Tara Plastics Business Process Planning Workshop Tara Plastics Business Process Planning Workshop Presented by: The Georgia Tech Center for Manufacturing Information Technology Course Instructors: Greg Holland Tarun Kataria Mackenzie Stevenson

Workshop Objectives Identify issues, tasks, and business and software requirements for future system implementation Review best practices and begin business and system process definition Define how you want to run your company and what tools you’ll need to do it

TEAM Process Chart Shipping / Receiving Master Scheduling Capacity Planning Shop Orders Shop Floor & Inventory Control Customer Master Vendor Master Company Master Warehouse Master Location Master Item Master Operation Master Product Config. Master Work Center Master Shop Calendar Customer Order Entry Peachtree ® Accountin g Finite Schedule MRP Sales Tax Codes Chart of Accounts A/R A/P Material Planning Purchasing TEAM Database

Bill / Route Structure

MAKE TO STOCK Ô Stock end items & fill orders from stock Ô Limited number of end items Ô Forecast MAKE TO ORDER Ô Produce subs, components, & end items on receipt of order Ô Combination of standard and custom subs/components Ô Customer orders ASSEMBLE TO ORDER Ô Stock subs/components; assemble end items per order Ô Large number of end items Ô Forecast subs/components Ô Customer orders for end items ENGINEER TO ORDER Ô Unique parts/subs/components per order Ô Unlimited number of end items Ô Customer orders Manufacturing Environments

Supermarket Locations Supply Chain Lead Times (Weeks) Customer Lead Times (Weeks) BagExtrudeTreat Blend Purchase Raw Material <1 <4 <7 <9 <17

Routing Describes how an item is manufactured 3 Operations 3 Sequence of operations 3 Work center data (available capacity) 3 Standards (run time, set-up time, move time, queue time) 3 Testing might also be included

Bill of Material End Item A Purchased Part E Subassembly B Purchased Part F Component C Raw Material D Level 0 Level 1 Level 3 Level 2

Bill of Material Raw Materials Purchased components Shipping materials Instructions Manufacturing Subassemblies Semi-finished Items

Sheeting Route BlendTreatPack Roll

Sheeting BOM Extruded Film ResinsAdditivesColors

Wicketed Bag Route BlendTreatPack RollWicket

Wicketed Bag BOM Extruded Film ResinsAdditivesColors Wicketed Bag

Bag - Rolls Route BlendTreatPack RollConvert

Bag – Rolls BOM Extruded Film ResinsAdditivesColors Bags on Roll

Low volume, high variety Functional layout Spaghetti flow Multi-level BOM High WIP High setup / large batches Long lead times MRP Job Shop vs. Flow Job Shop Flow High volume, low variety Cellular layout Continuous flow Flat BOM Low WIP Low setup / small lots Short lead times Kanban

BOM Accuracy For each BOM item verify: 3 Item number 3 Unit of measure 3 Parent quantity 3 Quantity per parent item Audit methods 3 Floor audit 3 Office/factory review 3 Product teardown 3 Variance analysis of issue vs. receipt variance 3 Product cost rollup

Route Accuracy For each route verify: 3 Operations 3 Sequence numbers 3 Work centers 3 Run rate Audit methods 3 Floor audit 3 Office/factory review 3 Variance analysis of actual labor vs. standard 3 Product cost rollup

BOM / Route Accuracy Bill of Material  Audit BOMs (# parent items correct / total # of parent items audited) Route  Audit routings (# correct routings / total # of routings checked)

Master Scheduling

MRP without MPS Extruded Film ResinsAdditivesColors Wicketed Bag

MRP with MPS Extruded Film ResinsAdditivesColors Wicketed Bag

Master Schedule Level End Items Raw Materials Subs/Components Goal: Master schedule at narrowest sensible point

System Planning Horizon System Planning Horizon The greater of… 3 Maximum cumulative lead time from bill of material, or 3 Time needed to make capacity changes for work centers or suppliers

Time Fences Points in time in the planning horizon used to: 3 Define and restrict the degree of allowable changes within the planning horizon 3 Regulate changes to the schedule that may adversely affect:  component lead times  capacity plans  customer deliveries  cost

MPS Change Policy MPS Change Policy Zone A Emergency Changes Zone B Trades Material & Capacity Committed Material & Capacity Planned Today Zone C Adds & Changes Material & Capacity Scheduled Cum. LT Demand Fence 1 Demand Fence 2 Item LT System Planning Horizon Releasable Period

Analyzing Change Requests Has demand really changed? What is the impact on the production plan? Is capacity available? Is material available? What are the costs and risks associated with making the change? What are the costs and risks associated with not making the change?

Material Planning

How To Do It What We Have Done Plan To Do Calculate Material Requirements What We Need To Do & When Materials Required On-Hand Inventory & Open Orders Bill of Material Demand Material Requirements Planning (MRP)

MRP Frequency Advantages: 3 Updates requirements based on most recent demand information 3 Ensures material and capacity are used to meet actual demand Disadvantages: 3 MRP regeneration time 3 Could cause nervousness in the schedule if schedule change policies lax

MRP Dates Due Date 3 Expected receipt date for a shop order or purchase order indicating when it’s available to use. Release Date 3 Planned or scheduled releases determined by subtracting the lead time from the planned or scheduled receipt date Need Date 3 Required date for intended use; in MRP the release date for a parent item determines the need date for the component child item Receipt Date 3 When an order is planned or scheduled to be received usually as a result of a planned or scheduled release

Buffer Types Safety Stock 3 Material buffer exceeding that which is needed to satisfy gross requirements  Used when there is uncertainty about quantity Safety Lead Time 3 Time buffer which requires early release and receipt dates for shop orders and purchase orders  Used when there is uncertainty about timing

Buffer Comparison Safety Stock = 20 units Lead Time = 2 periods Order quantity = 50 units

Buffer Comparison Safety Lead Time = 1 period Lead Time = 2 periods Order quantity = 50 units

Buffer Issues Buffer Size 3 How should I determine the right amount of safety stock and safety lead time? Buffer Location 3 Where do I place buffers to offer the highest protection at the lowest cost? Buffer Conflicts 3 How do I avoid the problem of working on orders to satisfy safety stock or safety lead time requirements instead of actual orders?

Buffer Size Safety Stock Calculation 3 Uncertainty in supply and demand quantity  SS = Zs Z = Value from normal table to match desired service level s = Standard deviation of supply or demand per period  s can be approximated by 1.25 MAD (mean absolute deviation)

Safety Factors

Safety Stock Calculation

Capacity Planning

Capacity Types Demonstrated Capacity 3 Capacity available in the past and expected in the future; based on actual output (standard hours) per week Available Capacity 3 Based on shop calendar and work center setup. Syn. Planned capacity Required Capacity 3 The expected hours from the item routing to process all planned and scheduled requirements in a work center Objective: Balance available capacity with required capacity

Available Capacity Available Capacity = (Loading Time) x (Utilization) x (Efficiency) Loading Time = (available hours) - (scheduled downtime) Utilization = (actual hours run)/(loading time) Efficiency = (standard hours produced)/(actual hours charged)

Infinite vs. Finite Capacity Infinite 3 Resource is loaded without regard to capacity available to perform the work in a given time period Finite 3 Resource is loaded with no more work than it can be expected to complete in a given time period

Infinite Capacity Planning Capacity Planned Capacity open orders planned orders 1357 open orders planned orders Required Capacity 246 Resource Capacity Profile Time Period

Finite Capacity Scheduling (FCS) Creates a realistic production schedule that recognizes and respects resource limits

Capacity Planning Decisions Infinite Capacity 3 Tool: Resource Capacity Profile Finite Capacity 3 Tool: Late Orders Report Adjust schedule and / or capacity to ensure supply meets demand and schedule is realistic

Production Planning

Production Planning Production Planning Process DemandSupply Master Production Schedule What are we going to make? MRP & CRP What do we need to make it? When do we have to have it? Plant Schedule When and where are we going to make it?

Releasable Orders Releasable Orders Shop Orders Lead Time Due Date Demand Fence 1 Today = Release Date Firm Planned Orders Release

Releasable Orders Caveat 1: Don’t release an order before it’s time 3 Orders released before they’re needed…  Use capacity and materials planned for other orders  Cause confusion on the shop floor regarding order priorities  Increase the number of shop orders that need to be rescheduled if the MPS is changed  Increase WIP and FG inventory

Identifying Shortages Caveat 2: Make sure you’re not counting inventory twice in the release process 3 Multiple orders may use the same component  Software summarizes total demand requirements for all releasable orders and compares to on-hand inventory  Demand pegging report identifying the demand from all shop orders for an item  Shortage report identifying allocations greater than on-hand inventory Manual Automatic

Production Control

Production Control Process 1. Shop order release 2. Material issue Removes inventory from issue location and places into WIP 3. Labor entry Hours and quantity posted against shop order route to update hours completed 4. Shop order receipt Receives shop order item into inventory at work center location Material issue occurs for backflush items 5. Inventory transfer

Transaction Reporting Metrics Quantity received vs. quantity ordered Quantity issued vs. quantity required Actual vs. standard operation quantity or hours Purchase order receipts vs. quantity ordered QOH vs. cycle count % of negative location balances Requires feedback and control mechanisms to not only correct the errors, but also prevent them from reoccurring.

Event Monitoring Monitor Exceptions Past due shop orders Past due purchase orders Downtime Material shortages Production delays Buffers Exceeded? No Analyze Adjust Notify Yes

Schedule Performance Metrics 3 % shop orders completed by due date / total shop orders 3 # schedule changes during releasable period 3 Setup costs 3 WIP value

Inventory Control

Controlling Inventory Accuracy For each inventory location area, determine: 3 What transactions need to be reported (issues, receipts, adjustments, transfers) 3 How transactions should be reported (mode) 3 When the transaction should be reported (timing) 3 Who should have authority to move inventory 3 Who should have responsibility for accuracy 3 Who should enter inventory transaction 3 What are the hardware, software, and procedural requirements to support inventory activities

Multi-location Storage Item count by multiple locations is a necessary software tool 3 Random location can provide 40% greater space utilization 3 Supports the need to quickly locate material 3 Set-up a location for any space that material can placed 3 Avoid assigned locations by item

Cycle Counting The systematic counting of parts to: 3 Correct errors 3 Eliminate root causes 3 Maintain inventory accuracy

Cycle Counting Methods 3 Control Group 3 Random Sample 3 ABC Method 3 Process Control The difference in these methods is how the sample is chosen

Measuring Accuracy

Setting Tolerances Tolerances are a function of: 3 Dollar Value 3 Usage 3 Lead Time 3 Handling 3 Criticality 3 Bill of Material Level 3 Combination of the above

Record Accuracy X 100% Total # of Accurate Records Total # of Records Counted Inventory Record Accuracy

Inventory Control Best Practices Capture transactions as soon after the activity is performed as possible Restrict authority for conducting activities and reporting transactions to those with a stake in the accuracy of the data Understand and address the impact of backflush transactions on inventory accuracy Assign locations and enter transactions only to the level of detail required to support business decisions Implement cycle-counting and investigate root causes of inaccuracy