Operations Planning and Control Systems 35E00100 Service Operations and Strategy #0 Fall 2015

Operations Planning and Control Systems

35E00100 Service Operations and Strategy

#0 Fall 2015

35E00100 Service Operations and Strategy #0 Aalto/BIZ Logistics2

Contents Planning and control systems Aggregate planning

Production planning issues Workforce planning considerations

Planning and scheduling at Air New Zealand Sales Planning at Vaisala MPC systems

Push – MRP Pull – JIT MPC integration

Development possibilities in manufacturing Key points

Useful material: Hopp, W. & Spearman, M. (2000), Factory Physics, Chapters 3, 4, 5 and 16 Vollmann, T., W. Berry & C. Whybark (1997) Chr 9 in Manufacturing Planning and Control Systems


DetailedPlanning

Execution

AggregatePlanning

Resource planning

Aggregate production planning

Demand management

Master production scheduling

Shop floorcontrol

Vendor systems

Production scheduling

Material requirementsplanning

Capacity planning

Basic Manufacturing Planning and Control (MPC) System

Vollmann et al. 1997


Demand Management


Pyramid Forecasting Technique

Newberry and Bhame 1981Vollmann et al. 1997, 320-325

x1 x2 z1 ... z9

Level 3 - Individual items

Level 2 - Product groups

x z

Level 1 - All business

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oll u

p””Force dow

n”

Gaming???


Resource Planning


Aggregate Production Planning


Week 1 2 3 4Beg. inventory (estimated) 3 23 3 23Production 40 0 40 40Sales forecast 20 20 20 20

confirmed deliveries/sales 19 11 7 2End inventory (estimated) 23 3 23 43

"Available to promise" 13 33 38

Available to promise (ATP)

Master Production Scheduling Order Promising


Qua

ntity

Time

Demand

Production

Chase Strategy(flexible production)

Time

Demand

Production

-I

+I

Qua

ntity

Master Production SchedulingBasic Production Strategies

Level Strategy(fixed production)


Detailed Material Planning

Inventory StatusBill of Material

Production Plan

Quantities and Timing


Period 0 1 2 3 4 5 6

On-hand inventory

Gross requirementsScheduled receipts

Planned order releases

Net requirementsTime-phased net requirements

Detailed Material Planning Basic MRP Record

Gross requirements Total expected demand in a time period

Schedule receipts Open orders scheduled to arrive

On-hand inventory Expected amount on hand at beginning of period

Net requirements Actual amount needed in each time period

Time-phased net requirements Net requirements offset by lead times

Planned-order releases Planned amount to order in each time period


Capacity Planning


Production Scheduling


160 days0 days

125 tons

25 tons

160 days0 days

125 tons

25 tons

Shop Floor Control

pk

pWptd

p

m

v

i

i jgigigiji

ij

1ij expmax (t)I


Main Order Penetration Points

Purchasing

Manufacturing

Retailer’s demand chain

Make-to-order (MTO)

Inventorymanagement

Packaging Distribution

Manufacturer’s supply chain

Purchasing

Manufacturing


Assemble or Pack-to-order (ATO) Packaging Distribution

Inventorymanagement


Manufacturing


Make-to-stock (MTS)


Purchasing Inventory

managementManufacturer’s supply chain

Hoover et al. 2000


Master Production Scheduling Time Fences

Time

Planning fence

Demand fence


Make-to-stock

Assemble-to-order

Customer orders

Forecast orders

Make-to-order

Capacity

FuturePresent


Replacing Forecast with Knowledge

Time


Capacity

FuturePresent

Orders

Forecast

Indicated Orders / Volume

(Knowledge)


From Material Management to…

Time

Lev

el o

f in

teg

rati

on

M

RP MRPII

ERP

APS


Aggregate Planning

Role in manufacturing planning and control Strategic preparation for tactical actions Long-term planning function that determines

The number of workers that should be employed each period The number of aggregate units that should be produced each period

Objective is normally to minimize total costs Production, payroll, and holding costs as well as costs due to changes in the size of the workforce

Main issues Planning horizon Treatment of demand Bottleneck problem - ability to respond to sudden changes Smoothing is not only about costs

Reputation, impact on usable labor force, and laws must be considered


Costs Considered Regular time costs

If no overtime or worker idle time do not have to be included in the evaluation of different strategies

Overtime and subcontracting costs Often costs assumed linear

Idle time costs Smoothing costs

Cost of changing the size of workforce Some costs difficult to measure e.g. decline in worker

morale

Shortage costs Backlogging normally assumed Linear function common

Holding costs Almost always assumed to be linear

Cost of changing the size of workforce

Holding and backorder costs

Ft = number of fires Ht = Number of hires

Cost

Slope = CF

Slope = CH

Back-orders Positive inventory

Slope = CP Slope = Ci

Inventory

Cost


A Classification of Selected Aggregate Production Planning Methods and Models

Silver et al. 1998, 556

Classification Type of Model / Method Type of Cost StructureFeasible solution Barter General / Not explicit

methods Graphical / Tabular (spreadsheet) Linear / Discrete

Mathematically Linear programming models Linear / Continuous

optimal methods Transportation models Linear / Continuous

Linear decision rules Linear / Quadratic / Continuous

Heuristic decision Simulation search procedures General / Explicit

procedures Management coefficients Not explicit

Projected capacity utilization ratios Not explicit


An Illustration of the Graphical Method

Nahmias 2001, 122


Workforce Planning Strategies

A firm can obtain accurate forecasts for 12 months based on firm orders. During 46-day period, when there were 120 workers, the firm produced 1 700 000 units.

Assume that there are 100 workers employed at the beginning of month 1 and zero starting inventory.

Example 1

Month Net forecast Workdays1 850 262 1260 243 510 204 980 185 770 226 850 237 1050 148 1550 219 1350 23

10 1000 2411 970 2112 680 13

Find the minimum constant workforce needed to meet monthly demand. Assume that holding cost is $0.10 per product per month, cost of hiring is $100 and cost of firing is $200. What is the total cost of the constant workforce plan?Construct a plan that changes the level of the workforce to meet monthly demand as closely as possible. What is the total cost of this plan?


Level Strategy - Constant Workforce PlanExample 1


Example 1

Chase Strategy – Zero Inventory Plan


Example 1

Comparison of the Production StrategiesMonthly Production vs. Monthly Demand

0

200

400

600

800

1000

1200

1400

1600

1800

1 2 3 4 5 6 7 8 9 10 11 12

Net Demand

Production - Level Strategy

0

200

400

600

800

1000

1200

1400

1600

1800

1 2 3 4 5 6 7 8 9 10 11 12

Net Demand

Production - Chase Strategy


Comparison of the StrategiesCumulative Production vs. Net Cumulative Demand

Example 1

0

2000

4000

6000

8000

10000

12000

14000

1 2 3 4 5 6 7 8 9 10 11 12Net Cum Demand

Production- Level Strategy

Production - Chase strategy


Linear Decision Rule (LDR)Approach by Holt, Modigliani, Muth & Simon (1960)

Computes workforce levels & production rates Inputs: forecasts of aggregate sales for each period of the planning

horizon, ending size of workforce, ending inventory in last period

Quadratic cost functions Regular payroll Hiring and layoff Overtime Inventory holding, backordering and set-ups

An evaluation of the approach Allows more realistic cost structure (+) Optimization (based on assumptions!) and fairly insensitive to large

errors in estimated costs (+) Dynamic and simple to apply (+) Cost functions simplify (-) No constraints on resources (-)

Can generate decisions that are infeasible

Ht = Number hiredFt = Number fired

Cost

Back-orders

Cost

Positive inventory

Cost of changing the size of workforce

Holding and backorder costs


Management Coefficient Approach (MCA) Bowman (1963)

Basic idea When managers decide production rates, inventories and workforce, they

consider costs but tend to overreact to (unexpected) changes Bowman concluded that decision rules based on past behavior should

produce better results than other methods

Heuristic method Coefficients of the rule are fit as closely as possible to prior decisions

Obtained through techniques such as regression analyses

Enables to encounter problems of traditional methods where The accuracy of assumptions is difficult to determine Values of input variables are difficult to measure

Cost savings compared to other methods reported Key advantage: prohibits too radical decisions


Comparison of LDR and MCA

The principles are similar Both obtain new production and workforce levels by considering linear combinations

of demand forecasts and current inventory and workforce levels

Determination of coefficients LDR: Optimal solution procedure derived from first principles; coefficients measured

from a direct observation of the system MCA: Coefficients determined by a retrospective examination of past management

behavior

Compared to linear programs Easier to compute Reflect the actual past behavior of management Assume quadratic costs, which could be inaccurate Do not provide optimal solutions to the problem


The Role of LP Models?

Silver et al. 1998, 556

Classification Type of Model / Method Type of Cost StructureFeasible solution Barter General / Not explicit

methods Graphical / Tabular (spreadsheet) Linear / Discrete

Mathematically Linear programming models Linear / Continuous

optimal methods Transportation models Linear / Continuous

Linear decision rules Linear / Quadratic / Continuous

Heuristic decision Simulation search procedures General / Explicit

procedures Management coefficients Not explicit

Projected capacity utilization ratios Not explicit


Practical Considerations

Dis-aggregation of aggregate plans Difficult problem that must be solved so that aggregate plans have value to the firm Aggregate plan and MPS for items should be consistent

Definition of an aggregate unit Organizational structure of the firm

Global production planning New smoothing factors arise, e.g. exchange rates, labor cost, tax structure, and pricing policy.

Difficulties in practice The definition of an aggregate unit Obtaining of cost and demand estimates for “artificial” units Consideration of political and operational realities / constraints Inventory is not an option for all types of products and processes Sensitivity and importance of the issues addressed

Reluctance of managers to rely on mathematical models


Other Aspects

Implementation responsibility Achieving organizational acceptance can be harder than finding OR solutions

to problems. Be sure to sell the approach to every level of management.

Criticality of decision models Finding good enough model formulation can make some decisions non-

critical. i.e., approximations that are sufficiently close the exact fit can be acceptable.

Role of computers Build computer programs of the decision analyses whenever possible.

The scale of profit payoffs depends on the level E.g. aggregate production versus product level

35E00100 Service Operations and Strategy #0 Aalto/BIZ Logistics

Case: Planning and Scheduling at Air New Zealand

Resources 8000 employees 33 aircraft (Boeing 737, 747, 767)

Daily operations 85 domestic flights 50 international flights to 26 countries

Other Base in New Zealand Award winning airline; customer satisfaction important

35


Planning Stages

Marketing (plan) Market analysis and market sensitivity

Estimated volume of passengers Timing of flights Pricing time

5-yr plan on markets to be served 3-yr plan Annual budget

Annual budget Drafting of timetable

Ops: resource constraints and possibilities Mkt: timetable based on analyses

Draft run through LP optimizer which takes into account availability and resources

Timetable for publication

Weekly schedule Balancing supply and demand of

manpower Evaluation of long-term impact on training

Rostering Assignment of specific people to specific

flights Required data (training, planning,

manpower leave) Safety rules and other restrictions

considered

Daily adjustment to unexpected changes Environmental (no control) ”Internal”

Air New Zealand

36


Planning Operations in the MPC System

Air New Zealand

Resourceplanning

Productionplanning

Demandmanagement

Master productionscheduling

Vendorsystems

Material andcapacity plans

Detailedmaterial planning

Detailed capacityplanning

Shop floorsystems

Front end

Engine

Back end

Resourceplanning

Productionplanning

Demandmanagement


Vendorsystems




Shop floorsystems

Front end

Engine

Back end

Schedule Draft

Timetable

Weekly Schedule

Rostering

Daily Adjustments

37



Balancing Demand and Resources

Air New Zealand

Resourceplanning

Productionplanning

Demandmanagement


Vendorsystems




Shop floorsystems

Front end

Engine

Back end

Schedule Draft

Timetable

Weekly Schedule

Rostering

Daily Adjustments

MarketingDemandDestinationsTimetable

• Regular / Charter• Season / yr around

Frequency

OperationsResourcesFleet

• Aircraft types• # of aircraft

Crew• Captains & co-

pilots• Flight attendants

ConstraintsAirport capacity (slots)(Max flight time)

ConstraintsAircraft capacityFlight range Air space limitationsWorkforce trainingAllowed working time

38



Flights are assigned to specific aircraft

Air New Zealand

Resourceplanning

Productionplanning

Demandmanagement


Vendorsystems




Shop floorsystems

Front end

Engine

Back end

Schedule Draft

Timetable

Weekly Schedule

Rostering

Daily Adjustments

”Constraints”Crew changesMaintenanceCateringFuelingCargo and baggage handlingCleaning

”Constraints”The pool of trained people

39



Specific crews are assigned to flights

Air New Zealand

Resourceplanning

Productionplanning

Demandmanagement


Vendorsystems




Shop floorsystems

Front end

Engine

Back end

Schedule Draft

Timetable

Weekly Schedule

Rostering

Daily Adjustments

ConstraintsTrainingMax working hrsWorkforce availability• Sick leaves• Days off• Holidays

40



Adjustments in response to unexpected changes

Air New Zealand

Resourceplanning

Productionplanning

Demandmanagement


Vendorsystems




Shop floorsystems

Front end

Engine

Back end

Schedule Draft

Timetable

Weekly Schedule

Rostering

Daily Adjustments

ExternalWeatherCatastrophesFuel or other resource availability

InternalAircraft breakdownsWorkforce absence due to illness etc.

41


Key Points on Planning

Planning and control systems Clear general structure of MPC exists. IT enables use of more advanced methods.

Different types of methods are available for aggregate planning: Feasible methods (e.g. graphical method) Mathematically optimal methods (e.g. LDR, linear programs) Heuristic decision models (e.g. MCA)

Aggregate planning matches demand and resources Tailor the model to fit the situation you are dealing with. Simplicity promotes understanding! Aggregate plans are rarely followed precisely robustness of the plans is

important.

©Vaisala | 2004-09-28 | Page 43

Case: Sales Planning at Vaisala Instruments What is the Right Demand/Supply Chain?

Functionalproduct

Innovativeproduct

EfficientSupply Chain

ResponsiveDemandChain

Uncertainty of Demandlow high

High inventory carrying cost

+lost market share

Too high operational costs

Flexibility

low

high

Utilizationrate [%]

high

low

Marginlow high

Optimum onthis diagonal?

Source: Hannu Vierimaa / Processman

©Vaisala | 2004-09-28 | Page 44

Example of Service Classes

Fast Track Standard Project

Order FulfilmentLead time (orderreceived by 14.00)

Delivery lot size

DeliveryPerformanceTarget

Other Information

1 work day 5 work days 20 work days

Min 1 pieceMax 2 pieces

Min 1 piecesMax 25 pieces

Min 10 piecesMax within supply frame

100 % 98 % 100 %

Basic + 50 USD According to Price List

Delivery to site,one or more lots

Price

Target Volume 10 % 80 % 10 %

Price includestransportation

Basic


Price includestransportation

©Vaisala | 2004-09-28 | Page 45

Sample record - Factory personnel utilization rate

Person result %Team Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05DMLA 74 66 66 43 53 47 47 47 43 43 42 41GMLA 102 92 80 75 76 70 74 68 80 78 71 76HMDW 85 77 88 91 92 77 87 78 99 96 89 94HMP1 77 92 69 125 104 105 106 98 132 131 122 126HMP2 86 77 81 87 79 78 73 55 54 50 44 49HMP3 61 60 67 76 79 57 68 59 62 62 57 60HVAC 87 63 81 71 75 71 71 66 103 103 95 102PMLA 66 112 69 83 85 77 76 74 87 87 79 86WMLA 53 106 92 54 59 52 51 51 52 53 48 53OPT 70 59 78 65 71 65 57 62 52 49 47 51

Product Utilization rate %: 78 83 74 77 79 70 72 72 66 71 66 70

Utilization rate of machines?

©Vaisala | 2004-09-28 | Page 46

Demand Chain ManagementKey elements of Integrated Demand Chain

Case company

End User

Material flow

Information flow

Execute to order -process

Plan for capacity -processChannellogistics

management

Manufacturing Distribution Sales CustomerSupplier Customer’scustomer

Supplier’ssupplier

ONE SET OF NUMBERSbased on BEST POSSIBLEMARKET DEMAND DATA

updated on rolling basis

SERVICE CLASSESaligned to

SEGMENTED CUSTOMER REQUIREMENTSforming the basis for customer promises

and fulfilment enablingEFFECTIVE AND EFFICIENT LOGISTICS

EXECUTE TO ORDERwith FAST THROUGHPUT TIME

achieved by INTEGRATED PROCESS

PLAN FOR CAPACITY,EXECUTE TO ORDER

CASE:

Demand Chain

Management


©Vaisala | 2004-09-28 | Page 47

What is the question?

How much money we needed for a product PRODUCED

Precisely wrong answers

How much money we needed for a product SOLD

Approximately right answers

Factory =Machine

Factory =System

StockExtra capacity

Precise world - every product has its own factory personnel

No good tools at the moment- capital tied up- investment increment

Need changes in thinkingBonus system: Process measurements -> Sales Planning Accuracy

Product price: Logistic cost -> Capital tied up


Basic Production Control Systems MRP = Push system

Provides a planning hierarchy Initiates production in anticipation of future demand Lot sizes based on forecasts of future demands and cost considerations Underlying model often inappropriate

JIT / Kanban = Pull system Improves production environment Initiates production as a reaction to present demand Reduce lot sizes to minimum to eliminate waste and unnecessary inventories Reduces congestion Suitable only for repetitive manufacturing

StockPoint

StockPoint. . .

StockPoint

StockPoint. . .

…


DetailedPlanning

Execution

AggregatePlanning

Resource planning


Demand management


Shop floorcontrol

Vendor systems



Capacity planning

MRP & MPC System


Routingfile

Bills ofmaterial

Inventory status data

Time-phased requirements


Uncertainty in MRP Systems

Source

Demand Supply

Type

Quantity

TimingRequirements shift from one period to

another

Orders not received when scheduled

Requirements for more or less than

planned

Orders received for more or less than

planned



Shortcomings of MRP

Assumes that required information known with certainty Uncertainty exists on markets Capacity not unlimited Lead times can vary

May depend on lot sizes No incentive to minimize slack Priorities can exist

Items can be defective

Time horizon issues Data integrity Practice versus theory

Only 10-50 % of MRP systems are implemented successfully High requirements on management, training, environment, and planning


DetailedPlanning

Execution

AggregatePlanning

Resource planning


Demand management


Shop floorcontrol

Vendor systems



Capacity planning

JIT & MPC System



JIT Manufacturing Systems

Core components:Set-up time reduction

Small lot size

Supplier quality levelEquipment layout

etc.

Just-in-Time

Long-range orientationPlant-wide mfg philosophy etc.

Manufacturing strategy Technology management

Quality feedback to shop floorPhysical working conditions etc.

Quality management

Recruiting and selectionSupervisory leadership etc.

Human resource mgmnt

Management leadership in mfgSupport for inter-functional co-op.

Top management support

Sakakibara et al. 1993

Design for manufacturabilityNew process development etc.


Shortcomings of JIT

Sources of inflexibility Stable volume Standard product mix Precise production sequence Rapid (inventory) replenishment

Measures to promote flexibility Capacity buffers Setup reduction Cross training Plant layout

Process design

Product design

Human/ organizational

elements

Manufacturing planning and

controlJIT


Integration of MRP and JIT

There is a need for integration Many firms have already installed a MRP system JIT programs seem to conflict with MRP system

There are physical changes that support integration Reduction of inventory transactions (unnecessary transfers) Cellular manufacturing

Implementation aspects JIT is difficult to implement without a formal MPC system Handoffs (phantom bills) from MRP to JIT at the start of the JIT process

and a transfer back to MRP at the end

Not every company can or prefer to implement JIT…



DetailedPlanning

Execution

AggregatePlanning

Resource planning


Demand management


Shop floorcontrol

Vendor systems



Capacity planning

(Re)Configuration of the MPC System



Marketrequirements

Manufacturingtask

MPCsystem design

ExistingMPC system

DesiredMPC system

Manufacturing process design

Businessspecifications

MPC System Design Choices

Vollmann et al. 1997, 362


Basis for planning and control MTO ATO MTSControl point Order backlog FAS ForecastMPS unit Customer orders Options End itemsProduct level End product End to inter-mediate

productEnd product

MPS featuresCustomer order promising High requirement Low requirementNeed to monitor forecast accuracy

Low requirement High requirement

Use of planning bills Yes Yes NoNeed to cope with design and process uncertainty

High Low

Basis of delivery to customer Make to customer order on time

Make to customer order on time

MTS replenishment order or to customer

call-off schedule

Master Scheduling Approach

Features of MPS Approaches



Basis for planning and control Time-phased Rate-phasedControl point Shop/purchase order ForecastControl unit Batches KanbansProduct level Material explosion of time-

phased net requirements for product components

Material explosion of rate-phased net requirements for

product components

MPS featuresFixed schedules No YesUse of WIP to aid planning High LowUpdating Daily/weekly Weekly/mothlyInventory netting Performed NoneLead time offsetting Performed NoneLot sizing Performed NoneSafety stock/safety lead time Considered Not consideredContainer size Not considered ConsideredBill of material Many levels Single level

Material planning approach

Features of Material Planning Approaches



Features of Shop Floor System Approaches


Basis for planning and control MRP JITControl point Work center capacity utilization Overall product flow timesControl unit Shop orders Kanban cards Product level Individual operations scheduled at each

work centerProduction on an as-required basis to

replenish downstream stock that support end item requirements

Shop floor system featuresControl of material flow Work center dispatching rules Initiated by downstream kanban cardsSequencing procedure Due-date oriented dispatching rules Not an issueOrder tracking Shop floor transactions by operation None (paperless system)

and stocking pointMonitoring and feedback Input/output and shop load reports Focus on overall resultOrder completion Shop order close-out in stockroom NoneAchieving delivery reliability Batch order status reports Through flow of materialLot size Large SmallWork-in-process and safety stock

Large Negligible

Shop floor system approaches


MTO ATO

Time phased

JIT basedMRP based

MTSMPSapproach

Shop-floorsystem approach

Detailed materialplanning approach Rate phased

Moog

Business Characteristics and the Design of MPC systems

Kawasaki Applicon



Linking Market Requirements and Mfg Strategy to the Design of MPS Approach


Market requirements MTO ATO MTSProduct design Custom StandardProduct variety Wide Predetermined & narrowIndividual product volume per period Low HighDelivery speed Through overlapping

schedulesThrough eliminating

process LTDelivery reliability Difficult Straightforward

ManufacturingProcess choice Low-volume batch High-volume batch/lineManaging flunctuations in sales volume

Through order backlog Through WIP or FGI Through FGI

Master scheduling approach


Linking Market Requirements and Mfg Strategy to the Detailed Material Planning


Market requirements Time-phased Rate-phasedProduct design Custom StandardProduct variety Wide NarrowIndividual product volume per period Low HighAbility to cope with changes in product mix High potential LimitedDelivery speed Through scheduling Through inventory

/excess capacityDelivery schedule changes Difficult Straightforward

ManufacturingProcess choice Batch LineSource of cost reduction

Overhead No YesInventory No YesCapacity utilization Yes No

Detailed material planning approach


Linking Market Requirements and Mfg Strategy to the Design of the Shop Floor System Approach


Market requirements MRP based JIT basedProduct design Custom StandardProduct variety Wide NarrowIndividual product volume per period Low HighAccomodating demand changes

Total volume Easy/ incremental Difficult/steppedProduct mix High Low

Delivery speed Achieved by schedule changes Achieved through FGIDelivery schedule changes More difficult Less difficult

ManufacturingProcess choice Low-volume batch High-volume batch/lineChangeover cost High LowOrganizational control Centralized DecentralizedWork-in-process (WIP) High LowSource of cost reduction

Overheads Low HighInventory Low High

Shop-Floor System Approach


Development Possibilities of Manufacturing

Coordinating Order and Value Offering Points Process improvement

Increase production volume Minimize lead time Eliminate inventory

Outsourcing Lean manufacturing Quick response Customization according to customer needs

Offer wider product variety using standardization, modularity, etc. Offer (additional) services, for example, based on the principles

of mass customization


Purchasing

Manufacturing


Make-to-order

Purchasing

Manufacturing


Pack-to-order

Manufacturing


Ship-to-order



management


Inventorymanagement


Inventorymanagement

Main Order Penetration Points (OPP)




Hoover et al. 2000


Understanding of the factors that affect OPP choices is important but…

Product characteristics

Delivery time

Market and demand

characteristics

Mfg process, infrastructure and control

characteristics

OPP

Manufacturinglead time

Olhager 1994



mngmnt

Manufacturing Packaging Distribution Ware-

housing

Purchasing Inventory mngmnt

Manufacturing Packaging Distribution

Retailing

Assortment planning



Offer to planning

Ware-housing

Assortment planning



Offer to inventory management

Manufacturing



Purchasing Offer to

purchasing


Inventory mngmnt

Assortment planning

…one should analyze value offering points (VOP) as well

Hoover et al. 2000


Conventional Demand-Supply ChainCollege Textbooks

Coursereading lists

(instructor)

Warehousing and

distribution

Printing of books

Assortment planning

(campusbookstore)

Purchasing

(campusbookstore)

VOP: Offer to purchasing

OPP: Ship to order

Bookstore’s demand chain

Publisher’s supply chain


Use textbook for course(student)

New Demand-Supply ChainCollege Textbooks

Demand chain

Supply chain

VOP: Students buy only material

they need

Review standard textbook(instructor)

Tailor book to course (instructor)

Plan order for course

(instructor)

On-demand printing(campus

bookstore)

Electronic textbook repository(publisher)

OPP: Settle copyright with publisher


Key Points

MRP and JIT as planning and control systems Both have benefits and shortcomings Applicability depends on the production environment

MPC integration ”Standard” pull and push systems rarely meet customer requirements

and/or manufacturing system needs

There are numerous ways to develop manufacturing operations

Break the conventional thinking processes E.g. focus on value offering instead of order penetration

Use modularity, mass customization, e-manufacturing, etc.


Abbreviations UsedAPS = Advanced planning system (supply chain planning)

ATO = Assemble-to-Order

ERP = Enterprise resource planning

FGI = finished goods inventory

JIT = just in time

LDR = Linear decision rule

MCA = Management coefficient approach

MES = Manufacturing execution system

MIP = Mixed integer programming

MPC = Manufacturing Planning and Control system

MPS = Master production schedule

MRP = Material Requirements Planning

MRPII = Manufacturing Requirements Planning

MSG = Master scheduling game

MTO = Make-to-Order

MTS = Make-to-Stock

OPP = order penetration point

Documents

Operations Planning and Control Systems 35E00100 Service Operations and Strategy #0 Fall 2015