Production and supply chain process
description
Transcript of Production and supply chain process
Production and supply chain processMIS2101: Management Information Systems
Based on material developed by C.J. Marselis
At Fitter Snacker, production manager schedules production based onexperience, rather than formal planning techniques
MRP and ERP What is MRP and what does it have to do with ERP?
Facilitating the production plan What kind of questions does the production plan
answer?
A successful company must be able to Develop a good production plan Execute the plan Make adjustments when customer demand differs
from the forecast
Production Approaches
Make to
Stock
Make to
Order
Assemble
to order
Raw
Mat
eria
l War
ehou
se Mixer
Mixer
Mixer
Mixer
Form Bake Pack
Fini
shed
Goo
ds W
areh
ouse
Snack Bar Line
Produces 200 bars/minute, 3,000 lb/hr
Operates 1 8-hour shift per day
Mixes 4,000 lbs/hrExcess capacity to ensure line doesn’t shutdown
Changing from NRG-A to NRG-B bars takes 30 minutes
Production Problems in “Un-integrated” systems
Communication Inventory Accounting
What are some of these problems?
Production planning process What are the
major steps in the production planning process?
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
PurchasingProduction
StartingInventory
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
Sales Forecasting
PurchasingProduction
StartingInventoryStarting
Inventory
9
An integrated process
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
PurchasingProduction
StartingInventory
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
Sales Forecasting
PurchasingProduction
StartingInventoryStarting
InventoryPredicts future demand for products
Break production plan down into smaller time increments
Create production schedule based on production plan from demand management
Uses the schedule to determine products and staffing
Determines what company should
produceRequires starting
inventory levels and sales forecast based on capacity
Determines amount and
timing of raw material orders
Takes quantity and timing information
from MRP and creates orders for
suppliers
10
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
PurchasingProduction
StartingInventory
Simple Sales Forecast
In an integrated system, where do I get the information to support my sales forecast?
Jan. Feb. March April May JunePrevious Year (cases) 5734 5823 5884 6134 6587 6735Promotion Sales (cases) 300 300Previous Year base (cases) 5734 5823 5884 6134 6287 6435Growth: 3.0% 172 175 177 184 189 193Base Projection (cases) 5906 5998 6061 6318 6476 6628Promotion (cases) 500Sales Forecast (cases) 5906 5998 6061 6318 6476 7128
Sales Forecasting
Sales and operations planning – SOP or S&OP
What question does S&OP answer?
Sales and Operations Planning Dec. Jan. Feb. March April May June1) Sales Forecast 5906 5998 6061 6318 6476 71282) Production Plan 5906 5998 6061 6318 6900 67003) Inventory 100 100 100 100 100 524 964) Working Days 22 20 22 21 23 215) Capacity (Shipping Cases) 7333 6667 7333 7000 7667 70006) Utilization 81% 90% 83% 90% 90% 96%7) NRG-A (cases) 70.0% 4134 4199 4243 4423 4830 46908) NRG-B (cases) 30.0% 1772 1799 1818 1895 2070 2010
Jan. Feb. March April May JunePrevious Year (cases) 5734 5823 5884 6134 6587 6735Promotion Sales (cases) 300 300Previous Year base (cases) 5734 5823 5884 6134 6287 6435Growth: 3.0% 172 175 177 184 189 193Base Projection (cases) 5906 5998 6061 6318 6476 6628Promotion (cases) 500Sales Forecast (cases) 5906 5998 6061 6318 6476 7128
Sales Forecasting
Demand Strategies If demand is greater than capacity…
Option ResultChoose not to meet the demand
Lost sales
Reduce promotional expenditures
Potential lost sales
Use overtime to increase capacity
Increased costs
Build up inventory in earlier periods
Increased costs and lost inventory
0
5
10
15
20
25
30
35
Time
SupplyCapacity
Forecasting in an Integrated System
Accurate historical sales values available for forecasting
“Fix” historical sales: If production was unable
to meet demand sales does NOT represent actual demand
Unusual conditions like weather
The effect of sales promotions
Sales provided fromSD module
Field where planner can “correct” the sales value
Sales and Operations Planning (SOP) Case Study
Kellogg’s achieved significant savings from coordinated sales and operations planning (SOP)
Changed focus based on how they were evaluated Marketing and sales: Evaluated on tons of cereal sold Manufacturing: Evaluated on tons of cereal produced No one evaluated on profit!
Kellogg’s new sales order process focused on profit Kellogg’s has reduced capacity, inventory and capital needs
while increasing sales
16
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
PurchasingProduction
StartingInventory
Demand Management What does “Demand Management” do?
Week 1 Demand Management 1/2 - 1/5 Monthly Demand NRG-A 4134
NRG-B 1772 Working Days in Week 4 Working Days in Month 22 MPS NRG-A 752 Weekly Demand NRG-B 322
7522244134
3222241772
4/22 represents how many
work “weeks” are in each
month
18
Sales and Operations Planning
Demand Management
MRPDetailedScheduling
Sales Forecasting
PurchasingProduction
StartingInventory
Bill of Material
What is a BOM? Ingredient NRG-A NRG-BOats (lb) 300 250Wheat germ (lb) 50 50Cinnamon (lb) 5 5Nutmeg (lb) 2 2Cloves (lb) 1 1Honey (gal) 10 10Canola Oil (gal) 7 7Vit./Min. Powder (lb) 5 5Carob Chips (lb) 50Raisins (lb) 50Protein Powder (lb) 50Hazelnuts (lb) 30Dates (lb) 70
Quantity
Lead Times and Lot Sizing
When it comes to purchasing raw materials, what are…“Lead Times”?“Lot Sizes”
and why do I care?
Purchasing and ERP What benefits do I get if my production planning
system is integrated with my procurement system?
Options to evaluate vendorsConvert MRP data to a purchase order
Production and Accounting in an Integrated System
What benefits do I get when my production systems are integrated with my accounting systems? Material
received (for MRP) and the
purchase order
Implications for Supply Chain Management
How quickly does information flow from the retailer all the way back to the raw materials suppliers when demand changes in:Non-integrated system? Integrated system?
Supplier
Raw
Mat
eria
ls
Manufacturer Wholesaler Retailer
Cus
tom
er
Goods Goods Goods Goods Goods
$$ $ $ $
Information Information Information Information Information
Supplier
Raw
Mat
eria
ls
Manufacturer Wholesaler Retailer
Cus
tom
er
Goods Goods Goods Goods Goods
$$ $ $ $
Information Information Information Information Information
Supply Chain Integration
What kind of benefits do I get when I integrate my supply chain with my “partners”?
Top Line Versus Bottom Line
Where do Supply Chain Systems add value?
Inventory Control Case Study – Hoyt Archery
Pre ERP, complete inventory count two times each yearClosed plant for 3 days at cost of $5000 /day
Post ERP, accurate, real-time inventory information and ongoing cycle- counting process: items are counted each day
Hoyt also simplified customer interaction with its configure-to-order (CTO) process
SCM with Customer Collaboration Case Study – Wal-Mart
POS data from bar code scanners is recorded in a massive data warehouse at Wal-Mart headquarters
Wal-Mart uses data mining techniques to predict what customers will buy at different times of the year
Data is shared with Wal-Mart suppliers to plan production Wal-Mart also allows its 5000 suppliers to directly access
its data warehouse through its Retail Link program Wal-Mart is leading the effort to leverage RFID technology
SCM Critical Success Factors
Business-driven strategy – Focus on customer
Management Commitment – From the business and IT, not an IT project!
Supplier/Partner Expectation Management
Internal Expectation Management Learning Period Acceptance
Summary An ERP system can improve the efficiency of
production and purchasing processes Begins with Marketing sharing sales forecast Production plan is created based on forecast and
shared with Purchasing so raw materials can be ordered properly.
Production planning can be done without an integrated system, but integrated system that allows MRP and Production to be linked to Purchasing and Accounting