SCM 301 Exam 2 Lecture Study Guide Lecture Outline I Classes 14 16 S OP a S OP Top Down Planning Sequence i Corporate strategic planning ii Business plan iii Tactical production plan 1 S OP 2 Given constraints how do we meet demand iv Detailed planning and control Master Schedule b What is Sales Operations Planning i A routine process led by senior management that evaluates revised time phased projections for supply demand and the resulting financials ii Decision making process that ensures that the tactical plans in all business functions are aligned and support the overall business plan iii Objective reach consensus on a single operating plan that allocates the critical resources of people capacity materials time and money to most effectively meet marketplace demands in a profitable way iv On a continuous basis get together and make decisions c What is S OP i Planning methodology that shows how tactical capacity will meet expected customer demand Integrated decision making process want to minimize risk ii iii How are we going to use capital and labor iv Timing becomes very important v More inventory than cost of lost sales vi Operations plant manager factory efficient i Getting into quantitative stuff ii Put somewhat similar forecasts together into one common d Monthly S OP forecast e S OP Planning Goals i Look at demand forecasts as resource requirements results in reduced costs controlled and minimal inventory customer needs met 1 Maximizing all resources ii S OP cannot exceed plant capacity f Basic S OP Strategies i Level production is constant ii Chase production changes based on forecasts iii Mixed both production and inventory change may rely on analytical techniques to find some optimal combination g Level Capacity Strategy i Maintain a steady rate of regular time production build up inventory during periods of low demand and use built up inventory and overtime during periods of high demand Increase production factory increase workers ii iii Cut production cut people off iv Production stays same workforce stays same v Costs a lot to change production run it steadily vi Production demand accumulating inventory vii Holding inventory is cheap or very rigid viii Ex Oil Refining h Chase Demand Strategy i Changing the rate of production to match the forecasted demand costs ii Workforce increases decreases based off of demand iii Hiring firing layoff costs are high Create problems with unions benefits goodwill etc iv Minimize inventories maintains efficiency less inventory v Production is always above or equal to the demand line production follows demand vi Hire so working at capacity vii Greater efficiency due to chasing demand Classes 17 18 Material Requirements Planning MRP a Components of Manufacturing Planning II i S OP Plan 1 Based on whether using level chase or mixed plan ii Master Schedule Record MSR 1 Used by sales to get reach sales targets or address capacity issues 2 May produce a number of factors of interest to sales force what haven t we made yet What s already made etc iii Master Requirements Plan MRP 1 Looking at each component of a final product b Master Production Schedule MPS i Follows S OP decisions and includes gross production requirements ii Level chase or mixed plans ended up with some production plan and some understanding of inventory iii Time phased production plan take into account lead times 1 Order products before needed so they are on hand c Material Requirements Planning MRP when we do need them i Recipe for what we re going to make ii Translates the MPS into the detailed time phased resource requirements needed to product all of the parts that eventually end up creating the final product iii Manages dependent demand items 1 Dependent demand demand for items tied directly to 2 company production of another item we can figure out what it takes to make these items ex tires Independent demand demand for items over which a company does not have control cannot influence the amount of a good that is sold 3 Example Ford 5150 a Number sold independent demand b Tires engines transmissions dependent d MRP Transformation Overview demand driven i Inputs MPS bill of materials inventory purchasing record files ii MRP Processing MRP program iii Outputs changes order releases order schedules exception planning performance control reports inventory transactions e Bill of Materials BOM i Diagram chart that shows all dependent demand items what it takes to build something ii Lists all raw materials parts sub assemblies and assemblies needed to produce one unit of a product iii Use product structure trees to depict the requirements to make each component listed by level and lead time iv See page 65 in notes numbers next to C E F on second slide just mean that you are multiplying the number of C s E s F s by that number to make one unit of the above component 1 Ex F x 3 would be enough of F to make ONE unit of C f MRP Inventory Purchasing Record i Inventory record for every component that makes up final product ii Used to be like a card catalog in the past iii Includes 1 Safety stock stock kept on hand just in case 2 Cost 3 Stock on hand 4 Storage location 5 Average lead time time order placed to time order iv Purchasing data includes source of supply info price and received terms etc g MRP Definitions i Gross requirements demand for item by time period ii Schedule receipts starting inventory iii Projected ending inventory expected on hand inventory at end of period what s left after we make product iv Planned order releases planned order receipts offset by lead times releases are net requirements adjusted for lot sizing think of this as backwards planning h Using MRP to Plan i What are capacity issues Only follow through if capacity is adequate change capacity around to meet requirements ii Will the plan work You want to find out if it will before committing i Supply Chain Issues with MRP i Capacity issues capacity and safety stock drive things ii Fixed lead times nothing is ever certain If one component is late the entire production line is delayed iii Need consistent organizational discipline can t let people do their own thing follow the plan so production is always consistent iv MRP Nervousness mistake or change in high level causes major changes in lower levels mistakes affect the entire process v Reporting issues communication coordination is essential Computerized to eliminate mathematical errors vi The process has upstream focus keep in contact with