CH_02

Introduction to Materials Management Chapter 2

Arnold, Chapman, & Clive: Intro Materials Management, 6th ed.

2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Planning System Questions What are we going to make? What does it take to make it? What do we already have? What do we need to get?



Priority Capacity

Key is to match

What is needed, when, and how much Capability to produce what is needed and whenPriority (Demand) Capacity (Resources)



Major levels of Planning and Control In order of time span (long to short) and detail (general to detailed): Strategic business plans Sales and Operations Plans (Production Plans and Marketing Plans) Master Production Schedules Material Requirements Plans Purchasing and Production Activity ControlArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

At Each Level, Need to Decide What are the priorities What to produce? How much? When?

What is the available capacity? How can the differences between priorities and capacities best be resolved?Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Planning HierocracyStrategic Business Plan Production Plan Master Production Schedule Material Requirements Plan

Master Plan Planning

Production Activity Control and PurchasingArnold, Chapman, & Clive: Intro Materials Management, 6th ed.

Implementation


Production Plan Quantities of each product group to be produced each period Projected/desired inventory levels Resources needed Equipment Labor Material

Availability of needed resourcesArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Master Production Schedule Shows, for each period, the quantity of each end item to be made. Level of detail is higher than the Production Plan End items versus groups of items Time periods usually shorter (e.g., weeks versus months)Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

More Detailed Planning and Control Material Requirements Plan End item requirements broken down into specific components what to make or buy, and when

Production Activity Control Execution plan, detailing specific orders to produce items from the Material Requirements Plan

Purchasing Similar to Production Activity Control, only includes items to be purchased rather than produced.Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Capacity Management At each level of the planning and control system, reconciliation with resources must be made Must obtain the right resources or change the plan

Inadequate resources = missed production schedules Resources significantly exceed planned production = idle resources and extra costArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Sales and Operations PlanStrategic Business Plan Annual

SALES AND OPERATIONS PLAN Monthly Marketing Plan Production Plan

Detailed Sales Plan

Master Production Schedule

Weekly or Daily



Sales and Operations Planning Can be used to update the strategic plan Provides a tool to manage change Enforces functional plans to be realistic and coordinated Represents a plan to achieve company objectives Provides management visibility of production, inventory, and backlogs.Arnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Developing the Production Plan Some key questions that must be answered to develop an effective planning strategy: How flexible are the resources, both in quantity and timing? Are outside resources available (subcontracting)? Can we utilize inventory to meet demand?



Basic Production Plan Strategies Chase vary production rates to meet changes in demand Often used when inventory cannot be used or when resources are flexible and inexpensive to change

Level establish average demand level and set production rate to that level Often used when resources difficult or very expensive to change

Hybrid use a combination of some chase and some levelArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

For Example:No. of Units

DemandTime



Chase Production:No. of Units

Chase Production

DemandTime



Level Production:No. of Units

Level Production

DemandTime



Level Production:No. of Units

USE Inventory Level Production

CREATE Inventory

DemandTime



Hybrid:No. of Units

Hybrid DemandTimeArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

Numerical Example:Suppose the forecasted demand for a product family looks like the table below. Assume the product family is a Make-to-Stock family with a starting inventory of 100.

Period Forecast (Demand)

1 150

2 160

3 180

4 175

5 155

6 140

Total 960



Production Plan Using a Level StrategyPeriod Forecast (Demand) Planned Production Planned Inventory 1 150 160 110 2 160 160 110 3 180 160 90 4 175 160 75 5 155 160 80 6 140 160 100 Total 960 960



Production Plan using Chase StrategyPeriod Forecast (Demand) Planned Production Planned Inventory 1 150 150 100 2 160 160 100 3 180 180 100 4 175 175 100 5 155 155 100 6 140 140 100 Total 960 960



Production Plan using a Hybrid StrategyPeriod Forecast (Demand) Planned Production Planned Inventory 1 150 140 90 2 160 140 70 3 180 140 30 4 175 175 30 5 155 175 50 6 140 175 85 Total 960 945



Make-to-Order Production Plans Products made to customer specifications The customer is willing to wait for completion Generally products more expensive to make and/or store Often several options offered Company often uses a backlog of unfilled customer orders rather than inventoryArnold, Chapman, & Clive: Intro Materials Management, 6th ed. 2008 Pearson Education, Upper Saddle River, NJ 07458. All Rights Reserved.

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