SCM Basics Session

Demand Management

Sales and Operations Planning

Master Scheduling

F)

G)

MRP Planning

Session 5 -- CapM and PAC

F)

G)

H)

Sessions 6, 7, &

F)

G)

H)

J)

Sessions 9 &

Lean & JIT

Theory of Constraints

F)

G)

Session

It is difficult to try to explain the frustrations found in trying to manage a supply chain to someone who doesn't have any experience in this environment. One way that the challenges might be effectively communicated might involve building a model of what the ideal supply chain might look like and then contrast that with what "actually" happens. There is a plethora of technologies that are already in existence that are geared toward producing optimum efficiencies throughout the supply chain. Examples of this include technologies such as radio frequency identification units, enterprise resource planning (ERP) software systems that are fully integrated with downstream suppliers, and real time data adjusting automatically based on the actual fluctuations in the marketplace.

Therefore the supply chain could theoretically be continuous flux of optimization based on data that integrated and adjusted itself automatically based on a network of transparent systems that communicated in real time. For example, if a monthly sales projection was found to underestimated based on the volume of sales for the first two of the month, then the system could scan the procurement environment for in stock items, calculate the optimal lead time vs. price restrictions, and send out the subsequent sales orders to gather the required materials for production. Then the production process would automatically adjust to meet the increased quantities; it could schedule employees, put the materials in the bins of their appropriate stations, the quantities updated for the production lines, and logistics notified about the upcoming changes.

Unfortunately, even with all of the advanced technology that our civilization has produced, this is generally not the way a supply chain works. As opposed to having integrated systems, nearly all the systems out there are in some way fragmented; nothing actually is updated in real time and everything has to update through fax, email, or over the phone. Material orders get lost in the shuffle and production lines are constantly waiting on raw materials; or something will get lost in shipment or have quality issues and have to be re-routed through the manufacturing process again. Bottlenecks will emerge in the most unexpected places and floor managers will have to shuffle processes around to meet deadlines. Basically, anywhere human error is possible it is likely going to happen at some point. Thus the current state of supply chain management is often as much of an art as it is a science.

1) Demand Management

A)

B)

Given the results of the two methods of forecasting, the moving average method seems fit under the given conditions. With a small amount of historical data and a sales pattern that does not appear to have any seasonal variability, the moving average should represent the more accurate measure. However, once a greater history has been established, the exponential smoothing method will likely increase in accuracy in the future.

C)

With only one year of sales history there is not enough data to be able to predict any seasonal patterns that might emerge in sales. Furthermore, it would be more accurate if the sales manager looked at individual reasons for the variance in the sales than try to compile a statistical average.

D)

Each statistical forecasting method has been geared toward a certain set of circumstances and thus each version has a set of strengths and weaknesses that may only be reasonable to utilize in a given situation based on various data sets. It is also important that the data represent the actual sales as accurately as possible in order for any forecasting method to be accurate. Without a valid data set any forecasting technique could ultimately be useless.

2) Sales and Operations Planning

A)

The sales and operating plan (SOP) is a cross functional endeavor that should include participation from business management, sales, finance, production management, and purchasing agent or materials manager. The SOP is a mid-range plan in duration but is generally updated frequently (usually monthly). The primary purpose of the SOP is to keep all of the related business functions abreast of what is happening while at the same time guiding everyone's efforts toward the stated organizational goals or SBPs.

B)

Make-to-stock -- this production plan offers the most responsive plan to the market. It offers consumers the opportunity to make purchase directly from inventory without having to wait on any production processes. Though maintaining an inventory has many advantages, it...

Furthermore, there is little flexibility in terms of product customization.
Make-to-order -- this production plan is the most responsive to product customization and requires little to no inventory in finished goods; thus there is little risk of obsolescence. However, the consumer must wait for the product to go through the production process which in some cases can be fairly lengthy.

Subcontracting -- in this method the production is handed off to a third party vendor who can either mirror the make-to-stock or make-to-order production method. This method reduces the amount of overhead needed to provide finished goods since all of the production process are essentially outsourced. In this scenario there is a great dependence on the third party vendor and very little control over their operations.

Hybrid strategy -- it is common for an organization to utilize various combinations of the previous production methods; possibly some combination of all three. The more common production items can be made-to-stock while customized versions are made-to-order. Furthermore, a production plan could have strategic subcontractors to manage periods of overflow. Though this strategy is common, it adds complexity to the business and could be hard to manage at times.

C)

3) Master Scheduling

A)

Master Scheduling can provide the company a more proactive response to production scheduling by working backwards from the scheduling date and basing production activities on priority rather than the current reactive method. The MPS also derives the MRP to make sure all the raw materials are available to enter into production when the time is right.

B)

C)

D)

No, based on the labor hours required there is a deficit of twenty hours. The organization could consider paying overtime, hiring temps, or possibly outsourcing some of the production to meet this deficit in labor.

E)

F)

The Available to Promise offers customer service an indication about the status of production activities so they can gauge the probability of being able to complete an order in any given period.

G)

No, if a new order was placed for 145 units in week one there would not be enough finished goods in week 4 to meet the order and the MPS would have to be adjusted to compensate for the increase in orders.

4) MRP Planning

A)

Each component of production is composed of either a raw material or an item that is a sub-component usually considered as work-in-progress. Thus the hierarchies involved with each stage of production must account for these requirements and make sure the materials are available. This system is generally referred to as material resource planning (MRP).

B)

The bill of materials (BOM) is comprised of the total amount of raw materials and sub-assembly components needed to make any finished good. The amount of materials can vary over time due to different variables such as new equipment, new procedures, employee skill sets, or even the quality of the raw material. Therefore it is recommended that the five-year-old BOM be verified for accuracy. The American Production and Inventory Control Society (APICS) defines various methods of producing BOMs including a single level bill composing only on level in the hierarchy as well as a multi-level bill that can account for various sub-assembly processes.

C)

Session 5 -- CapM and PAC

A)

B)

C)

Yes, the scheduled order should be able to be completed in time even with the Bottleneck at work centre A. However, if there were any more constraints placed upon this bottleneck then load placed upon that center could be split into four different lot sizes to ease the constraint for that activity.

D)

E)

F)

Backwards scheduling starts at the delivery date at sets the schedule from that point. This leaves very little in terms of slack in case some problem arose. If a problem did arise it would likely lead to the delivery being late. Forward scheduling on the other hand, begins at the earliest possible date and schedules from that point. This leaves more time to spare in case some problem arose. However, it should also be noted that orders must be prioritized based on the availability of the work centre and thus the constraints on production or material availability might dictate which method should be used.

G)

Since Work Centre A has been identified as the bottleneck, it can be said that this is the greatest constraint on the production flow or throughput speed. It will be the slowest of all the production Centers as well as be forced to carry the greatest constant load when compared to other activities.

H)

The Production Activity Control is responsible for taking the MPS and executing it along with the MRP. It is up to the PAC to maximize the productivity of the…