Class 7

1. Class 7 Resource Planning

2. Enterprise Resource Planning (ERP) • Organizes and manages a company’s business processes by sharing information across functional areas • Connects with supply-chain and customer management applications • Largest ERP provider SAP

3. Finance & Accounting Sales & Marketing Production & Materials Management ERP Data Repository Human Resources ERP’s Central Database

4. ERP Implementation • First step is to analyze business processes • Which processes have the biggest impact on customer relations? • Which process would benefit the most from integration? • Which processes should be standardized?

5. Customer Relationship Management (CRM) • Plans and executes business processes that involve customer interaction • Changes focus from managing products to managing customers • Point-of-sale data is analyzed for patterns used to predict future behavior

6. Supply Chain Management • Supply chain planning • Supply chain execution • Supplier relationships • Distinctions between ERP and SCM are becoming increasingly blurred

7. ERP and MRP • MRP (material requirements planning) was the precursor to ERP • Primarily a production planning and control system • MRP evolved to MRP II (manufacturing resource planning) • ERP and ERP II continue to extend the links through all business processes

8. Material Requirements Planning • Computerized inventory control & production planning system • Schedules component items when they are needed - no earlier and no later

9. When to Use MRP • Dependent and discrete items • Complex products • Job shop production • Assemble-to-order environments

10. Master production schedule Product structure file Material requirements planning Item master file Planned order releases Work orders Purchase orders Rescheduling notices Material Requirements Planning

11. Master Production Schedule • Drives MRP process with a schedule of finished products • Quantities represent production not demand • Quantities may consist of a combination of customer orders & demand forecasts • Quantities represent what needs to be produced, not what can be produced

12. Basic MRP Processes Exploding the bill of material Netting out inventory Lot sizing Time-phasing requirements

13. MRP Outputs • Planned orders • Work orders • Purchase orders • Changes to previous plans or existing schedules • Action notices • Rescheduling notices

14. Capacity Requirements Planning (CRP) • Computerized system that projects load from material plan • Creates load profile • Identifies underloads and overloads

15. Capacity Terms • Load profile • Compares released and planned orders with work center capacity • Capacity • Productive capability; includes utilization and efficiency • Utilization • % of available working time spent working

16. More Capacity Terms • Efficiency – how well the machine or worker performs compared to a standard output • Load • The standard hours of work assigned to a facility • Load percent • The ratio of load to capacityLoad % = (load/capacity)x100%

17. Scheduling

18. Scheduling • Specifies when labor, equipment, facilities are needed to produce a product or provide a service • Last stage of planning before production occurs

19. Objectives in Scheduling • Meet customer due dates • Minimize job lateness • Minimize response time • Minimize completion time • Minimize time in the system • Minimize overtime • Maximize machine or labor utilization • Minimize idle time • Minimize work-in-process inventory • Efficiency

20. Shop Floor Control Scheduling and monitoring day to day production of a job Loading - Check availability of material, machines & labor Sequencing - Release work orders to shop & issue dispatch lists for individual machines Monitoring - Maintain progress reports on each job until it is complete

21. Loading • Allocate work to machines (resources) • Perform work on most efficient resources • Use assignment method of linear programming to determine allocation

22. Sequencing • Prioritize jobs assigned to a resource • If no order specified use first-come first-served (FCFS) • Many other sequencing rules exist • Each attempts to achieve to an objective

23. Sequencing Rules • FCFS - first-come, first-served • LCFS - last come, first served • DDATE - earliest due date • CUSTPR - highest customer priority • SETUP - similar required setups • SLACK - smallest slack • CR - critical ratio • SPT - shortest processing time • LPT - longest processing time

24. Theory of Constraints • Not all resources are used evenly • Concentrate on the” bottleneck” resource • Synchronize flow through the bottleneck • Use process and transfer batch sizes to move product through facility

25. Theory of Constraints • What to Change • What to Change to • How to cause the change

26. Chapter 4 Quality Management Quality is a measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use

27. What Is Quality? • “The degree of excellence of a thing” (Webster’s Dictionary) • “The totality of features and characteristics that satisfy needs” (ASQ) • Fitness for use • Quality of design

28. Quality • Quality Management – not owned by any functional area – cross functional • Measure of goodness that is inherent to a product or service

29. FedEx and Quality • Digitally Assisted Dispatch System – communicate with 30K couriers • 1-10-100 rule  1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix  10 – if caught later in different department or location = as much as 10X cost  100 – if mistake is caught by the customer = as much as 100X to fix

30. Product Quality Dimensions • Product Based – found in the product attributes • User Based – if customer satisfied • Manufacturing Based – conform to specs • Value Based – perceived as providing good value for the price

31. Dimensions of Quality (Garvin) • Performance • Basic operating characteristics • Features • “Extra” items added to basic features • Reliability • Probability product will operate over time

32. Dimensions of Quality (Garvin) • Conformance • Meeting pre-established standards • Durability • Life span before replacement • Serviceability • Ease of getting repairs, speed & competence of repairs

33. Dimensions of Quality (Garvin) • Aesthetics • Look, feel, sound, smell or taste • Safety • Freedom from injury or harm • Other perceptions • Subjective perceptions based on brand name, advertising, etc

34. Service Quality • Time & Timeliness • Customer waiting time, completed on time • Completeness • Customer gets all they asked for • Courtesy • Treatment by employees

35. Service Quality • Consistency • Same level of service for all customers • Accessibility & Convenience • Ease of obtaining service • Accuracy • Performed right every time • Responsiveness • Reactions to unusual situations

36. Quality of Conformance • Ensuring product or service produced according to design • Depends on • Design of production process • Performance of machinery • Materials • Training

37. Quality Philosophers • Walter Shewhart – Statistical Process Control • W. Edwards Deming • Joseph Juran – strategic and planning based • Philip Crosby • Armand Fiegenbaum – total quality control “entire business must be involved in quality improvement”

38. Deming’s 14 Points Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training

39. Deming’s 14 Points Instill leadership among supervisors Eliminate fear among employees Eliminate barriers between departments Eliminate slogans Remove numerical quotas

40. Deming’s 14 Points Enhance worker pride Institute vigorous training and education programs Develop a commitment from top management to implement these 13 points

41. 1. Plan Identify the problem and develop the plan for improvement. 4. Act Institutionalize improvement; continue the cycle. 3. Study/Check Assess the plan; is it working? 2. Do Implement the plan on a test basis. The Deming Wheel(or PDCA Cycle) Also known as the Shewart Cycle

42. Six Sigma • Quality management program that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products

43. Six SigmaStarted By Motorola • Define • Measure • Analyze • Improve • Control Made Famous by General Electric 40% of GE executives’ bonuses tied to 6 sigma implementation

44. Malcolm Baldrige National Quality Award • Category 3 – determine requirements, expectations, preferences of customers and markets • Category 4 – what is important to the customer and the company; how does company improve

45. Total Quality Management Customer defined quality Top management leadership Quality as a strategic issue All employees responsible for quality Continuous improvement Shared problem solving Statistical quality control Training & education for all employees

46. Strategic Implications of TQM • Quality is key to effective strategy • Clear strategic goal, vision, mission • High quality goals • Operational plans & policies • Feedback mechanism • Strong leadership

47. TQM in Service Companies • Inputs similar to manufacturing • Processes & outputs are different • Services tend to be labor intensive • Quality measurement is harder • Timeliness is important measure • TQM principles apply to services

48. Cost of Quality • Cost of achieving good quality • Prevention • Planning, Product design, Process, Training, Information • Appraisal • Inspection and testing, Test equipment, Operator

49. Cost of Quality • Cost of poor quality • Internal failure costs • Scrap, Rework, Process failure, Process downtime, Price-downgrading • External failure costs • Customer complaints, Product return, Warranty, Product liability, Lost sales

50. Employees and Quality Improvement • Employee involvement • Quality circles • Process improvement teams • Employee suggestions