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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/8/3/2019 Week 9 Supply Chain.pptx 8 Post
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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
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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
Sales and Operations Planning
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
Sales and Operations Planning
Demand Management
MRPDetailed
Scheduling
Sales
Forecasting
PurchasingProduction
Starting
Inventory
Sales and Operations Planning
Demand Management
MRPDetailed
Scheduling
Sales
Forecasting
Sales
Forecasting
PurchasingProduction
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
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Sales and Operations Planning
Demand Management
MRPDetailedScheduling
SalesForecasting
PurchasingProduction
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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Sales and Operations Planning
Demand Management
MRPDetailedScheduling
SalesForecasting
PurchasingProduction
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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Sales and Operations Planning
Demand Management
MRPDetailedScheduling
SalesForecasting
PurchasingProduction
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