Mr. Tim Loar Manager, Production Planning Ross Products Division of Abbott Laboratories

1. Session 9Master Production Schedulinghttp://www.pom.edu/mpc/lectures_in_manufacturing_planning.htmlecture session 8 Mr. Tim Loar Manager, Production Planning Ross Products Division of Abbott Laboratories

2. Agenda • Ross/Abbott background • Operations structure at Ross • Production planning: theory • Production drivers • Production planning: reality • Inventory Management • Conclusion

3. Ross Productions Division: Primary Focus • Nutritionals • Infant formula • Adult nutritionals • Pharmaceuticals • Growth area • Feeding devices • Pumps and sets

4. Ross Products Division: Manufacturing • Five manufacturing plants • Produce 888 sku’s • 27 different mfg. lines • Third party manufacturers • For expertise/capabilities don’t have in-house • Product 674 sku’s • 33 different mfg. lines • 87% of Ross sales produced in Ross Plants

5. Ross Products Division: Operations

6. Ross Products Division: Production Planning

7. Production Planning: Theory

8. Production Planning: Theory

9. Ross Products Division: Production Drivers • Forecasting • Customer service • Inventory days-on-hand • Plant SVP (stnd. value of production) • Warehouse space • Sales history • Mfg. lead times

10. Daily Case Shipments Report

11. Aggregate Forecast Accuracy

12. Forecast Accuracy – September, xxxx

13. Marketing forecast Forecast administrator Finance Operations forecast Production Planning: Reality • Ongoing products • Compiling the “realistic” forecast • Monthly meetings with Marketing • Sku by sku review • Agree to forecast for next 6-12 months • (2 financial plans look out further, up to 18 months)

14. Marketing forecast Forecast administrator Finance Operations forecast Production Planning: Reality • New products/Promotions • Strong reliance on Marketing/Sales • No history for a forecast base • Consumer research • Bi-weekly/monthly promotions meetings • Review planned promotions • Understand demand impact on promotion item and cannibalization of other sku’s

15. Production Planning: Reality Bill-of-Material Forecasting system MPS Production Plan by plant/TPM Plan passed to plants • MPS generation: most trouble-free portion • Base Accounting system is 17 years old • MPS module is 10 years old • Numerous limitations • Driven by forecasts and target levels

16. Plant fills product Product is incubated Product is released Production Planning: Reality Reality… • Tough decisions • Production trade-offs • Limited capacity • Long commodity lead times • Management anxiety over backorders potential in competitive environment • Overall game plan • High levels of MPS interaction/“what-ifs”

17. MPS Planning Horizon Detail

18. Plant fills product Product is incubated Product is released Production Planning: Reality • Tough decisions • prioritization • Which customer base has biggest impact • When to contact the customer • Which unaffected products can survive a period of neglect? • Fallout • Daily attention to detail put on hold

19. Plant fills product Product is incubated Product is released Production Planning: Reality • Developing recovery game plan • True RPD team effort • Must be a team player • Supply chain perspective • What’s best for entire organization …not Production Planning, not Purchasing, etc. • MPS is the tool to facilitate trade-off decisions • Foundation for recovery projections

20. Plant fills product Product is incubated Product is released Production Planning: Reality • Performance measures • Production to Schedule • +/- 2% to frozen schedule • Reported monthly • Batch Release Tracking • % of on-time releases • Reported monthly • Batch Delivery Performance • Based on one week frozen schedule

21. Product is deployed Production Planning: Reality • Very close interaction with MPS • Logistics manages inventory by DC/warehouse site • Logistics utilizes MPS to determine deployment plan • For example, short supply out West: • Move product from the East (high trans. $’s) • Evaluate MPS (& finite plant schedule) to determine next production run and product release timing

22. Orders Received Production Planning: Reality Sales results feed Back into MPS • Biggest daily impact on MPS management • Variance to forecasted sales • Pull production forward for oversells • Push production out for undersells

23. Inventory Plan MPS Production plan by plant/TPM Inventory Management and MPS • The focus is on DOH • Two budget processes per year • MPS generates projected inventory value • Based on established target levels • Forms basis for inventory investment accountability • MPS used to assure compliance with the inventory plan

24. Inventory Plan MPS Production plan by plant/TPM Inventory Management and MPS (continued) • MPS-related issues with inventory plan • Tendency is to want to keep lines running • MPS data allows for monitoring of adherence to plan • Production must move with sales to forecast variances • MPS keeps planner appraised of variances to inventory target levels based on sales results

25. Inventory Plan MPS Production plan by plant/TPM Inventory Management Tools • Data Warehouse • Comparisons of actuals vs. projections • Comparisons of current future projections to plan • Variance detail down to sku level • …or aggregated up for an entire line

26. DOH By Year (1989 – 2002 Plan)Ross Products Division