Chapter 14 Resource Planning

Enterprise Resource Planning (ERP) Organizes and manages a company’s business processes by sharing information across functional areas Connects with supply-chain and customer management applications Largest ERP provider SAP

ERP’s Central Database Finance & Accounting Sales & Marketing Human Resources Production & Materials Management ERP Data Repository

ERP Implementation First step is to analyze business processes Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which processes should be standardized?

Customer Relationship Management (CRM) Plans and executes business processes that involve customer interaction Changes focus from managing products to managing customers Point-of-sale data is analyzed for patterns used to predict future behavior

Supply Chain Management Supply chain planning Supply chain execution Supplier relationships Distinctions between ERP and SCM are becoming increasingly blurred

ERP and MRP MRP (material requirements planning) was the precursor to ERP Primarily a production planning and control system MRP evolved to MRP II (manufacturing resource planning) ERP and ERP II continue to extend the links through all business processes

Material Requirements Planning Computerized inventory control & production planning system Schedules component items when they are needed - no earlier and no later

When to Use MRP Dependent and discrete items Complex products Job shop production Assemble-to-order environments

Material Requirements Planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure Master production schedule

Master Production Schedule Drives MRP process with a schedule of finished products Quantities represent production not demand Quantities may consist of a combination of customer orders & demand forecasts Quantities represent what needs to be produced, not what can be produced

Basic MRP Processes Exploding the bill of material Netting out inventory Lot sizing Time-phasing requirements

MRP Outputs Planned orders Work orders Purchase orders Changes to previous plans or existing schedules Action notices Rescheduling notices

Capacity Requirements Planning (CRP) Computerized system that projects load from material plan Creates load profile Identifies underloads and overloads

Capacity Terms Load profile Capacity Utilization Compares released and planned orders with work center capacity Capacity Productive capability; includes utilization and efficiency Utilization % of available working time spent working

More Capacity Terms Efficiency – how well the machine or worker performs compared to a standard output Load The standard hours of work assigned to a facility Load percent The ratio of load to capacity Load % = (load/capacity)x100%

Capacity Requirements Planning MRP planned order releases Routing file Capacity requirements planning Open orders Load profile for each machine center

Initial Load Profile Hours of capacity Normal capacity Time (weeks) 1 2 3 4 5 6 Time (weeks) Normal capacity 120 – 110 – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 –

Remedies for Underloads Acquire more work Pull work ahead that is scheduled for later time periods Reduce normal capacity

Remedies for Overloads Eliminate unnecessary requirements Reroute jobs to alternative machines or work centers Split lots between two or more machines Increase normal capacity Subcontract Increase the efficiency of the operation Push work back to later time periods Revise master schedule

Adjusted Load Profile Hours of capacity Normal capacity Time (weeks) 1 2 3 4 5 6 Time (weeks) Normal capacity 120 – 110 – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 – Pull ahead Push back Overtime Work an extra shift

Chapter 16 Scheduling

Scheduling Specifies when labor, equipment, facilities are needed to produce a product or provide a service Last stage of planning before production occurs

Scheduling by Process Type Process Industry Linear programming EOQ with noninstantaneous replenishment Mass Production Assembly line balancing Project Project -scheduling techniques (PERT, CPM)

Objectives in Scheduling Meet customer due dates Minimize job lateness Minimize response time Minimize completion time Minimize time in the system Minimize overtime Maximize machine or labor utilization Minimize idle time Minimize work-in-process inventory Efficiency

Shop Floor Control Scheduling and monitoring day to day production of a job Loading - Check availability of material, machines & labor Sequencing - Release work orders to shop & issue dispatch lists for individual machines Monitoring - Maintain progress reports on each job until it is complete

Loading Allocate work to machines (resources) Perform work on most efficient resources Use assignment method of linear programming to determine allocation

Sequencing Prioritize jobs assigned to a resource If no order specified use first-come first-served (FCFS) Many other sequencing rules exist Each attempts to achieve to an objective

Sequencing Rules FCFS - first-come, first-served LCFS - last come, first served DDATE - earliest due date CUSTPR - highest customer priority SETUP - similar required setups SLACK - smallest slack CR - critical ratio SPT - shortest processing time LPT - longest processing time

Critical Ratio Rule CR considers both time and work remaining CR = = If CR > 1, job ahead of schedule If CR < 1, job behind schedule If CR = 1, job on schedule time remaining due date - today’s date work remaining remaining processing time Ties scheduling to Gantt Chart or PERT/CPM and project crashing

Sequencing Jobs Through Many Machines/Processes Facility is dynamic, new jobs added Develop global sequencing rules First-in-system, first-served (FISFS) Work-in-next-queue (WINQ) Fewest # remaining operations (NOPN) Slack per remaining operation (S/OPN) Remaining work (RWK) Study system via simulation

Monitoring Gantt Chart Input / Output Control Shows both planned and completed activities against a time scale Input / Output Control Monitors the input and output from each work center

Advanced Planning and Scheduling Systems Infinite - assumes infinite capacity Loads without regard to capacity Then levels the load and sequences jobs Finite - assumes finite (limited) capacity Sequences jobs as part of the loading decision Resources are never loaded beyond capacity

Advanced Planning and Scheduling Systems Advanced planning and scheduling (APS) Add-ins to ERP systems Constraint-based programming (CBP) identifies a solution space and evaluates alternatives Genetic algorithms based on natural selection properties of genetics Manufacturing execution system (MES) monitors status, usage, availability, quality

Theory of Constraints Not all resources are used evenly Concentrate on the “bottleneck” resource Synchronize flow through the bottleneck Use process and transfer batch sizes to move product through facility

Theory of Constraints What to Change What to Change to How to cause the change

Chapter 3 Quality Management Quality is a measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use

What Is Quality? “The degree of excellence of a thing” (Webster’s Dictionary) “The totality of features and characteristics that satisfy needs” (ASQ) Fitness for use Quality of design

Quality Quality Management – not owned by any functional area – cross functional Measure of goodness that is inherent to a product or service

FedEx and Quality Digitally Assisted Dispatch System – communicate with 30K couriers 1-10-100 rule  1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix  10 – if caught later in different department or location = as much as 10X cost  100 – if mistake is caught by the customer = as much as 100X to fix

Product Quality Dimensions Product Based – found in the product attributes User Based – if customer satisfied Manufacturing Based – conform to specs Value Based – perceived as providing good value for the price

Dimensions of Quality (Garvin) Performance Basic operating characteristics Features “Extra” items added to basic features Reliability Probability product will operate over time

Dimensions of Quality (Garvin) Conformance Meeting pre-established standards Durability Life span before replacement Serviceability Ease of getting repairs, speed & competence of repairs

Dimensions of Quality (Garvin) Aesthetics Look, feel, sound, smell or taste Safety Freedom from injury or harm Other perceptions Subjective perceptions based on brand name, advertising, etc

Service Quality Time & Timeliness Completeness Courtesy Customer waiting time, completed on time Completeness Customer gets all they asked for Courtesy Treatment by employees

Service Quality Consistency Accessibility & Convenience Accuracy Same level of service for all customers Accessibility & Convenience Ease of obtaining service Accuracy Performed right every time Responsiveness Reactions to unusual situations

Quality of Conformance Ensuring product or service produced according to design Depends on Design of production process Performance of machinery Materials Training

Quality Philosophers Walter Shewhart – Statistical Process Control W. Edwards Deming Joseph Juran – strategic and planning based Armand Fiegenbaum – total quality control “entire business must be involved in quality improvement”

Deming’s 14 Points Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training

Deming’s 14 Points Instill leadership among supervisors Eliminate fear among employees Eliminate barriers between departments Eliminate slogans Remove numerical quotas

Deming’s 14 Points Enhance worker pride Institute vigorous training and education programs Develop a commitment from top management to implement these 13 points

The Deming Wheel (or PDCA Cycle) 1. Plan Identify the problem and develop the plan for improvement. 2. Do Implement the plan on a test basis. 3. Study/Check Assess the plan; is it working? 4. Act Institutionalize improvement; continue the cycle. Also known as the Shewart Cycle

Six Sigma Quality management program that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products

Six Sigma Started By Motorola Define Measure Analyze Improve Control Made Famous by General Electric 40% of GE executives’ bonuses tied to 6 sigma implementation

Malcolm Baldrige National Quality Award Category 3 – determine requirements, expectations, preferences of customers and markets Category 4 – what is important to the customer and the company; how does company improve

Total Quality Management Customer defined quality Top management leadership Quality as a strategic issue All employees responsible for quality Continuous improvement Shared problem solving Statistical quality control Training & education for all employees

Strategic Implications of TQM Quality is key to effective strategy Clear strategic goal, vision, mission High quality goals Operational plans & policies Feedback mechanism Strong leadership

TQM in Service Companies Inputs similar to manufacturing Processes & outputs are different Services tend to be labor intensive Quality measurement is harder Timeliness is important measure TQM principles apply to services

Cost of Quality Cost of achieving good quality Prevention Appraisal Planning, Product design, Process, Training, Information Appraisal Inspection and testing, Test equipment, Operator Cost of achieving good quality Prevention quality planning, product design process, training information Appraisal inspection & testing test equipment operator Cost of poor quality Internal failure costs scrap, rework process failure & downtime downgrading products External failure costs customer complaints returns, warranty product liability, lost sales 18

Cost of Quality Cost of poor quality Internal failure costs Scrap, Rework, Process failure, Process downtime, Price-downgrading External failure costs Customer complaints, Product return, Warranty, Product liability, Lost sales Cost of achieving good quality Prevention quality planning, product design process, training information Appraisal inspection & testing test equipment operator Cost of poor quality Internal failure costs scrap, rework process failure & downtime downgrading products External failure costs customer complaints returns, warranty product liability, lost sales 18

Employees and Quality Improvement Employee involvement Quality circles Process improvement teams Employee suggestions

Cause-and-Effect Diagram Quality Problem Out of adjustment Tooling problems Old / worn Machines Faulty testing equipment Incorrect specifications Improper methods Measurement Poor supervision Lack of concentration Inadequate training Human Deficiencies in product design Ineffective quality management Poor process design Process Inaccurate temperature control Dust and Dirt Environment Defective from vendor Not to specifications Material- handling problems Materials Also known as Ishikawa Diagram or Fish Bone

Lots of Hoopla and no follow through Hot House Quality Lots of Hoopla and no follow through

ISO 9000:2000 Customer focus Leadership Involvement of the people Process approach Systems approach to management Continual process improvement – GAO Factual approach to decision making Mutually beneficial supplier relationships

Implications Of ISO 9000 Truly international in scope Certification required by many foreign firms U.S. firms export more than $150 billion annually to Europe Adopted by U.S. Navy, DuPont, 3M, AT&T, and others

ISO Accreditation European registration 3rd party registrar assesses quality program European Conformity (CE) mark authorized United States 3rd party registrars American National Standards Institute (ANSI) American Society for Quality (ASQ) Registrar Accreditation Board (RAB)

Upcoming Events Final Exam in class in 2 weeks Presentations next week Harley Papers by last week of class

Operations and Life “I would rather attempt to do something great and fail than attempt to do nothing at all.”

In your next assignment remember the dead fish! Zen and Operations Management In your next assignment remember the dead fish! Even a dead fish can swim down stream and give the illusion of progress!!!