Managing production across supply chain

1. MANAGING PRODUCTIONS
ACROSS SUPPLY CHAIN
SUSHANT SINHA
SUSHOVAN BEJ

2. PLANNING AND CONTROL
Sales and Operation Planning
Master Scheduling
Vendor order ManagementProduction Activity Control
Material Requirement Planning

3. MASTER SCHEDULING
It is a detailed planning process that tracks production output and
matches this output to actual custom orders. For e.g.
Month Demand Production Inventory
January 1500 1500 700
February 2500 2500 700
March 4000 5000 1700
April 5000 6000 2700
Partial sales and operation plan Master Schedule March
Week 1 Week 2 Week 3 Week 4
Demand 200 250 300 350
Push Mowers Production 650 0 650 0
Inventory 200 650 400 750 400
Demand 400 500 600 700
Power Mowers Production 0 1350 0 1350
Inventory 400 0 850 250 900
Demand 100 150 200 250
Lawn tractors Production 250 250 250 250
Inventory 100 250 350 400 400
700
5000
4000
1700
Beginning Invetory
Total Monthly Production
Total Monthly Demand
Ending Inventory

4. MASTER SCHEDULE RECORD
Most master schedule or Master Production Schedule record track
several key pieces of information as following :
• Forecasted Demand
• Booked Orders
• Projected Inventory Levels
• Production Quantities
• Units still available to meet customer need (available to promise)

5. Forecasted Demand Vs. Booked
Orders
• In week 45, for instance, the estimated demand for snow blowers
is 150, yet the company already has the confirmed order for 170
• While in the month of December booked orders appear to be
lagging forecasted demand.
Now as there is considerable difference b/w demand and booked
orders. In that case this MSR will help manager to take decision,
whether to cut down the production or lower the price.
Month
Weeks 45 46 47 48 49 50 51 52
Forecasted demand 150 150 150 150 175 175 175 175
Booked Orders 170 165 140 120 85 42 20 0
Master Production schedule 300 0 300 0 350 0 350 0
November Decemeber
MeltoMatic Snow Blower

6. Projected Ending Inventory
It is a conservative estimate of the inventory position at the end of each week, which
is calculated using formula
• EI(t) = EI(t-1) + MPS(t)- maximum{F(t), OB(t)}
• Where EI(t)=ending inventory in time period (t), EI(t-1)= ending inventory in time
period (t-1)
• MPS(t)=master prod. Schedule quantity available in time period (t),
• F(t)=Forecasted demand for the time period (t) and OB(t)=order booked for the
time period (t)
On-hand inventory at end of week 44 100
Month
Weeks 45 46 47 48 49 50 51 52
Forecasted demand 150 150 150 150 175 175 175 175
Booked Orders 170 165 140 120 85 42 20 0
Projected Ending Inventory 230 65 215 65 240 65 240 65
Master Production schedule 300 0 300 0 350 0 350 0
MeltoMatic Snow Blower
November Decemeber

7. Available to Promise
It indicates the number of units that are available for sale each week, given those that
have already been promised to customer
• ATP(t) = EI(t) + MPS(t) - ∑OB(t)
• ATP(t)= Available to promise in week ‘t’
• ∑OB(t)= sum of all orders booked from week ‘t’ until week ‘z’
On-hand inventory at end of week 44 100
Month
Weeks 45 46 47 48 49 50 51 52
Forecasted demand 150 150 150 150 175 175 175 175
Booked Orders 170 165 140 120 85 42 20 0
Projected Ending Inventory 230 65 215 65 240 65 240 65
Master Production schedule 300 0 300 0 350 0 350 0
Available to Promise 65 40 223 330
MeltoMatic Snow Blower
November Decemeber

8. Material Requirement Planning
Simply, calculates the timing and quantities of material orders
needed to support master schedule.
i.e translates the master production schedule into planned orders for
actual parts and components needed to make the ordered product.
• different from single inventory approach (independent inventory)
eg. Amazon
• dependant inventory approach
products and parts dependant on each other for complete
product.
eg. IKEA

9. MRP is different in managing inventory than EOQ ( Economic Order
Quantity ) i.e economic system in which the inventory is managed
using less space. MRP is based on :
• Bill of Material
• Backward Scheduling
• Explosion of Bill of Material
BILL OF MATERIAL
It is a listing of all the subassemblies, intermediate parts, and raw
materials that go into a parent assembly, showing the quantity of
each required to make an assembly.
• Involves PLANNING LEAD TIME i.e time from when a component
or material is ordered until it arrives and is ready to use

10. Bill of Materials
Chair
Seat
Back
Assembly
Leg
Assembly
Legs (2) Crossbar
Side rails
(2)
Crossbar
Back Slats
(3)
1 week
1 week
2 week
1 week
2 week 2 week 2 week 2 week 2 week
}Level 0
}Level 1

11. BACKWARD SCHEDULING
Calculating the deadline by working backward in time so that the
component or material is ready to use in time.
EXPLODING OF BILL OF MATERIAL
The process by which one works backward from master schedule to
determine the quantity and time for receiving all the various
components and sub- assemblies.

12. MRP RECORD
A record needs to be maintained for the various components and
sub-assemblies.
GROSS REQUIREMENT (GR)
The number of products needed for the order.
Eg. 500 wooden chairs is the gross requirement
This depends on:
• Inventory carried over / closing stock (EI)
• Scheduled receipts / units already on order (SR)
• Planned receipts / new orders
This helps to determine any new orders need to be placed
i.e NET REQUIREMENTS (NR)
NR(t) = GR(t) - EI(t) – SR(t)

13. ADVANTAGES OF MRP
• Directly tied to the master production and indicates exact timing
and quantity of orders of all components.
• Allows managers to trace every order for lower level items through
all the levels of the BOM.
• Tells precisely to the firm and the supplier what needs to be made
when.

14. CONSIDERATIONS FOR MRP
• Requires organizational discipline.
• Must have accurate information ( Master schedule, BOM etc. ).
• Must also incorporate uncertainty so as to offer reliable service.
Because a change in a single step can cause drastic effects on the
complete procedure ( MRP nervousness ).

15. Production Activity Control & Vendor
Order Mgmt. System
• In this emphasis shifts from planning to execution
• Other capabilities of the system
• Route & prioritize jobs going through the supply chain
• Coordinate the flow of goods and materials b/w a facility and other
supply chain partners
• Provide supply chain partners with performance data on operation
and supply chain activities

16. Job Sequencing
• Job sequencing rules have been used for decades to determine the
order in which job should be processed when resources are limited
and multiple jobs are waiting to done.
• Critical Ratio =(Total task time remaining)/(days until due)
Carlos Restoration Services
Total Task Days Crticial
JOB Step 1 Step 2 Step 3 Time Until Due Ratio
Uptown Gallery 3 2 3.5 8.5 21 0.405
High Museum 5 2 1 8 20 0.400
Chester College 3 2 5 10 10 1.000
Smith 6 4 1 11 15 0.733
Estimated Days

17. Which is BEST?
First come-first served Days
JOB Start End Start End Start End Late
Uptown Gallery 0 3 3 5 5 8.5 0
High Museum 3 8 8 10 10 11 0
Chester College 8 11 11 13 13 18 8
Smith 11 17 17 21 21 22 7
Average Lateness 3.75
Earliest Due Date Days
JOB Start End Start End Start End Late
Chester College 0 3 3 5 5 10 0
Smith 3 9 9 13 13 14 0
High Museum 9 14 14 16 16 17 0
Uptown Gallery 14 17 17 19 19 22.5 1.5
Average Lateness 0.375
Earliest Due Date Days
JOB Start End Start End Start End Late
Chester College 0 3 3 5 5 10 0
Smith 3 9 9 13 13 14 0
Uptown Gallery 9 12 12 15 15 18.5 0
High Museum 12 17 17 19 19 20 0
Average Lateness 0.000
Step 1 Step 2 Step 3
Step 1 Step 2 Step 3
Step 1 Step 2 Step 3

18. Monitoring & Tracking Technology
• Recently, Radio Frequency Identification (RFID), bar coding and
online order tracking system have been developed to trace the
movement and location of materials in the supply chain and report
on the progress of specific jobs.
• Beside helping the company to control its operation and supply
chain activities, these system also alert managers to potential
problems.
• For e.g. It could help in provide users with real-time information about
the status of manufacturing jobs and required materials. If a shortage
of materials threatens to delay job, the system flags the problem and
indicates which jobs will be affected.

19. SYNCHRONISING PLANNING AND CONTROL
ACROSS SUPPLY CHAIN
This is done using:
• Distribution Requirement Planning (DRP)
• KANBAN
 DRP helps to synchronize supply chain partners at the MASTER
SCHEDULE level.
 Kanban helps to synchronize supply chain partners at the
PRODUCTION ACTIVITY CONTROL and VENDOR ORDER
MANAGEMENT level.

20. SYNCHRONIZINGPLANNINGANDCONTROL
PLANNING AND CONTROL
PRODUCTION ACTIVITY CONTROL (PAC) VENDOR ORDER MANAGEMENT SYSTEM
MATERIAL REQUIREMENT PLANNING
MASTER SCHEDULING
SALES AND OPERATION PLANNING ( S&OP)

21. DISTRIBUTION REQUIREMENT PLANNING
• Time based planning approach similar to MRP
• Observe planned orders at the point of demand ( warehouse ) to
determine forecaster demand at source level ( plant )
• Uses MRP style logic to feed accurate demand information into
the master schedule

22. DISTRIBUTION REQUIREMENT PLANNING

23. KANBAN SYSTEM
Uses cards, containers or visual cues to control the production and
movement in the supply chain
• Production Activity Control
• Vendor Order Management Systems
PRODUCTION ACTIVITY CONTROL
Assures that the in-house manufacturing takes place according to
plan
VENDOR ORDER MANAGEMENT
Assures that the materials ordered from the supply chain partners
are received when needed

24. KANBAN SYSTEM
Simply a pull system
i.e Actual downstream demand sets off a chain of events that pull
materials through the various process steps.
i.e When a finished product goes out, it pulls the materials from the
previous steps.