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4. Production and Material Planning

4. Production and Material Planning. Planning Process. Aggregate production plan. Master production schedule. Material requirements plan. C apacity plan. Realistic. No. Yes. Execute capacity plans. Execute material plans. Master Production Schedule.

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4. Production and Material Planning

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  1. 4. Production and Material Planning

  2. Planning Process Aggregate production plan Master production schedule Material requirements plan Capacity plan Realistic No Yes Execute capacity plans Execute material plans

  3. Master Production Schedule • A time-phased production plan that specifies how many of, and when to build, each end item • Must be in accordance with the aggregate production plan, which sets the overall level of output in broad terms

  4. Months January February Aggregate Production Plan 1,500 1,200(shows the totalquantity of amplifiers) Weeks 1 2 3 4 5 6 7 8 Master Production Schedule(shows the specific type andquantity of amplifier to beproduced 240 watt amplifier 100 100 100 100 150 watt amplifier 500 500 450 450 75 watt amplifier 300 100 MPS Example 1

  5. MPS Planning • Lot-for-lot or batch production policies Ft = forecast for periodt Ot = (confirmed) customer orders for periodt It = end-item inventory in period t Qt = MPS, manufacturing quantity in periodt

  6. MPS Example 2Io = 1600, lot for lot or batch = 2500

  7. Material Requirements Planning (MRP) • Determines quantity & timing of dependent demand items • Creates requirements and schedules identifying the parts, components, and materials necessary to produce the end products specified in the MPS

  8. Objectives of MRP • Minimize inventory level • Maximize operating efficiency • Improve customer service

  9. Inputs of MRP • Master production schedule • Specifications or bills-of-material • Inventory availability • Purchase orders outstanding • Lead times

  10. Data Files Output Reports MRP by period report BOM Master production schedule MRP by date report Lead times (Item master file) Planned order report Inventory data Purchase advice Material requirement planning programs (computer and software) Exception reports Order early or late or not needed Order quantity too small or too large Purchasing data Structure of the MRP System

  11. Bill of Material (BOM) • List of components, ingredients, and materials needed to make product • Provides product structure • Items above given level are called parents • Items below given level are called children

  12. Level Product structure for “Awesome” (A) 0 A Std. 12” Speaker kit w/ amp-booster 1 B(2)Std. 12” Speaker kit C(3) 2 Std. 12” Speaker booster assembly E(2) E(2) F(2) Packing box and installation kit of wire, bolts, and screws D(2) D(2) G(1) 3 Amp-booster 12” Speaker 12” Speaker Product Structure Diagram

  13. BOM • May add other factors such as lot size, weight, etc.

  14. BOM Explosion • To produce 50 part A: Part B: 2 x number of As = (2)(50) = 100 Part C: 3 x number of As = (3)(50) = 150 Part D: 2 x number of Bs + 2 x number of Fs = (2)(100) + (2)(300) = 800 Part E: 2 x number of Bs + 2 x number of Cs = (2)(100) + (2)(150) = 500 Part F: 2 x number of Cs = (2)(150) = 300 Part G: 1 x number of Fs = (1)(300) = 300

  15. Week 1 2 3 4 5 6 7 8 Lead Time Required date 50Order release date 50 1 week Required date 100Order release date 100 2 weeks Required date 150Order release date 150 1 week Required date 200 300Order release date 200 300 2 weeks Required date 300Order release date 300 3 weeks Required date 600 200Order release date 600 200 1 week Required date 300Order release date 300 2 weeks Gross Requirements

  16. MRP

  17. Capacity Plan • MRP systems do not consider capacity during normal planning cycles • Finite capacity scheduling (FCS) recognizes actual capacity limits • By merging MRP and FCS, a finite schedule is created with feasible capacities which facilitates rapid material movement

  18. Example

  19. Enterprise Resource Planning (ERP) • An extension of the MRP system to tie in customers and suppliers • Allows automation and integration of many business processes • Shares common data bases and business practices • Produces information in real time levels • Coordinates business from supplier evaluation to customer invoicing • Has potential to reduce transaction costs and to increase the speed and accuracy of information

  20. ERP Modules • Basic MRP • Finance • Human resources • Supply chain management (SCM) • Customer relationship management (CRM)

  21. ERP Structure

  22. Advantages of ERP Systems • Provides integration of the supply-chain, production, and administration • Creates commonality of databases • Can incorporate improved best processes • Increases communication and collaboration between business units and sites • Has an off-the-shelf software database • May provide a strategic advantage

  23. Disadvantages of ERP Systems • Is very expensive to purchase and even more so to customize • Implementation may require major changes in the company and its processes • Is so complex that many companies cannot adjust to it • Involves an ongoing, possibly never ending, process for implementation • Expertise is limited with ongoing staffing problems

  24. Video Case Study • Why is accurate inventory such an important issue at Wheeled Coach? • What kind of plan would you suggest for dealing with excess inventory at Wheeled Coach?

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