BSCM Notes.doc

PRIVATEBSCM (Basic Supply Chain Management)BSCM Session 1 Introduction to Supply Chain ManagementWealth CreationWealth comes from natural resources, manufacturing and servicesMoney is not wealth; its a medium of exchangeThem more value we add to a product, the wealthier we can becomeExternal EnvironmentWorld competitionQualityCustomer ExpectationsCustomer ExpectationsPriceQualityDeliveryPre-and Post-sale serviceProduct and volume flexibilityl Order qualifiersCompetitive characteristics needed to be a viable competitorl Order winnersCompetitive characteristics that cause customers to choose firms products and servicesMeeting customer expectations requires good communicationUnderstand customer needsTwo-way communicationWorking with customers to solve design and production problemsFreeness and opennessBusiness StrategyTo meet customer expectations, be market orientedAll functions in a business must support this conceptOperations must be tuned to meet the needs of the marketplaceLead Time“A span of time required to perform a process” APICS DictionaryDelivery lead timel “The time from the receipt of a customer order to the delivery of the product” APICS DictionaryCumulative lead timel “The longest planned length of time to accomplish the activity in question”APICS DictionaryManufacturing StrategiesEngineer to order Design-Purchase-Manufacture-Assembly-ShipMake to order Inventory-Manufacture-Assembly-ShipAssembly to order Manufacture-Inventory-Assembly-ShipMake to Stock Manufacture-Assembly-Inventory-ShipMass customizationPhysical DistributionTransportationDistribution InventoryWarehousingPackagingMaterial HandlingOrder EntryCompany ObjectivesBest customer serviceLowest production costLowest Inventory investmentLowest Distribution costMaterial Management1Manufacturing planning and controlProduction planningForecastingMaster planningMaterial requirement planningCapacity planningImplementation and controlInventory Management2Physical supply/distributionCustomer serviceRight ProductRight quantityRight qualityRight timeRight PlaceRight priceManufacturing ObjectivesRight goodsRight qualityRight quantityRight TimeAt minimum costCharacteristics of Product Layoutl Limited range of similar productsl Dedicated workstationsl Sufficient demandl Capital intensiveAdvantages of Product Layoutl Little work-in-process inventoryl Short throughput and manufacturing lead timesl Lower unit costCharacteristics of Process Layoutl Intermittent lot productionl Many different parts processed at workstationsl General-purpose machineryl Similar types of skills and equipment in each departmentl Work moves only to required stationsl Relatively easy to change product or volumel Complex and expensive production and inventory controll High work-in-process inventory levelsl Longer lead timesCharacteristics of Project Layoutl Used for large, complex projects like building, ships, aircraft, system implementationl Project remains in one location for assemblyl Avoids cost of moving the productFour basis questions about priority and capacityWhat are we going to make?What does it take to make it?What do we already have?What must we get and when?Planning and Control HierarchyPriority Management Techniques -Capacity Management TechniquesBusiness Plan -NoneProduction Plan Resource Planning RSMaster Production Schedule MPS -Rough-Cut capacity planning RCCPMaterial Requirement Planning MRP -Capacity Requirements Planning CRPProduction Activity Control PAC -Input/Output control, Operation SequencingAt each level, there are three questions:l What are the priorities?l What capacity is available?l How can differences be resolved?Manufacturing resource planning (MRP II) or MRP II A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.Session 2 ForecastingFactors influencing DemandGeneral business and economic conditionsCompetitive factorsMarket TrendsFirms own plansSources of Demandl Customersl Spare partsl Promotionsl Intracompanyl OtherCharacteristics of demandTrend，increase, decrease or flat.Seasonality, yearly, daily or weekly.Random Variation Cyclical variation, history of growth or recession, long or short range cycleDemand PatternsStable: remains same general shape over timeDynamic: Tends to be erraticDemand patternsDependent: Should never be forecastedIndependent: Only independent demand needs to be forecastedWhat should be forecasted?Level -Forecast -Time FrameBusiness plan -Market direction -2-10 YearsSales and Operation Planning -Product lines and family -1-3 yearsMaster Production Schedule -End items and options -6-18 monthsPrinciples of Forecastingl Are rarely 100% accurate over timel Should include an estimate of errorl Are more accurate for product lines and familiesl Are more accurate for nearer periods of timeCollection and Preparation of DataRecord data in terms needed for the forecastRecord demand not shipmentUse the same time intervals used in planningForecast items controlled by manufacturingRecord circumstances relating to the data (like promotion)Record demand separately for different customer groups (buying patterns different)Qualitative Techniquesl Are based on intuition and informed opinionl Tend to be subjective主观的l Are used for business planning and forecasting for new products l Are used for medium-term to long-term forecastingQuantitative Techniquesl Based on historical data usually available in the companyl Assume future will repeat pastl Are used most often in production planningExtrinsic Techniquesl Are based on the idea of cause and effect.l Based on external indicatorsl Are called causal techniques因果技术l Useful in forecasting total company demand or demand for families of productsIntrinsic Quantitative Techniquesl Are based on internal factors.l Is not always quantitativeMoving Average Forecastingl Can be used to filter out random variation.l Longer periods smooth out random variation.l If a trend exists, it is hard to detect.l Manual calculations can be cumbersome when dealing with more periods.l A moving average will lag the actual sales.Exponential SmoothingProvides a routine method of updating items forecastWorks well for stable itemsIs satisfactory for short-range forecastsCan detect trends, but will lag themReduce the amount of data and make moving average simpler.Seasonalityl Measures the amount of seasonal variation of demand for a productl Relates the average demand in a particular period to the average demand for all periodsl Seasonal index=period average sales/average sales for all periodsMonitoring forecastForecast are rarely 100% correct over time. Why we need monitor the forecast?To plan around the error In the futureTo measure actual demand versus forecastTo improve our forecasting methods.Forecast errorsBias error: the forecast of average sales is in error. Also called cumulative errorRandom error. If we could measure the amount of random variation, we canMake a judgment about the reasonableness of the errorMake contingency plansSet safety stockMean Absolute Deviation (MAD)The average of the absolute values of the deviations of observed values from some expected valueStandard deviationA measurement of dispersion of data or of a variable.Standard DeviationA measurement of dispersion of data or of a variable. The standard deviation is computed by finding the differences between the average and actual observations, squaring each difference, adding the squared differences, dividing by n - 1 (for a sample), and taking the square root of the result. See: estimate of error.Session 3 Master PlanningAs we move down the hierarchy, the level of detail increases and the planning horizon decreases.Production planning is concerned with:Planning for each product familyMeeting desired inventory levelsDetermining resources needed: equipment, labor and materials needed in each period.Comparing with available resourcesTypical Characteristics of the Production Planl 12-month time horizonl The plan is usually stated as a monthly rate.l Fluctuating or seasonal demandl Plan made for product familiesl Variety of management objectivesDeveloping a Production Plan Three basic strategies can be used:l Match/chase. Produce the amounts that are demanded at any time.l Level: Continuously produce an amount equal to the average demand.l Combination/hybrid:Chase Strategy Advantages:l Stable inventoryl Varied production to meet sales requirementsChase Strategy Disadvantages:l Costs of hiring, training, overtime, and extra shiftsl Costs of layoffs and impact on employee moralel Possible unavailability of needed work skillsl Maximum capacity neededLevel Production StrategyAdvantage:l Smooth, level production avoids labor and capitol costs of demand matchingDisadvantage:l Buildup of inventoryl Requires a more accurate forecastCombination Strategyl Produces at or close to full capacity for some part of the cyclel Produces at a lower rate (or does not produce) during the rest of the cyclel Makes use of available capacity, yet limits inventory buildup and inventory carrying costsMake-to-Stock Production PlanGoods are put into inventory and sold from inventoryUsed when:l Demand is constant and predictablel Only a few product options existl Delivery times are shorter than time needed to make the productMake-to-Stock Production Plan Information neededl Forecast by time period for the planning horizonl Opening inventoryl Desired ending inventorySubcontractingSubcontracting allows production at the minimum demand level at all timesAdditional demand is met by subcontractingIt enables a company to meet fluctuations in demand.Alternate methods of meeting demand fluctuations include adding a shift or having employees work overtime.Resource Requirements PlanningThe production plan must be compared with existing resourcesl Are required resources available?l If not, how will differences be reconciled?Master Production ScheduleStates requirements for individual end items and options by date and quantityl Constrained by and supports the production planl “Disaggregates” the production planObjectives of Master Schedulingl Maintain desired level of customer servicel Make best use of resourcesl Keep inventories at desired levelInput to Master Scheduling ProcessProduction PlanForecastOrders from customersAdditional independent demandInventory levelsCapacity constraintsRelationship to The Production PlanProduction plan is for a family of products and the forecast is for individual itemsProduction plan are usually stated in months and MPS is stated in weeks.Steps in making an MPSMake a preliminary MPSPerform rough-cut capacity planningResolve differencesRough-Cut Capacity Planningl Rough-cut capacity planning checks whether critical resources are available to support the preliminary master schedulel A resource bill shows the time required for individual items on a critical resourceResolving DifferencesIf required capacity exceeds available capacity,Capacity must be increased, orPlan must be altered.The MPSThe MPS is notl A sales forecastl A wish listl A final assembly scheduleThe MPS should bel The anticipated build schedulel Realistic and achievableMPS and Delivery PromisesAs orders are received, they “consume” available production and or inventoryAny part of the MPS level not consumed is available-to-promiseAvailable-to-promiseATP for period1= on hand customer orders due before next MPS scheduled receiptATP for other period = MPS Scheduled receipt customer orders dur before next MPS scheduled receiptPlanning HorizonThe amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers or of key suppliers. For longer term plans the planning horizon must be long enough to permit any needed additions to capacity. See: cumulative lead time, planning time fence.Time fence A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. Time fences can be used to define these points. See: demand time fence, hedge, planning time fence.Session 4 Material Requirements Planning (MRP)The material requirements plan is driven by the master production schedule MPS.MRP is concerned with the components needed to make the end items.The MRP drives or input to production activity control PAC and purchasing.Objectives of MRPl To determine the materials required What is required How much is required When it is requiredl To establish and maintain prioritiesInputs to MRP ProcessMPS: provide information on planned and scheduled orders for end items how much is wanted and when.Inventory: Provide information on what is already available. On order and on hand.BOM:Planning data: lot size, lead time, scrap factors, yield factors and safety stock.Computer:Bill of Materialsl A bill of material lists all the components needed to make one assemblyl Each part has a unique part numberBill of Materials TypeSingle LevelMultilevelMultilevel bill is make up of subassemblies.Subassemblies reflect the way manufacturing plans to build the product.The lowest items on the bill are purchased partsAll parts and subassemblies have unique part numbersThe final assembly is level zero.The multilevel bill is a collection of single level billsThe computer stores single level bills only.Item can be both parents of components and components of other parents.Where-Used and Pegging DataWhere-UsedLists all the parents in which a component is used, whether there is a demand for the parent or notMay be single-level or full-levelPeggingShows the parents creating the demand for components, the quantities needed, and whenUses where-used logic to identify current sources of demandMay be single-level or full-levelThe MRP ProcessDeterminesl What is neededl How much is neededl When to orderInvolvesl MPS datal Bills of materiall Inventory statusl Planning dataLead Time, Exploding, and OffsettingLead time:The time from when an order is placed until the part is ready for useExploding:Multiplying the parent requirements by the usage quantity through the product treeOffsetting:Placing the requirements in their proper time periods based on lead timeGross and Net RequirementsAvailable inventory must be taken into accountNet requirements = gross requirements available inventoryExample:Gross requirements 50 unitsAvailable inventory 20 unitsNet requirements 30 unitsSteps in releasing planned ordersCheck availability of componentsCreate shop packet or purchase requisitionAllocate components to that orderRelease planned order, creating a scheduled receipt.Basic MRP LogicTop row show time periods called time bucketsNumber of periods called planning horizonAn items is considered available at the beginning of the time bucket in which it is required.The quantity shown in the projected available row is the projected available balance at the end of the period; all other quantities are for the beginning of the period.Using the Material Requirements Planl The MRP logic will Gross, net, offset, and explode requirements Create planned orders Keep priorities currentl The software Can provide action or exception messages The computer can perform all calculations and create planned order releases Does not issue purchase or manufacturing orders or reschedule open ordersUsing the Material Requirements PlanPlanners actions include the following:l Releasing planned ordersl Rescheduling open ordersl Changing order quantitiesl Working with others to solve problemsMaterial planner works with three types of ordersPlanned orders: calculated and controlled by softwareReleased orders: Scheduled receipts, releasing is the responsibility of the planners.Firm planned orders: the planner tells the computer the order is not to be changed.Replanning: planner to do so.Session 5 Capacity Management and Production Activity ControlCapacity ManagementPlanning and controlling resources needed to meet production objec