity Planning (RCCP)

medium-range capacity planning module used to check the feasibility of the MPS..converts MPS from the production needed to the capacity required and then compares it to available capacity.

Capacity Requirement Planning (CRP)

short-range capacity planning module used to check the feasibility of the MRP.

Distribution Requirement Planning (DRP)

time phased finished good inventory replenishment plan in a distribution network.

• process of determining how and where to deploy the finished goods inventory that is produced.

• DRP is a logical extension of the MRP system an ties physical distribution to the manufacturing planning and control process.

Neccessities for DRP

• forecasts by distribution center

• current inventory level by distribution center

• target safety stock by distribution center

• recommended replenishment quantities

• replenishment lead times

Enterprise Requirement Planning Systems (ERP)

info system connecting an organization’s functional areas and operations via a common software infrastructure.

• real time integrated management of the central business processes necessary to plan and control the organization.

  • Accounting and Finance

  • Customer Relationship Management

  • Human Resource Management

  • Manufacturing

  • Supplier Relationship Management

  • Supply Chain Management

    • SAP

    • ORACLE

    • MICROSOFT

Best-of-breed

pick the best ERP application for each function

dis: software may not integrate together well, but this may not be significant in the future.

Single Integrator Solution

pick all the desired ERP applications from a single vendor, better connectivity.

Advantages of ERP

• visibility

• standardization

• measures performance and communication

Disadvantages of ERP

• time and capital investment

• complex to implement and run

Data Management

provides the foundation for data analytics

• collecting, storing, organizing, and securing data

• accurate, complete, and accessible

Data Analytics

process of analyzing, exploring, and transforming data to find patterns and trends that can provide insight and help real-time decision making.

Supply Chain Digital Transformation

aligning all processes and data on one platform, automating key processes, and using technologies such as AI to collect and analyze massive amounts of data to identify, predict, and prevent problems.

• Traditonal Supply Chains —> Linear Progress

  • Dependency, costs, and possible delays

  • Digital Supply Chains —> dynamic responses and high data