Apics Study Notes DSP

http://www.apicsexamwarehouse.
com
Detailed Scheduling and Planning

Inventory and Ordering
Inventory Management and Customer Service
Information used in the Material Planning Process
MRP Mechanics The Basics
Using MRP Outputs
Detailed Capacity Planning Process
Capacity Mechanics
Establishing Relationships with Suppliers
Supplier Relationships and Procurement Plans
Inventory and Ordering

Types of Inventory
1. Raw Materials (RAW)
a. Inputs into manufacturing
b. Normally longest lead time inventory type
c. Valued at standard cost while in inventory (what was paid for them)
2. Work in Process (WIP)
a. Material in various stages of completion
b. Value includes direct labor hours and overhead.
3. Finished Goods (FG)
a. Completed part
b. Sold to the customer external or internal (e.g. a different division)
c. Stored at either the production facility, warehouse, or distribution center
4. Maintenance, Repair, and Operating Supplies (MRO)
a. Large quantities but low cost
b. Include office and custodial supplies
c. Maintenance and spare parts
d. Replenishment: visual review, use and replace, reorder point
Categories related to Time-Fences
Excess
Surplus
Inactive
Obsolete
Consignment: Supplier physically gives customer inventory but retains ownership until
customer uses inventory
Vendor Managed: differs from consignment supplier has more visibility of customers
forecasts
Order Review Methodologies
Material Requirement Planning (MRP)
a. Primary benefit: accommodates ordering strategies for parts with variable dependent
and independent demand.
b. Different from end-item inventories:
1/27
http://www.apicsexamwarehouse.com
i. End-item demand based on forecast/master schedule

ii. Demand lumpy and discontinuous if not scheduled in daily batches (more
noticeable at lower BOM levels)
iii. Lower level demand not forecasted if has defined BOM relationship, its
calculated
iv. Little or no safety stock needed for 100% service for parts subject only to
dependent demand and have sufficient lead time.
Reorder Point
a. ROP = DDLT + SS
i. ROP: Reorder Point
ii. DDLT: Demand During Lead Time
iii. SS: Safety Stock
b. Assumes steady demand
Time-Phased Order Point
a. Allows lumpy withdrawals instead of time periods
b. Advantage over reorder point because combines dependent and independent demand
in time-phased manner
c. No assumption of steady demand
d.
Periodic Review (fixed-interval order system, or fixed reorder cycle inventory model)
a. Independent demand model
b. Order quantity is variable
c. Order is placed every n times (as required)
d.
i. M = Maximum inventory level
ii. DDL = Demand During Lead Time
iii. DDR = Demand During Review Period
iv. SS = Safety Stock
e.
i. Q = Order Quantity
ii. X = Inventory on hand
iii. O = Inventory on order
Visual Review
a. Actually look at inventory on hand
b. Used for low-value items
c. Min-max is common technique
Kanban
a. Signal for replenishment
b. Each Kanban is same quantity
c. Station upstream only produces parts when it gets signal (empty bin, ticket, empty floor
space, etc)
d. Quantity for replenishment determined from rate-based MRP as fixed order quantity
Order Quantity Constraints: Take precedence over Modifiers

Upper limits restrict days of supply or dollar amount for an order
o E.G. Order quantity cant exceed $100 or 14 days of stock for a certain item
Lower limits restrict from placing too many orders for inexpensive parts
2/27
o E.G. Order 7 widgets on Monday instead of 1 widget a day for 7 days

Order Quantity Modifiers
Adjusts order quantity to supplier indicated multiples
o E.G. GreatSupplier Inc. sells material only by 100 piece lots, you cant by 101 pieces.
Price break adjustments
o E.G. 500 piece order costs $2 per piece while a 600 piece order costs $1.90 per
piece. We would modify our quantity to take advantage of the cost savings.
Scrap and Yield factors
o E.G. We want to produce 1,000 widgets but have a 90% yield in our process so we need
to order a total of 1,100 parts.
Lot-Sizing Techniques
1. Economic Order Quantity (EOQ)
a. Assumes uniform annual demand
b. EOQ , carry, order, and total cost equations
c.
2. Fixed Order Quantity
a. Usually because of something relating to shipping, handling, or line replenishment
b. Consistent order regardless of demand variability
c. Determined informally or based on long term EOQ calculation
3. Period Order Quantity
a. Equal to net requirements for a given number of periods
b. Number of planner periods established by planner or on EOQ calculation
c. Equations
4. Lot for Lot
a. Sum of requirements for a period
b. MRP replanning nightly, periods can be as short as one day
Advantages to using MRP for the ordering process
Common computer system for all planning and ordering
Same item may be subject to lot-for-lot ordering for certain order types, and regular period or
other type of ordering technique for other order.
o Business doing contract work for military and uses same items in commercial business
Residuals may exist these will be applied automatically by MRP prior to triggering new order.
3/27
Inventory Management and Customer Service

Safety Stock: Planned quantity of stock to protect against fluctuation in demand or supply
Required when:
o Demand for a product is uncertain
o Timely resupply of product is uncertain
Higher the SS the less of a chance of stock outs and better service
Higher the SS the higher the cost to provide this good service
If permanent SS is not desired, Safety lead times can be used (causes receipts to be earlier than
required)
Safety Stock for Dependent demand items:
SS needed if supply is variable (production scrap/yields or supplier delivery)
MRP keeps safety stock for independent demand and dependant demand separate
Customer Service
Traditional: Shipping a customer order on a committed date
Measurement
o Order shipped on committed date
o Line items of orders shipped on committed date
o Dollar volume shipped on committed date
o Ordering periods without stock-out
o Backorders
Expanded Customer Service
o Cycle time from order placement to delivery at customers location
o Focus on request date by customer, not committed date. Competition can take our
customers if they want it in 2 and we commit 4.
o Cycle time of response to customer requests (e.g. schedule change or material change)
o Total units delivered compared to returned materials authorizations (RMAs) Dead on
arrival, mis-entered, mis-shipped product.
o Total customer experience responsiveness, design suggestions, service and warranty
Customer Service and Order Quantity
Small order quantities = Risk of short, frequent stock outs
Large order quantities = Risk of long, seldom stock outs
Standard Deviation and MAD
or
o
o
o Data points < 30? Use

o Data points > 30? Use
Tracking Signal
Used to monitor deviation trend or Bias in a forecast
When tracking signal calculates to be outside a specified range, the item is flagged for review
4/27
A negative tracking signal value means the forecast is consistently higher than actual.
Safety Factors
The Table of Safety Factors
o Provides some level of service and converts the standard deviation into a specific amount
of safety stock
o Always round up to safety stock quantity
o
Lead Time Deviation
Forecast frequency upon with standard deviation is based the items lead time
typically in range of .5 to .7 (this value will be give in the exam)

Time Period Safety Stock
Allows even amount of safety stock, equal to the usage, over a designated time frame
Varies with change in independent and dependant demand (NOT on deviation from demand)
Protects against the following situations
1. End of month reviews that do not indicate reorder
2. The next day material falls below reorder point
o No review until next month, safety stock must buffer this delay
*Remember to convert the SS time period into a monthly period (e.g. 2 weeks = .5 months)
Fixed Safety Stock

Used for items that need special oversight or that should have zero safety stock
Applied in the following situations
o New part phase in
o Part phase out with long usage history
o Dependant demand parts with no unplanned usage and completely planned by MPS and
MRP systems
Inventory Valuation
Definition
o Determined using either cost or market valuesome recognition of inventory age
distribution (e.g. old inventory may be worth less)
Purpose
o Considered short-term asset
o Includes raw materials, work in process, and finished goods
o Maintenance, Repair, and Operating Supplies (MRO) not included
Types of Inventory Valuation
o FIFO: First-in, First-out
o LIFO: Last-in, First-out
o Transfer
o Standard Cost:
single value for an inventory item,
difference between actual costs incurred and standard costs reported as a variance
from the standard
typically reviewed annually
o Actual Cost
5/27
Lot control to trace a load back to a PO

Not used often except for government contracts or for warranty or safety reasons
o Project Cost
o Process Cost
Collect costs by time period and averaged over all units produced during period
Data Accuracy
Accurate
Timely
Fix Root Causes
Eliminate informal systems created to correct erros
Inventory Accuracy
Accounting: Dollars
Planning: Acceptable Percentage Range
Production: Absolute Count Accuracy
Costs of inaccurate Records
Shortages
Missed schedules
Late Deliveries
Lost Sales
Excess Production
Excessive expediting
High inventory levels
Low productivity
Excess freight costs
High obsolescence levels
Goal of inventory accuracy program
100% inventory accuracy
100% of the parts
100% of the time
Cycle Count Analysis
Operating cost
Cost avoidance
Infrastructure investment
*Each contain tradeoffs
ABC analysis to classify/analyze inventory
Pareto Principle: 80/20
Focus on the costly few as opposed to the trivial many
Uses of ABC Classification
o Cycle-Counting Frequency: A items verified more frequently than C items
o Customer Service
o Engineering Priorities: improvement efforts better spent on A items (high usage/cost)
o Replenishment Systems
o Investment Decisions
ABC Calculation
o Calculate annual dollar usage
o Rank items from highest to lowest by annual dollar usage
o Assign ABC categories
6/27
Types of Inventory Accuracy Methodologies

Cycle Counting: Efficient use of few experienced people throughout year
Periodic Inventory: Inefficient use of many inexperienced people in a short period once a year
Cycle Counting
Periodic Inventory
Fewer Mistakes
Many Mistakes
Minimal loss of production time
Plant/Warehouse shutdown for
inventory
Timely detection/correction of
No correction of error causes
error causes
Systematic improvement of
One-time improvement of
accuracy
accuracy
Inventory Objectives
Maximize Customer Service
Minimize Plant Costs
Minimize Aggregate Investment
Efficient Operations
7/27
Information used in the Material Planning

Process
Demand
Independent Demand comes from:
o Customer order/forecast
o Interplant requirement
o Request from a branch warehouse
o Safety stock replenishment
o Unexpected levels of scrap or yield
Inventory Turnover
Should be based on the companys annual average inventory level

Deviation from Target
Identify how close actual performance is to target performance
Intent is to get deviation to remain at 0 percent

Inventory Data
Database Design Elements
o Item identification
Unique item numbers
One set of item numbers should be used
Assigned responsibility for number creation
Numbers no longer used should NOT be reassigned
Concise
Kept uniform
Avoid confusing characters
Allow room fro expansion
o Item description
o Stock locations
o On hand balances at each location
o On order information by due date
o Reorder and safety stock info
o Financial info
o Usage
o Unit of measure
o Classification information
o Sourcing
o Lead time
Storage and Location of Inventory Items
Areas that store inventory are usually referred to as Bins with a location code identifying it
Bin examples
o Space on shelf
o Vat or other liquid container
o Space on floor
8/27
o Outdoor space in storage lot

o Designated segment of a rack
Requirements of bin-location system
o Sequence bin-location codes
o Identify location of bin numbers with multiple storage sites
o Include aisle number
o Design grid arrangement
Location Methods
o Random Locations: Bins assigned each time a shipment arrives
Advantages
Variations in stock quantities store material in more than one bin,
computer tracks quantities in each bin, allows for smaller bins and less
wasted space
Lot or batch identity maintained easily
First-in, First-out picking
Changes to variety of items stocked can be accomodated
o Fixed Locations: each bin designated to hold a particular item number
Advantages
Items always in same place easy to locate
Items requested most frequently can be located where easiest to access
Location strategy easy to grasp and understand
Bin locations can be assigned to facilitate picking
Disadvantages
Inadequate capacity
Unused space
o Zoned Locations
Can be based on characteristics of item: flammability, dimension, value, risk of
pilferage, etc
Automated Storage and Retrieval (ASR)
o Robotic
Stock Balances
Scheduled Receipts (Open-Order or On-Order)
o How much?
o When will it arrive?
o Where will it go?
Allocations
o Reserved inventory, assigned to specific orders not yet released
Current Usage Rates
Master Production Schedule (MPS)
Input into detailed scheduling and planning
Planning Horizon
Amount of time the master production schedule extends into the future.
For the MPSshould be at least as long as longest cumulative lead time for items being scheduled
but is usually longer.
Long Planning Horizon: Longer view into the future (avoids future problems, take advantage of
special circumstances)
Resolution of Differences
Difference between available capacity and required capacity
9/27
If available exceeds required, the production schedule is workable

If not, available capacity must be increased (overtime? Extra workers? Subcontracting?) or the
requirements have to be decreased by revising the production schedule
Planner needs to measure value of the MPS in following terms:
o Resource Use
o Customer Service
o Cost
10/27
MRP MechanicsThe Basics

MRP:
3 functions
1. Plans and controls inventories
2. Plans and controls order releases
3. Provides accurate planned order loading for CRP
Design Characteristics
Planning Horizon
o At least as long as the longest cumulative lead time item
Time Buckets
Replanning Frequency
o MRP Nervousness: rapid, small requirements changes that cause material plan to change back and
forthdisrupts planners, vendors, and floor.
Firm Planned Orders
o Reduces/suppresses MRP nervousness
o Firm means the planner cant alter due date, release date, and planned order quantity
Pegging
Mechanics of MRP
MPS
Material balance needs
o What
o When
o How much
Material and Capacity Plan
Maintaining Plan
Manual MRP
Gross Requirements: quantities that must be issued to support a parent order or orders
Filling in an MRP Grid
1. Gross requirements from Master Schedule (independent demand)
2. Gross requirements from service-part demand (independent demand)
3. Inventory Data
a. Factors: lot size, lead time, safety stock
b. Stataus data: On-hand, allocated, scheduled receipts
c. Where does inventory data come from? The item (part) master record
4. Net Requirements and Planned Orders for low-level code 0
a. Gross Requirements + Allocations Scheduled Receipts Projected Available + Net Requirements
Net requirements for first period with inventory on hand:
Gross Requirements + Allocations Scheduled Receipts On-Hand Inventory = Net Requirements (if net
requirements is a negative number, set net requirements to 0 and the projected available to that
number but positive)
11/27
Using MRP Outputs

MRP Netting
Used in MRP
Used in TPOP
Used in DRP Netting
MRP Extensions
Time-phased order point (TPOP)
o Advantages
1. Keeps open-order due dates valid
2. Furnishes capacity planning system with the items planned orders
3. Plans gross requirements for the items components
Distribution requirements planning
o Determines need for replenishments at branch warehouses
o Used time phased order approach
MRP Outputs
Exception Report
Action Report
Pegging Report
Changes Affecting MRP Plan
Engineering changes
Excess Scrap
Inventory corrections
Lot Size changes
Customer revision of orders
Supplier/production issues
MPS revisions
Replanning
Action report may suggest to:
o Expedite order
o Release a planned order
o Cancel firm planned order/scheduled receipt
o Delay firm planned order/scheduled receipt
o Look into firm planned order/scheduled receipt
Pegging
Allow users to trace items gross requirements to parent sources
Best to go up one level and use single-level pegging to resolve demand-supply mismatchestry to resolve
them as low in the product structure as possible
Full Pegging
o Allows user to link item demand all the way back to the MPS
o Useful for engineer-to-order, make-to-order, and products having few common components
o Modifying MPS is last resort
Where used list
o Displays quantity of every parent item to produce one unit of a component
Firm Planned Orders
Overrides MRP logic when an order is put in firm planned status by user
Planning Parameters
Lot Size
Lead Time: largest componenet of manufacturing LT is queue time
Safety Stock
Safety Lead Time
12/27
Closing the Loop
Who furnishes information?
Who uses information?
13/27
Detailed Capacity Planning Process

Capacity
Capability of operations to produce output per period
Capacity require: system capability to produce a specified product mix
Capacity Planning
Determining amount of capacity required
o Aggregate/product line level Resource Requirements Planning
o Master Scheduling Level Rough-Cut Capacity Planning
o Material Requirements Planning Level Capacity Requirements Planning
Load
Amount of planned work scheduled and actual work released to facility
Objective of Capacity Planning
High service levels, short delivery times, high reliability
Low capital investment
Efficient use of available capacity
Flexibility/adaptability
Minimal fixed costs
ULTIMATE GOAL of detailed scheduling and capacity planning
Balance Load with Available Capacity
Vicious Cycle of not planning capacity
1. Customer orders increase
2. Higher load on work centers
3. Longer queue times
4. Actual lead times prolonged
5. Delivery due dates not met
6. Prolong standard lead times
7. Orders released earlier
*REPEAT*
Manufacturing Environments and Process Descriptions
Project: One-of-a-Kind Production
o Large, unique items requiring custom design capability
o PERT: Program Evaluation and Review Technique
o CPM: Critical Path Method
o NOT CRP
Job Shop: Intermittent Production
o Handle wide range of product designs
o Fixed Plant locations
o General purpose equipment
o Constraining work center may vary depending on product mix/volume.
Batch
o Similar design items
o Wide range of order volumes
o Items ordered; of a repeat nature
o CRP applicable as product mix/volume changes
o CRP essential when constraining work centers change
Repetitive: Assembly Line Production
o Minimize setup, inventory, and manufacturing lead times
o Determination of capacity more frequently done at MPS level
o Capacity planning might be done at RCCP
o Detailed capacity planning may not be performed at all
Continuous Process: Flow Production
14/27
o Capacity constraints designed into physical facility itself
o Minimal interruptions in actual process between similar product runs
o CRP is least applicable
Data Requirements for Capacity Planning
Routing
o Operations to be performed
o Sequence of operations
o Workcenters
o Setup/Run Standards
Unique Routing Information
o Tooling
o Operator Skill Level
o Inspection
o Testing Requirements
Routing Data
o Operation ID Code
o Operation Description
o Work Center
o Set/Tear-out Time
o Run time per unit
o Tooling Requirements
Lead Time: span of time required to perform a process or series of processes
Queue Time: time waiting before operations begins
Setup Time: time to get ready for operation
Run Time: time to perform operation
Wait Time: time waiting after operation ends
Move Time: time physically moving between operations
Distribution of Lead Time
Interoperation Time: Do NOT impose Load on work center (Queue, Wait, Move)
Operation Time: Impose Load on work center (Setup, Run)
Capacity Determination
Theoretical Capacity
o Based on clock hours
3 machines x 10-hour shifts x 7 Days per week = 210 hours
.4 standard hours per unit: 210 .4 = 525 units
Demonstrated Capacity
o Average Historical Output
Last 5 periods in units = 320, 462, 356, 485, 278
Average output in units: 380.2
Demonstrated capacity in hours: 380.2 x .4 = 152.08 hours
Rated Capacity
o Hours available adjusted by utilization and efficiency
210 hours available x .95 utilization x .85 efficiency = 169.6
.4 standard hours per unit: 169.6 .4 = 424 units
Utilization =
Efficiency =
Rated Capacity Formula
o Standard hours worked = (multiplication of )
Shifts per day
Machines or workstations or operators
Hours per shift
Days per period
15/27
Utilization
Efficiency
Sources of Load
Open Order (Scheduled Receipts)
Planned Orders (Planned by Material Planning)
Other Sources
o Rework
o Scrap
o Process yield
o Engineering-related downtime
o Prototypes, sales samples, etc
o Destructive tests
Queuing effects
High Capacity Utilization = Long Average Queue Time
Scheduling Strategies
Backward Scheduling: begins with latest due date for order, calculates latest start date for it. (most often
used)
Forward Scheduling: begins with earliest start date for order, calculates earliest completion date for it.
Central Point Scheduling: for critical operations, forward scheduling is used. For operations previous to
critical operations, backward scheduling is used.
Probable Scheduling: takes slack time into account to increase or decrease lead time, provides element of
flexibility in planning, often used for project scheduling
Load Profile: future capacity requirements
Infinite Loading
Calculating loads by time period while ignoring capacity
Goal is to meet due dates as scheduled
Most useful when priority give with respect to due dates (job shop environment)
Finite Loading
Considers capacity, not permitting overloads
Start and due dates are changed to prevent overloads
Goal is good use of capacity through course of time
Most useful if limited capacity is major problem (continuous flow production environment)
Techniques
o Process-oriented: minimize potential delays to individual operationsthus average potential delay
of entire production order; rules of priority (sequencing rules)
o Order-oriented: as many orders as possible on time, w/ low levels of WIP; orders scheduled in
entirety, one after another; most commonly used technique
o Constraint-oriented: orders planned around bottleneck capacities; Optimized Production
Technology (OPT) intended to link scheduling and capacity; practical application of Theory of
Constraints (TOC);
1. Only orders with minimum batch size are generated
2. Batch size lots come together at bottleneck capacities
3. Operations at bottleneck scheduled
4. Operations before bottleneck then scheduled backward, later ones scheduled forward
using normal lead times.
Scheduling Manufacturing and Logistics Operations
Load Leveling
Order-Oriented Finite Loading
o Orders scheduled in entirety, one right after another, in time periods
o Goal: find priority rules enabling as many orders as possible to be completed
o Planning horizon divided into time periods
o Capacity limit exceed? Three possible responses:
16/27
1. Load the operation
2. Defer operation
3. Refuse order
o Capacity and loads reliable
o Due dates flexible
o Limitations
Short planning horizons
Regular re-planning needed
In short term planning; doesnt allow local, reactive re-planning
Long queues
With inflexible capacities lower utilization of capacity as soon as due dates are deferred.
o Areas of Application
Serial production, long period, monopoly situation, sellers market
Suitable for discrete manufacturing industries (if capacity is flexible)
Shop-floor control
Actual work program for next few days
Acceptable work program that allows situation planning
Long-term planning, few orders, high value added, regular planning/re-planning
Mixed Manufacturing
Produce goods with various market strategies/logistics goals
Example: organization may make mass-produced goods and maintain stocks at various stages (goal: to
maximize capacity utilization). Also produce to customer order, one-of-a-kind production (goal: shortest
possible lead time)
Load-Oriented Order Release (LOOR)
o Rough-Cut technique for order-oriented finite loading
o Adapts load to actual available capacity
Capacity-Oriented Material Management (Corma)
Enable mixed manufacturers to play WIP off against limited capacity and short deliveries for customer
production orders
Stock replenishment orders of MTS considered filler loadings
Consists of 3 parts
1. Criterion for order release: stock replenishment orders released before re order point
2. Probable Scheduling for shop floor control: priority to early release order only when needed
3. Mechanism that couples shop floor scheduling with materials planning:continually rescheduling
stock replenishment orders according to actual usage
Review
1. Resource Planning
2. Rough-Cut Capacity Planning
3. Detailed Capacity Planning
4. Planning and Control (shop floor/work place level)
17/27
Capacity Mechanics
Objectives:
Detailed required to produce effective load and priority plans; includes level of safety capacity.
Capacity planning outputs to formulate:
Capacity plans
Tooling requirements
Overload conditions
Underload conditions
Methods that balance capacity and load
Rescheduling order
Splitting orders
Changing capacity workforce changes/subcontracting
Modifying order quantities/priorities
Close loop with master planning of resources and distribution planning
Product quantities
Timing
Priorities
Close loop within detailed scheduling and planning process
Purchased
Self-manufactured materials
Part quantities
Timing
Priorities
Close loop with execution and control of operationsverify that all these made correctly, on time:
Manufactured parts
Subassemblies
Assemblies
Priority/Capacity Hierarchy
CRP cannot compensate for overloaded conditions caused by higher-level load/priority plans
Accomplishing Production Schedules
Capacity
Priority
Concerned with correct mix of
Valid due date maintenance
equipment, personnel,
tooling, and other resources
Receives and is dependent on
Validated by capacity planning
input from priority planning
at each level
functions
CRP less common in repetitive and continuous line production
CRP more common in job shop and batch production environments
Resource planning typically loads departments/areas in terms of general amounts of work days, numbers
of personnel, numbers of types of finished products.
RCCP translates these conditions into capacity of key work centers (bottlenecks)
Complications of Capacity
Lot sizing
o Order timing variability because of aggregation
o Order mix variability
Bottlenecks
Complexity
o Uncertainty
o Variability of demand
18/27
CRP Inputs
Routing Data
Production Order Status
Schedule of planned manufacturing order releases
Workcenter data
CRP Output
Workcenter load report
Revised schedule of planned manufacturing order releases
Load Unit of Measures
MPS Level
o Product Category
o Product Type
CRP Level
o Standard Hours
o Standard Units
Primary sources of load to be measure by CRP
Open-order status info from Production Control
Planned order releases produced by MRP
Increasing Capacity
Overtime/weekends
Add personnel
Extra shifts
Add equipment/facilities
Reassignment of personnel
Reduce Load
Decrease Lot Sizes
Subcontracting
Hold orders in production control
Reduce MPS last resort
Reducing Capacity
Reassign personnel
Eliminate shifts/reduce length of shifts
Increasing Load
Release orders early
In-source normally purchased or subcontracted items
Increase Lot sizes
Increase MPS
Redistributing Load
Use alternate workcenter
Use alternate routings
Adjust operation start dates forward and backward in time
Revise MPS or lot sizes
Split orders
Capacity Planning in Repetitive Production
Fixed Routings
Variable run times by product mix
Insignificant queue and wait times
Setup time only during line changeover
Production rate constrained by slowest workstation
Feedback at key points rather than at every operation
*CRP is not often used in this environment*
Measuring performance of Detailed Capacity Planning Process
19/27
Eliminated past due load
Balanced load according to capacity
Shorter queues
Reduced WIP
Higher productivity
Reduced idle time
Reduced overtime
Increased throughput
Rated Capacity = Hours/shift x Days/Week x Shifts/Day x Number of Machines x Utilization x Efficiency
Master Planning interaction
Monitors info from key workcenters for overload and underload
Distribution Requirements Planning
Personnel Planning:
o By wave or shift on daily basis per shipping plan
Wave: store orders or routing stops being picked up at a time
o Demonstrated capacity over time
Detailed Scheduling and Planning Internal Interactions
CRP closes loop with MRP in terms of availability of resources to support MRP priorities
o More real time integration the better
Identify orders for which capacity exists
Capacity shortage for orders
Execution and Control of Operations Interactions
Identify orders for which capacity exists
Identify orders for which there is capacity shortage
Balance loads and capacity
Advantages of CRP
Confirms adequate cumulative capacity
Considers lot sizes and routings
Provides time-phases visibility of capacity and load imbalances
Estimates lead time precisely
Helps eliminate erratic lead times
Disadvantages of CRP
High amount of computation required
Computational preciseness is approximation
Applies mainly to non-repetitive production
Extensive accurate input data required
No precise level of detail (function of execution and control)
Effect of MPS revision not clear
Effects of not doing CRP
Low Productivity
Higher WIP
Bottlenecks
Late deliveries and shortages
Long Lead Times
High Labor costs
20/27
Establishing Relationships with Suppliers

Principles of Partnership with Suppliers
Mutual Need
Compatibility of Interests
Trust
Openness
Financial Health
Liquidity Ratios how capable can they meet short term cash needs?
o Current ratio
o Quick ration
Activity ratios How is the company doing at managing its assets?
o Inventory turnover
o Average collection period
o Fixed asset turnover
o Return on assets
o Installed capacity
Profitability ratios Are they overcharging/undercharging?
o Gross profit margin
o Net profit margin
o Return on equity
o Return on investment
o Earnings before interest/taxes
o Price earnings ratio
Debt ratios overleveraged and incapable of paying long-term debts?
o Debt ratio
o Times interest earned
Costs
o Direct labor
o Indirect labot
o Materials
o Sales and general admin
o Overhead
o Manufacturing and operating
o Logistical
Involvement
Financial Partnering
o Concern: holding stock in these companies
o Joint venture
o Buying group
o Limited partnership
Operational cooperation
o Strategic alliance
o Cartel
o Consortium
o Electronic market
o Keiretsu: legally/economically independent though woven together in many ways
o Virtual organization
Tactical Buying: Low Risk
Strategic Sourcing: High Risk
Team Approach to Supplier Selection
21/27
Commodity procurement strategy team
Sourcing team
Supplier performance evaluation team
Supplier certification team
New product development team
Strategic Alliances
Formed at any business level
Involves modifying business practices
Technical and commercial partnering
Operation partnering
NOT a legal entity
Factors that drive Strategic Sourcing
Agreements that do not minimize costs
Purchasing organization goal that conflict with corporate goals
Purchases accounting for over 50 % of the cost of goods and services
Increased competitiveness
Market volatility
Initiate Strategic Sourcing
Supply strategy for key markets
Supplier database
Financial impact of investments
Source of strategic materials
Potential suppliers for partnering
Capture supplier ideas
Performance measures
Sole Sourcing: ONLY one supplier because of unique technology, distribution arrangement, or government
regulation.
Single Sourcing: more than one source but its the companys choice to buy from only one.
Advantages
o Better quality
o Better pricing
o Delivery
o Reliance
o Buyer clout
Disadvantages
o Slow response to changes
o Lose focus on market competitive price
o Excess Demand
Managed Inventory
Consignment: also called Vendor-Owned Inventory (VOI)
Vendor-Managed Inventory (VMI)
Differences between VMI and VOI:
o Suppliers role
o Technology used
Benefits to Managed Inventory
o Fewer stock-outs
o Better Inventory Turns
o Lower Inventory
Supplier Involvement in Product Development
Early as possible
Especially current supplier base
Leverage supplier knowledge
22/27
Advantages of Material Buying
Shares supplier base and strategy
Avoids additional transaction from engineering to manufacturing
Increase speed of transfer to manufacturing
Disadvantages of Material Buying
Communication of changes may be better if buying is done in engineering
Response from material may be slower because of production and other commitments
Tracking costs of development easier if done by engineering buyer
23/27
Supplier Relationships and Procurement Plans

Main Objective of Purchasing: Maintain reliable supply of materials or services at lowest possible price and at
desired quality level.
Purchasing decisions
Cost/value analysis
o Direct Cost: major portion of cost; small reduction means large impact on final cost
Direct labor: geographic, union vs. non-union, workforce skills
Direct material: purchased, self manufactured
o Indirect Cost
Engineering overhead
Material overhead
General and admin
Manufacturing overhead
Selling and Marketing
o Price is relative: Total Cost of Ownership is whats important (returns, bad quality, late shipments,
carrying costs, etc)
o Profit
Suppliers need to make a profit
Price is always consideration
Determination is subjective
o Cost uncertainty
Supplier cost responsibility
Supplier profit
Supplier incentives
Risk and uncertainty are related
Make or Buy
o Cost
o Time
o Capacity utilization
o Production/quality control
o Secrecy
o Supplier expertise/reliability
o Volume
o Workforce
Award criteria
o Establish prior to submitting requests for quotes
o Quality
o Time
o Security
o Existing suppliers
Compensation agreements
o Incentive arrangements: motivate supplier to improve performance
Target cost
Target profit
Sharing agreement
o Fixed Price
Most common/preferred
With economic adjustment: high value RMs
Redetermination: fixed in initial period then adjusted per clause
o Cost Plus Fixed Fee
Supplier assumes no risk
24/27
Customer pays allowable costs
Customer pays agreed fee
Supplier profit is low
Contractual obligations
o Verbal commitment
o Purchas credit card
o Purchas orders
o Blanket orders/releases
Advantages
Fewer Pos
Buyers can focus on other areas
Volume pricing
Information flow
Lower inventory/lead times
Long-term supplier relationship
o Contracts
Order placement
Pricing Principles
Economic Considerations
o Variable margin pricing: companies sell line of products and establish prices to generate profit
margin for entire line.
o Product differentiation: product really different from other suppliers or just hype?
o Cost plus profit
o Sellers market
Price Analysis
o Benchmark total price
o Historical
o Proposal
o Catalog/market
Discounts
o Quantity
o Seasonal
o Trade
Given to buyer or distributor for performing some marketing functions of seller
o Cash
Contracts Elements
Mutual Obligation
Agreement or meeting of minds
Competent parties
Lawful purpse
Contract Types
Long-Term
Definite Delivery: production schedule of entire period known, high degree of certainty
Indefinite Delivery
o Definite quantity: quantity specified; delivery is to be specified
o Requirements: all requirements for period of time; minimum requirements established;
termination protection
o Indefinite quantity: minimum/maximum range specified; delivery to be specified; high and low
limits
Order Placement Process:
1. Purchas Req
2. Request for Proposal/Request for Quote (RFP/RFQ)
25/27
3. Quote Evaluation
4. Purchas Order (PO)
5. Acknowledgement
6. Approval of invoice
7. Reconciliation
Invoicing
Accounting pays invoice
Reconciliations
Supplier Rating Systems
Metrics to be measured depend on needs of the company
Balanced Scorecard:
o Financial
o Customer
o Business Process
o Learning and Growth
Performance measure should address:
o Customer satisfaction/quality
o Time
o Cost
o Quality
o Assets
Performance Measurement Standards
o Product Quality
o Certification
o Delivery/performance
o Cost performance
o Quantity
o Cooperation
o Oter
Buyer Performance Standards
o Buyers Service Level
o Purchasing workload
o Planned number of buyers
o Number of documents per year per buyer
o Input ratio number of res received/number of orders placed
o Product flow
o Year-to-date expense variance
Ethical Standards
Ethical perceptions
Responsibilities to Employer
Conflict of Interest
Gratuities
Treatment of suppliers
Confidential information
Reciprocity
Federal and state laws
Small, disadvantaged, and minority-owned businesses
Personal purchases for employees
Responsibilities to the profession
International purchasing
International Procurement
Currency fluctuations
26/27
Transportation
Cultural
27/27

Apics Study Notes DSP

Cargado por

Información del documento

Título original

Derechos de autor

Formatos disponibles

Compartir este documento

Compartir o incrustar documentos

Opciones para compartir

¿Le pareció útil este documento?

¿Este contenido es inapropiado?

Copyright:

Formatos disponibles

Apics Study Notes DSP

Cargado por

Copyright:

Formatos disponibles

http://www.apicsexamwarehouse.

Detailed Scheduling and Planning

Inventory and Ordering

i. End-item demand based on forecast/master schedule

Order Quantity Constraints: Take precedence over Modifiers

o E.G. Order 7 widgets on Monday instead of 1 widget a day for 7 days

Inventory Management and Customer Service

o Data points < 30? Use

typically in range of .5 to .7 (this value will be give in the exam)

Fixed Safety Stock

Lot control to trace a load back to a PO

Types of Inventory Accuracy Methodologies

Information used in the Material Planning

Should be based on the companys annual average inventory level

Intent is to get deviation to remain at 0 percent

o Outdoor space in storage lot

If available exceeds required, the production schedule is workable

MRP MechanicsThe Basics

Using MRP Outputs

Detailed Capacity Planning Process

Establishing Relationships with Suppliers

Supplier Relationships and Procurement Plans

También podría gustarte