IMM 8th ed Ch 2 -updated-1

Introduction to Materials Management

• Overview of materials management concepts and systems.

• Authors: Chapman, Arnold, Gatewood, and Clive.

• Focus on the production planning system.

Overview of Key Concepts

Priority and Capacity

• Priority: Defines what is needed, when, and in what quantity.

• Capacity: Refers to the ability to produce the required amount at the required time.

Manufacturing Planning and Control

• Strategic Plan

• Production Plan

• Master Production Schedule (MPS)

• Material Requirements Plan (MRP)

• Purchasing and Production Activity Control (PAC)

• Capacity Management

• Sales and Operations Planning (S&OP)

Basic Production Strategies

• Types:

  • Chase Strategy: Adjust production rates to follow demand.

  • Level Strategy: Maintain average production rates.

  • Hybrid Strategy: Combination of chase and level strategies.

  • Subcontracting: Supplement internal production.

• Costs and benefits associated with each strategy.

Planning System Questions

• Key considerations in production planning:

  • What are we going to make?

  • What does it take to make it?

  • What resources do we have?

  • What resources do we need to acquire?

Major Levels of Planning and Control

• Levels range from long-term strategic plans to short-term specific production details:

  1. Strategic Plans

  2. Strategic Business Plans

  3. Sales and Operations Plans (SOP)

  4. Master Production Schedules

  5. Material Requirements Plans

  6. Purchasing and Production Activity Control

Decision Factors at Each Planning Level

• Need to determine:

  • What priorities must be addressed? (What to produce, how much, when)

  • What capacity is available?

  • How to reconcile differences between priorities and capacities?

The Strategic Plan

• Establishes the broad direction of the firm:

  • Product lines

  • Market focus

  • Growth strategies

• Input required from senior management and all functional areas.

• Hoshin Planning may be used:

  • Vision and goals for the organization.

Sustainability Considerations

• Essential to ensure operations can be sustained:

  • Pollution and waste control.

  • Social responsibility practices.

  • Remanufacturing and reverse supply chain management.

  • Recycling practices.

Risk Management

• Negative Risks: Evaluate sources of failure and impacts; develop mitigation strategies.

• Positive Risks (Opportunities): Identify sources and develop exploitation plans.

Responses to Risk

• Response strategies depend on:

  • Risk magnitude (probability and impact).

  • Success likelihood of risk management strategies and costs.

• Types of risk responses:

  • Risk Acceptance: Decision to do nothing.

  • Risk Avoidance: Adjust plans to eliminate risk.

  • Risk Mitigation: Reduce probability or impact.

  • Risk Transfer: Transfer risk to a third party (e.g., insurance).

Planning Hierarchy

• Shows how different plans relate at various levels:

  • Strategic Business Plan

  • Production Plan (SOP)

  • Master Production Schedule

  • Material Requirements Plan

  • Production Activity Control and Purchasing

• Involves resource planning, capacity management, and implementation.

Production Planning Strategies

Developing the Production Plan

1. Data Gathering: Analyze last month’s actuals and inventory.

2. Demand Planning: Forecast future demand.

3. Supply Planning: Combine sales and inventory plans.

4. Pre-S&OP Meeting: Resolve discrepancies and rate alternative plans.

5. Executive Meeting: Make final decisions.

Basic Production Strategies Explained

• Chase Strategy: Adjust production to exactly meet demand.

  • Pros: Low inventory costs.

  • Cons: Can lead to variability in production rates.

• Level Strategy: Produce at a consistent average level.

  • Pros: Stability in operations.

  • Cons: Higher inventory costs.

• Hybrid Strategy: Combine elements of both chase and level strategies for flexibility.

Practice Example: Production Planning Calculation

• Example problem demonstrating how to calculate production needs based on forecasted demand and inventory levels.

Evaluating Resource Plans

• Objectives include evaluating feasibility and adequacy of resources in relation to the production plan.

• Bill of Resources: Lists key resources required at the product family level.

Steps for Resource Planning

1. Determine the bill of key resources for each product family.

2. Assess available capacity for each resource by period.

3. Calculate load on each key resource.

4. Adjust production plans as necessary to meet capacity constraints.

Manufacturing Resource Planning (MRP II)

• Involves closed-loop planning feedback at each stage of production.

• Critical to distinguish MRP from more advanced planning systems like APS (Advanced Production Scheduling).

Chapter Review Key Points

• Essential topics include priority, capacity, various levels of manufacturing planning and control, and the importance of aligning resource planning with strategic objectives.

• Functions of the S&OP process in minimizing disruptions and improving efficiency.