L19 Planning And Execution

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Manufacturing Strategy, Planning and Execution

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Major Issues

• Types of manufacturing environments

• Overview of corporate and business strategies

• Order winners and qualifiers

• Operations strategy overview

• Market and resource perspectives of operations strategy

• Functional strategies

• Manufacturing planning and execution

• The reconciliation of functional perspectives

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Major Issues

• Production planning

• Demand management

• Resource planning

• Capacity issues in production planning

• Master Production Scheduling and MRP

• Execution of plans

• Best Manufacturing Practices (BMP)

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Characteristics of Manufacturing Environment

• Increased product diversity• Reduced product life cycles• Increased awareness of the environment

– impact of products & manufacturing systems

• Difficulties of estimating the costs and benefits

• Changing social expectations

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Discrete Manufacturing Environments

• Make-to-Stock (MTS)

• Assemble-to-Order (ATO)

• Make-to-Order (MTO)

• Engineer-to-Order (ETO)

Level of complexity

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Discrete Manufacturing: MTO

• An MTO product is finished after receipt of the customer order. Frequently long lead time components are planned prior to the order arriving in order to reduce the delivery time to the customer. Where options or other subassemblies are, the stocked prior to customer orders arriving, the term ‘assemble to order’ is frequently used”

APICS (1987)

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Discrete Manufacturing: ATO

• Typically, delivery time requirements are shorter than total manufacturing lead time

• Production is usually started in anticipation of customer orders

• Basic components and subassemblies are produced using a push system (MRP)

• Final assembly is managed via a pull system (JIT)

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Major Issues





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Corporate Strategy

• How the firm plans to use all its resources and functions to gain competitive advantage

• Corporate objectives typically include:– Growth– Survival– Profit– Return on Investment– Other financial measures– Employee policies– Environmental policies– ...

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General Business Strategy

• Cost leadership

• Differentiation– Create unique products commanding a premium

price based on:• Brand image• Quality• Features/options• Rapid delivery• Superb customer service

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Major Issues





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Competitive Priorities

• Basic strategies:– Cost– Quality– Speed of delivery– Product/volume flexibility– Innovation

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The Order Qualifiers

• These are product or service characteristics that allow your company to be present in the market. They include:– Quality– Price– Reputation– Number of years in business– Reliability– ...

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The Order Winners

• These are product or service characteristics that allow your company to win orders in the market. They include:– Quality– Price– Speed of delivery– Consistency of delivery– Reliability– ...

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Order Winners and Qualifiers

• Over the lifetime of a product operations-related criteria are most important winners and qualifiers

• The relative importance (weights) of various order winners changes as products travel on the product lifecycle curve (over time) and must be continuously monitored and updated for each product and each market segment

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Major Issues





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Operations Strategy: Definition

• Operations strategy involves the decisions which shape the long-term capabilities of the company’s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources

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Corporate

Objectives

Marketing Strategy

Order Winning Criteria

Manufacturing Strategy

Process Choice Infrastructure

• Growth• Survival• Profit• Return on

investment• Other

financial measures

• Product markets and segments

• Range • Mix • Volumes • Standardization

vs. customization • Level of innovation • Leader vs.

follower alternatives

• Price • Conformance

quality • Delivery speed • Delivery reliability • Volume flexibility • Color range • Product range • Design • Brand image • Technical support • After sales support

• Choice of alternative processes

• Tradeoffs embodied in process choice

• Role of inventory in process configuration

• Make of buy decisions and supply chain management

• Capacity size • Capacity timing • Capacity location

• Functional support for operations

• Manufacturing planning and control systems

• Quality assurance and control

• Manufacturing systems engineering

• Clerical procedures • Compensation

agreements • Work structuring • Organizational

structure

Developing an Operations Strategy

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Components of the Operations Strategy

Operations Mission and Strategy

ProductDesignProcurement

Quality Management

Schedule

Location

Layout

Process Design

Reliability &Maintenance Inventory

HumanResources &Job Design

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Operations has to cope with the clash between the nature of external markets and the nature of internal resources

Operations Resources are….

Difficult to change

Technically constrained

Complex

Market Requirements are….

Dynamic

Heterogeneous

Ambiguous

The Dichotomy of Business Views

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“Hard” issues

“Soft” issues

Process Technology

Development and Organization

Supply NetworkCapacity

Operations Decisions are Structural & Infrastructural

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Understanding Markets• Understanding markets and agreeing on how to

approach them is critical to strategy implementation success– In-depth debate about the markets, their needs and

manufacturing/operations capabilities must involve all functions (cross-functional team approach)

– Each organizational function must develop strategies to support current and future market needs

– Each function’s strategic contributions are expressed in terms of priorities, developments and investments or resources

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Major Issues





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Operations Resources

Market Requirements

OPERATIONS STRATEGY

Strategic Reconciliation

Operations strategy reconciles the requirements of the market with the capabilities of operations resources

Market Needs vs. Operations Capabilities

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Understanding markets

Understanding resources and

processes

Performance Objectives

Market Positioning

Customer Needs

Competitors’ Actions

Required performance

Operations Strategy

Decision Areas

Tangible and Intangible Resources

Operations Capabilities

Operations Processes

Strategic decisions

Two Operations Strategy Perspectives

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PERFORMANCE OBJECTIVES

•Dependability•Speed of delivery•Conformance quality•Speed to market

MARKET POSITION

•Innovative products•Time to market•Product range •Coordinated launches

Differentiation based on:

CUSTOMERS Segmentation based on:

COMPETITORS

Traditionally weak in:

•Promotion•Design innovation•Conformance quality

Example: The Market Analysis for a Hydraulic

Pumps Manufacturer •Purchase volume•End-item application•OEM or replacement •Geographic location

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Resources Tangible

•Equipment•Staff

Intangible•Reputation•Relationships

(internal and external)•Experience

•Application of leading-edge high-pressure

technology and electronic controls

• Articulation of client requirements

Capabilities

• Integration of equipment supply and client

requirements

• Design process

• Supplier liaison process

Processes

•Location•Computer simulation capability•Internet specking by customers•Supplier development•Order tracking system•Organizational structure/culture•Staff meetings

Operations Strategy Decisions

Example: Operations Strategy Decisions for a

Hydraulic Pumps Manufacturer

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Understanding Resources and

Processes

Strategic Reconciliation Market Requirements

Understanding Markets

CapacitySupply networksProcess technologyDevelopment and organization

QualitySpeedDependabilityFlexibilityCost

Operations Processes


Operations Competences

Market Positioning

Market Segmentation

Competitor Activity

Strategic Decisions

Operations Strategy

Decisions

Required Performance

Performance Objectives

Operations strategy is the strategic reconciliation of market requirements with operations resources

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Major Issues





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Functional Strategies

• Functional strategies are typically developed independently of one another and may be inconsistent with corporate strategic objectives

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Functional Perspectives

• Inputs from all functions that are engaged in the provision of product or interface with the marketplace hold insights into customer requirements

• One function cannot dominate the process since this leads to overemphasizing the need to respond to customer’s actual or perceived needs and demands

• Checking the impact on a business must be part of a firm’s overall assessment of a market, segment or customer

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Firm/business unit strategy

R&D Marketing Engineering Manufacturing

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• Functional strategies should be developed in an integrated process and be consistent with corporate strategic objectives

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Firm/business unit strategy

R&D Marketing Engineering Operations

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Major Issues





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Manufacturing Planning and Execution

Resource Planning Production Planning Demand Management

Master ProductionScheduling

Detailed MaterialPlanning

Detailed CapacityPlanning

Material and Capacity Plans

PurchasingOrder Release

Front End

Engine

Back End

Planning

Execution

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• Overall manufacturing planning

• Detailed material planning

• Executing the plans

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• Planning involves converting firm orders and demand forecasts into material requirements using:– Production plans (months) – MPS (weeks)– MRP (weeks)

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• Execution involves, for each work center:– Issuing daily assembly schedules– Using component inventories to convert them

into finished products for order fulfillment– Issuing daily shipping schedules

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• It is expected to have a discrepancy between the resources planned vs. the resources available during execution

• Deficiencies in planning must be overcome by actions in execution

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• Approaches to addressing discrepancies between planned and available resources during execution: – Discipline in execution – sticking to the MPS– Total cycle time reduction – Simplifying product lines

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Major Issues





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Firm orders from knowncustomers

Forecast of demand

from random customers

Aggregate Product Plan

Master Production Schedule

(MPS)

Material Requirements

Planning (MRP)

Engineering design changes

Bill of Materials (BOM) file

Inventory transactions

Inventory records

file

Reports

The Reconciliation of Functional Perspectives

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The Linkages of Functional Planning

• Various functions including marketing, finance and production, interact in formulating a “game plan”

• A game plan reconciles market and resource perspectives in formulating a production plan

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Marketing Planning “The Game Plan” Financial Planning

Markets

The Linkages of Functional Planning

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Major Issues





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Production Planning

• Production planning is the forum for reconciling various functional perspectives from the point of view of operations

• Production planning facilitates a dialogue between manufacturing and top management

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Production Planning

• Production planning uses a common business terminology in communicating with manufacturing and non-manufacturing executives

• It is stated in commonly understood measures, such as aggregate units

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Top Management Role in Formulating a Game Plan

• Commitment to the game planning process

• Align functional strategies with the corporate strategy – Resolve conflicts between functional goals – Resolve tradeoffs between functions prior to

approving plans

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The Role of Functions in Executing a Game Plan

• All functional areas must “hit” the agreed upon plan – Communication … especially in instances

when there are problems in hitting the plan

• The most critical issue is integration of planning and control between marketing and production

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Markets

Overall Manufacturing Planning

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Overall Manufacturing Planning

• Activities for overall direction setting for manufacturing– Demand Management– Resource Planning– Master Production Scheduling

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Major Issues





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Demand Management

• Forecasting

• Order entry

• Order promising

• Distribution planning

• Other activities

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• Is a link to the market place

• It should enable coordination between manufacturing, markets, other plans and warehouses

• Demand management provides inputs to:– MPS (for end items)– MRP (for spare parts)

Demand Management

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• Account for all sources of demand – Finished products – Spare parts – Intra-company requirements – Samples – Pipeline inventory

Demand Management

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Major Issues





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Resource Planning

• Long range capacity planning to produce products – Involves converting aggregate production

plans into resources such as labor hours and machine hours

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Resource Planning

• Long range capacity planning to produce products – Involves converting aggregate production

plans into resources such as labor hours and machine hours

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Major Issues





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Resource PlanningResource Planning Production Planning Demand Management


Material RequirementPlanning

Capacity RequirementPlanning

Vendor Systems

Rough-cut CapacityPlanning

Shop-Floor SystemsInput/Output

Analysis

Finite Loading

Capacity Issues in Production Planning

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Rough-Cut Capacity Planning (RCCP)

• Rough estimate of capacities required to satisfy the master production schedule – RCCP does not take into account WIP

inventory,scheduled receipts, planned orders, etc.

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Example: Rough-Cut Capacity Planning

• Suppose that 35,000 hrs of final assembly time are available per week. The MPS for a product is 2,000 units/week. One unit requires 20 hrs of assembly time. The capacity required is (2000)(20) = 40,000 hrs.

• Therefore, an additional 5,000 hrs of final assembly capacity will be needed in that period

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Capacity Requirements Planning (CRP)

• Detailed capacity plans

• Capacity need for machine centers and labor– CRP takes into account WIP

inventory,scheduled receipts, planned orders, etc.

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Example: Capacity Requirements Planning

• Suppose that 35,000 hrs of final assembly time are available per week. Also, an equivalent of 7,500 hrs is available in the form of WIP inventory

• Therefore, in reality, we have 2,500 hrs of excess capacity

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Finite loading

• Allocation of capacity to work orders subject to available capacity constraint

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Input/Output Analysis

• Monitoring consumption of capacity during execution phase

• Compare actual inputs with planned inputs and

• Actual outputs with planned outputs

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Major Issues




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Master Production Scheduling (MPS)

• Master Production Schedule (MPS) is an anticipated build schedule for finished (end) products given production capacity constraints and capacity utilization desires– MPS is NOT a forecast – MPS is a primary input to generate material

requirement plans (MRP)

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• In an ATO environment, Final Assembly Schedule (FAS) is the actual build schedule, i.e. it is the build schedule with the exact end-item options

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• MPS is the basis for key inter-functional trade-offs – For example, order processing activity

coordinates marketing and production perspectives

• MPS is the basis for developing manufacturing budgets in line with financial budgets

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• In determining MPS trade-offs need to be made between market and resource perspectives– Accommodating too many changes in MPS

results in productivity loss and inefficiency– Allowing too few changes in MPS may result

in poor customer service and increase inventory

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• Hence, marketing and production should work together to respond to product mix changes

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• Hitting the production plan defined:

(FAS) = (MPS) = Production Plan

– Ideally, the planned and actual resource usage to meet the market requirements should be the same

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Material RequirementPlanning

Detailed CapacityPlanning

Material and Capacity Plans

PurchasingOrder Release


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Material Requirements Planning (MRP)

• Detailed material plans for dependent demand items

• Period-by-period plans for parts and raw material

• MRP is a priority-setting scheme

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A

Independent Demand Items

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent DemandItems

Independent vs. Dependent Demand

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Material Requirements Planning (MRP)

• Basic Inputs to MRP– MPS– Bill of Material (BOM)

• A list and amount of components and/or material required to produce a product

– Inventory Status File

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Major Issues




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Execution of Plans

• Execution of plans uses the purchased or internally manufactured materials for order fulfillment – Shop-floor scheduling and control ---

releasing production orders and control– Vendor scheduling and control --- releasing

purchasing orders and follow-up

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Execution of Plans

• Measurement of actual execution results relative to the plans

• Order status information and warning signals to MRP

• Peaks and valleys in capacity requirements make execution more complicated and difficult

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Major Issues




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Best Manufacturing Practices (BMP) Areas

1. Lead Time Reduction

2. Streamlined Flow

3. Quick Changeover

4. Cellular Manufacturing (Focused Factories)

5. Empowered Teams

6. Cross-Functional Teamwork

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7. Employee Involvement & Commitment

8. Process Reliability

9. Continuous Improvement

10. In-Process Quality

11.Seamless Shift Operations

12.Standard Operating Procedures

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13.Goal Deployment

14.Visual Management Systems

15. Incentives, Rewards & Recognition

16.Plant Safety, Loss Prevention & Housekeeping

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17.High-Performance Leadership

18.Supplier Partnerships

19.Cross-training

20.World-Class Performance Measures

Source: http://www.granite-bay.com/best-manufacturing-practices.html

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Best Manufacturing Practices: Local Examples

• Kohler Generators http://www.kohlerco.com/hub/powersystem.html

– Migrating products from MTO to ATO environments

• Use of pull system for final assembly• Use of push system for material planning • Use of manufacturing cells for subassemblies • Exploring commonality of parts

http://www.kohlerco.com/hub/powersystem.html

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– Innovations in visual inventory management – Innovations in managing suppliers

• Expanding the scope of vendor-managed inventory • Enforcing discipline in deliveries • Globalization of supply chain


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– Process improvements • New painting technology • Optimization software for laser cutting of sheet

metal
