Week 9 Supply Chain.pptx 8 Post

8/3/2019 Week 9 Supply Chain.pptx 8 Post

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Production and SupplyChain Processes

MIS 2101: Management Information Systems

Douglas M. Schutz

Based on material developed by C.J. Marselis, Munir Mandviwalla.

and Mart Doyle
http://www.sbm.temple.edu/


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Learning Objectives Describe the steps in the production planning

process.

Describe Fitter Snackers production andmaterials management problems.

Describe how a structured process for productand materials management planning enhancesefficiencyand decision making.

Describe how production planning data in an Esystem can be sharedwith suppliers to increassupply-chain efficiency.

2


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Problems at Fitter Snacker (FN

Production manager schedulesproduction based on

experience, rather than formalplanning techniques


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Consequences of the Failure to UFormal Planning Techniques

Inaccurate delivery promises to the

customer

Inability to effectively manage

shortages/overages when the

order is placed4


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What is Material Requirements Plannin(MRP) and what is its relation to

Enterprise Resource Planning (ERP)


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Facilitating the Production Plan

Production plan answers the following types ofquestions:1) How much product should we make?

2) When should we make the product?

3) How much____ materials should we procure and when?

A successful company must be able toDevelop and execute a good production planMake adjustments when customer demand differs

from the forecast


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Three Categories/ApproachesofProduction Systems

1. Make to

Stock

2. Make to

Order

3. Assemble

to Order
http://www.youtube.com/watch?v=mnBYWYgcANshttp://www.youtube.com/watch?v=mnBYWYgcANs


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Fitter SnackersManufacturing Process

8


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RawMaterialWareho

use Mixer

Mixer

Mixer

Mixer

Form Bake Pack

Snack Bar Line

Produces200 bars/minute,3,000 lb/hr

Operates 1 8-hour shift per day

Mixes 4,000 lbs/hrExcess capacity to ensure line doesnt shutdown

Changing from NRG-A to NRG-B bars takes 30 minutes


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Production Problems inUn-integrated Systems

Communication Inventory Account

What are some of these problems?


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Production Problems inUn-integrated Systems

Problems due to poor communications between Market

and Production Sales promotions, large orders, stockouts, increased procurement and

production costs

Problems related to inventory management Not real-time, based on finished goods, large order production capacity

conflicts, unable to accurately adjust production schedules, oversupply

materials

Problems related to accounting Difficult to accurately estimate costs11


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Production Planning Process

What are themajor steps in theSAP R/3

ProductionPlanningProcess? (of anytypical high-volumemanufacturer such asFitter Snacker)?

Sales and Operations Planning

Demand Management

MRPDetailed

Scheduling

Sales

Forecasting

PurchasinProduction

Starting

Inventory


Demand Management

MRPDetailed

Scheduling

Sales

Forecasting

Sales

Forecasting

PurchasinProduction

Starting

Inventory

Starting

Inventory


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Major Steps in the SAP R/3Production Planning Process are

1. Sales Forecasting

2. Sales and Operations Planning3. Demand Management

4. MRP

13


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14

An Integrated Process


Demand Management

MRPDetailed

Scheduling

Sales

Forecasting

PurchasingProduction

Starting

Inventory


Demand Management

MRPDetailed

Scheduling

Sales

Forecasting

Sales

Forecasting


Starting

Inventory

Starting

Inventory

Predicts

future demand

for products

Break production

plan down into

smaller timeincrements

Create production

schedule based on

production plan from

demand management

Uses the schedule to

determine products

and staffing

Determincompany

Requires

invento

and sales

based on c

Det

amo

timin

materia

Takes quan

timing infofrom M

creates or

s

Sales

Starting
http://www.youtube.com/watch?v=mnBYWYgcANshttp://www.youtube.com/watch?v=mnBYWYgcANs


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Demand Management

MRPDetailedScheduling

SalesForecasting


StartingInventory


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1) Sales Forecasting

In an integrated system, where do I get theinformation to support my sales forecast?

Simple Sales Forecasting example:

Jan. Feb. March April May

Previous Year (cases) 5734 5823 5884 6134 6587

Promotion Sales (cases) 300

Previous Year base (cases) 5734 5823 5884 6134 6287

Growth: 3.0% 172 175 177 184 189

Base Projection (cases)5906 5998 6061 6318 6476

Promotion (cases)

Sales Forecast (cases) 5906 5998 6061 6318 6476

Sales Forecasting


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2) Sales and OperationsPlanning (SOP or S&OP)

What question does S&OP answer?

Sales and Operations Planning Dec. Jan. Feb. March April May

1) Sales Forecast 5906 5998 6061 6318 6476

2) Production Plan 5906 5998 6061 6318 6900

3) Inventory 100 100 100 100 100 524

4) Working Days 22 20 22 21 23 5) Capacity (Shipping Cases) 7333 6667 7333 7000 7667

6) Utilization 81% 90% 83% 90% 90%

7) NRG-A (cases) 70.0% 4134 4199 4243 4423 4830

8) NRG-B (cases) 30.0% 1772 1799 1818 1895 2070

Jan. Feb. March April May

Previous Year (cases) 5734 5823 5884 6134 6587

Promotion Sales (cases) 300

Previous Year base (cases) 5734 5823 5884 6134 6287

Growth: 3.0% 172 175 177 184 189

Base Projection (cases) 5906 5998 6061 6318 6476

Promotion (cases)

Sales Forecast (cases) 5906 5998 6061 6318 6476

Sales Forecasting


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Demand Strategies

If demand is greater than capacityOption ResultChoose not to meetthedemand

Lost sales

Reduce promotionalexpenditures Potential lost sales

Use overtime to increasecapacity

Increased costs

Build up inventoryinearlier periods Increased costsand lost inventory

0

5

1 0

1 5

2 0

2 5

3 0

3 5

Tim e


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Forecasting in an IntegratedSystem

Accurate historical salesvalues available forforecasting

Fix historical sales: If production was unable to

meet demand, sales doesNOT represent actualdemand

Unusual conditions likeweather

The effect of salespromotions

Sales provided from

Sales and Distribution

(SD) module

Field where plan

correct the sal


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Sales and Operations Planning(SOP) Case Study

Kelloggs achieved significant savings from coordinated Sand Operations Planning (SOP)

Changed focus based on how they were evaluated; in the Marketing and Sales: Evaluated on tons of cereal sold

What is wrong with that measure?

Manufacturing: Evaluated on tons of cerealproduced

No one evaluated onprofit!

Kelloggs new sales order process focused on profit

Kelloggs has reducedcapacity, inventory and capital neewhile increasingsales

Sales

Starting


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Demand Management


SalesForecasting


StartingInventory


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3) Demand Management

What does Demand Management do?

Week 1

Demand Management 1/2 - 1/5

Monthly Demand NRG-A 4134NRG-B 1772

Working Days in Week 4Working Days in Month 22

MPS NRG-A 752Weekly Demand NRG-B 322

75222

4

4134 =

32222

41772 =

4/22represe

how ma

work we

are in e

mont

Sales

Starting


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Demand Management


SalesForecasting


StartingInventory


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4) MRPs Bill of Material(BOM)

What is a BOM? Ingredient NRG-A NROats (lb) 300 2

Wheat germ (lb) 50

Cinnamon (lb) 5

Nutmeg (lb) 2

Cloves (lb) 1

Honey (gal) 10

Canola Oil (gal) 7

Vit./Min. Powder (lb) 5

Carob Chips (lb) 50

Raisins (lb) 50

Protein Powder (lb) Hazelnuts (lb)

Dates (lb)

Quantity


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Lead Times and Lot Sizing

When it comes to purchasing rawmaterials, what areLead Times?

Lot Sizes?

and why do I care?


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5) Purchasing and ERP

Benefits if my production planning system isintegrated with my procurement system

Options to evaluate vendoConvert MRP data to

a purchase order

P d ti d A ti


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Production and Accountingin an Integrated System

What benefits doI get when myproductionsystems are

integrated withmy accountingsystems? Material

received (fo

MRP) and th

purchase

order

I li ti f


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Implications forSupply Chain Management (SCM How quickly does information flow from the

retailerall the way back to the raw materialssuppliers when demand changes in:

Un-integrated system? Integrated system?

Supplier

Raw

Materials

Manufacturer Wholesaler Retailer

Customer

Goods Goods Goods Goods Goods

$$ $ $ $

Information Information Information Information Information

Supplier

Raw

Materials

Manufacturer Wholesaler Retailer

Customer

Goods Goods Goods Goods Goods

$$ $ $ $

Information Information Information Information Information


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Supply Chain Integration

What kind of benefits do I get when I integratemy supply chain with my partners?

I t C t l C


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Inventory Control CaseStudy Hoyt Archery

Pre ERP, complete inventorycount two times each year

Closed plant for 3 days at cost of $5000 /day Post ERP, accurate, real-time inventory

information and ongoing cycle- countingprocess: items are counted each day

SCM ith C t C ll b ti


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SCM with Customer CollaborationCase Study Wal-Mart

POS (Point of Sale) data from bar code scanners is recorin a data warehouse at Wal-Mart headquarters

Wal-Mart uses data miningtechniques topredictwhatcustomers will buy at different times of the year

Data is sharedwith Wal-Mart suppliers to plan production Wal-Mart also allows its 5,000 suppliers to directly access

data warehouse through its Retail Link program Wal-Mart is leading the effort to leverage RFID technology


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SCM Critical Success Factors1) Business-driven strategy

Focus on customer2) Management Commitment

Driven top down from the business supported by MIS

3) Supplier/Partner Expectation Management Change Management4) Internal Expectation Management

training and information

5) Learning Period Acceptance takes time


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SummaryAn ERP system strategy can improve the efficien

production and purchasing processes Begins with Marketing sharing sales forecasts Production plan is created based on forecast and

shared with Purchasing so raw materials can be

properly ordered. Production planning couldbe done without an

integrated system, but ERP containing MRP enabProduction to be linked to Purchasing and Accoun

Data sharing increases efficiencyand accuracy

Week 9 Supply Chain.pptx 8 Post

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