OSCM FE P1

Warehouse Benefits

* Offer benefit of time and place utility
* Locate the product closer to the customer in both distance and time

SC Logistics SC Elements Inventory - MARKETING

Full product line, Display Stock, Inventory Pipeline

SC Logistics SC Elements Inventory - BUFFERING

* Protects against uncertainty
* Adjust safety stock NOT order quantity

Transportation speeds ranked slowest to fastest

Rail/Highway/Pipeline/Air

Make to Order Companies

* Ability to meet the promised delivery date is key to good customer service
* Requires good master production scheduling and execution

Make to Stock Companies

* Major concern is delivery timing
* Stock will be available for shipment
* Setting fixed delivery time and meeting that commitment is critical

The Economic Order Quantity calculates...?

The order quantity that will minimize the costs of ordering and holding inventory

EOQ Assumes:

* Expected demand is constant
* order quantities are determined at the warehouse level
* Quantity determination can incorporate quantity discounts and transportation economics

Base Stock System

* Shipped on scheduled ship dates
* Quantity shipped is actual usage

Three Replenishment Systems

* ROP/EOQ (dominant method)
* Base Stock Systems
* Distribution Requirements Planning

The key elements of warehouse analysis are:

* How many warehouses
* Where they should be located

The three approaches to warehouse analysis;

* Simulation
* Heuristic Procedures


* Programming

Resource Planning

First level plans for new capital, buildings, machines, and warehouse space

Rough Cut Plan

Second level plans that deal with resources for products

Third Level

Concerned with capacity needs for both key machine centers and labor

Fourth Level

Components and capacity are scheduled together

Fifth Level

Focus on capacity management in which plans are compared to actuals

MPC is seen as encompassing two major activities;

Planning and control of materials / Control of capacities

Capacity planning techniques primary objectives;

Estimate capacity requirements sufficiently far enough in the future / Execute capacity plan flawlessly

CPOF

Based on planning factors derived from standards or historical data

Capacity Bills

* Provides a much more direct linkage between individual end products in the MPS and the capacity required at individual work center than does the CPOF
* \
* Needs more data
* Very simple

Resource Profile

Rought cut time phased capacity plan that includes production lead time

Capacity Requirements Planning

Component level time phased capacity plans that use MRP information

Order preparation costs are costs to...?

Replenish Inventory

Inventory carrying costs are costs to...?

Hold inventory

Shortage and customer service costs are costs of...?

Shortage

In the EOQ equation, Cp =

Ordering Costs

In the EOQ equation, A =

Annual Demand

In the EOQ equation, CH =

Inventory carrying costs

If Cp goes up in the EOQ equation, then EOQ...?

Goes up

Independent Demand

\- Demand that is influenced by factors outside of company decisions

\- Demand is forecasted

Dependent Demand

\- Demand derived from internal factors

\- Calculated from final assembly schedule or MPS

Inventory turnover =

Annual sales / average inventory investment

EOQ is influenced by

\- Annual Demand

\- Order preparation costs

\- Carrying costs

ROP is influenced by

\- Customer service level desired

\- Forecast error

\- Demand within the lead time

ABC Analysis: A

20% of items and 80% of value

ABC Analysis: B

30% of items and 15% of value

ABC Analysis: C

50% of items and 50% of value

Front End

Establishes overall company direction for MPC

Engine

Encompasses Materials Mgmt

Back End

Coordinates suppliers, manages shop-floor orders and the quality system

What are the key considerations when choosing an ERP system

* Rqmt. of the firm’s processes


* System costs
* Business complexity
* Available resources
* Business size

What are the ERP system imperatives

* Multifunctional in scope
* Integrated
* Modular
* Facilitates MPC activities

What are the essential tasks of the MPC system

* Manage efficient flow of materials
* Utilize people and equipment effectively
* Use capacity of suppliers to respond to customer requirements

What are the ERP components

* Manufacturing planning and control
* HR
* Finance
* Supply chain logistics
* Sales and marketing

Demand management must conform to…?

The different firm strategies, capabilities, and customer needs

The key to classification is the…?

Customer decoupling point

The decoupling point is…?

The point at which the firm becomes responsible for determining the timing and quantity of materials to be purchased, components made, and products finished

MTS decoupling point and focus

* DP: Finished goods
* F: Customer served from FG inventory

ATO decoupling point and focus

* DP: At component level
* F: Maintaining configuration mgmt.

MTO decoupling point and focus

* DP: Raw materials
* F: Engineering mgmt.

ETO decoupling point and focus

* DP: At the suppliers
* F: Engineering mgmt.

Rank ETO, MTO, ATO, and MTS on level of communication from highest to lowest

1. ETO
2. MTO
3. ATO
4. MTS

Overall market trends are most appropriate for…?

Sales and operations planning and patterns for product families

Detailed product mix is most appropriate in…?

MPS (master production scheduling)

Strategic business planning forecast frequency and length

* FF: Annual or less
* L: Years by years or quarters

SOP forecast frequency and length

* FF: Monthly or quarterly
* L: Several months to a year

MPS and control forecast frequency and length

* FF: Constant
* L: Few days to a week

Pyramid Forecasting

Ensuring consistency between sources of forecasts

Roll-Up

* Begins with forecast of individual products
* Rolled up into product lines
* Then into total business

Force Down

* Begins with total business
* Breaks down into product families
* Then to individual items

The objective of SOP in the firms payoffs

Develop overall business plan

Goals of SOP

To link strategic goals

SOP is top managements…?

Handle on the business

Steps in the monthly planning cycle

* Run forecasting reports
* Demand planning phase
* supply planning phase
* Pre SOP meeting
* Make decisions on SOP

\

MPS is a statement of…?

Future output

MPS specifies…?

* The products to be completed
* The time of completion
* Quantities

\

MPS is NOT a forecast and takes into account…?

* Capacity limitations
* Costs of production
* Other resource considerations
* SOP plan

MRP Technical Issues: Processing Frequency

Regeneration run with low computer demand

MRP Technical Issues: Pegging

Used to find specific source of demand

MRP Technical Issues: Firm Planned Orders

Order doesn’t change when conditions do

MRP Technical Issues: Service Parts

Must be included in MRP record

MRP Technical Issues: Scheduled Receipts

Have formal commitment

MRP Technical Issues: Planned Receipts

Have no commitment and are computer generated

Front End Activities

establishes the overall company direction for MPC

Engine Activities

encompasses set of MPC systems for detailed material capacity planning (encompasses materials management)

Back End Activities

shows the execution of three systems- coordinating suppliers, managing shop-floor orders, and quality system

SOP (front end)

coordinates various planning efforts including financial, operations, and HR planning

Materials Management (engine)

covers tasks including purchasing, vendor evaluation, warehouse, and inventory management

Production Planning and Control (back end)

supports all phases of manufacturing, including capacity leveling, MRP, JIT, product costing, BOM processing, and database management

Matching MPC System with Needs of the Firm-Specific Requirements

Requirements of the Firm's Processes, System Costs, Business Complexity, Available Resources, Business Size, Customer Expectations

ERP System Imperatives

Multifunctional in Scope (ability to track finances in monetary term, procurement units, and sales in product units) Integrated (integration ensures a common vision) Modular (can be combined into a single expansive system) Facilitate MPC activities

MPC System

manage efficiently the flow of material, utilize people and equipment effectively, respond to customers requirements by using capacity of suppliers

MPC System Decisions

provides information on which managers make effective decisions, however, it does not make or evaluate decisions but supports them

Demand Management

gateway module, provides link to marketplace, helps gather info from/about market and does forecasting , enters orders, communicating changes, communicates with customers by promising delivery dates, confirming order status, and communicating changes. Also identifies all sources of demand for manufacturing capacity including service parts demand, intracompany requirements, and promotional inventory buildup

Demand Management in MPC Environments

key to classification is the customer decoupling point- point at which firm becomes responsible for determining the timing and quantity of material to be purchased, components made, and products finished.

MPC Environment Communications

ETO- highest level of communication needs, MTO-second highest level of communication needs, ATO-third highest level of communication needs, MTS-least amount of communication needs

Data Capture

falls into two categories. Overall Market- this data is most appropriate for SOP. Detailed product mix- data is most appropriate in MPS

Forecasting Information

nature of the forecast must be matched with the nature of the decision

Roll Up Forecasting

MRP-MPS-SOP, begins with forecast of individual products which are rolled up into product lines and then into total business

Force Down Forecasting

SOP-MPS-MRP, next step is to constrain the product line and individual item forecasts

SOP Benefits

key link for executives, provides basis for production resources

SOP Fundamentals

updating sales forecast, reviewing impact of changes to the operations plan and determining if there is adequate capacity, identifying alternatives, formulating agreed on recommendations for top managements regarding overall changes to the plans. communicating info to top management, contract with functional groups

MPS

statement of future output, differs from the forecast because it takes into account capacity limitations, cost of production, SOP

Processing Frequency

regeneration of MRP records run when computer demand is low in the firm

Pegging

can be used to find the specific source of demand.

Planned Orders

an order that does not change when conditions change, planned replenishment order for the item at the beginning of each period (not set in stone)

Service Parts

must be included in the MRP record

Scheduled Receipts

have a formal commitment, existing replenishment orders for item due at the beginning of each period (set in stone)

Planned Orders vs Scheduled Receipts

not set in stone and can be changed, set in stone and have a formal commitment