Appendix C Manufacturing Information Systems MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod, Jr. and George Schell Copyright 2001 Prentice-Hall, Inc. C-1

Manufacturing Information System n Used to support efforts to produce products n Evolution of computer use in manufacturing –Systems keyed on reorder points –MRP –JIT n Consists of three input and four output subsystems C-2

The Computer as Part of the Physical System n Focuses on computer-controlled machines in the production area –CAD (computer-aided engineering) –Design database –CAM (computer-aided manufacturing) –Robotics C-3

The Computer As an Information System n Term “manufacturing information system” used to describe the CBIS subsystem that provides information concerning the production operations n Goes by many other names –ROP, MRP, MRP II –JIT, CIM C-4

Reorder Point (ROP) Systems n Key Terms –Reorder point, stockout, lead time, safety stock n ROP formula: R = LU+S n Still used by many firms –Well suited to retail inventories C-5

Reorder Point With No Safety Stock and With a Safety Stock Reorder point Lead time Time Safety stock Balance on hand Balance on hand A. No safety stock B. Safety stock C-6

Material Requirements Planning (MRP) n Looks to the future and identifies the materials needed n Components: 1. Production scheduling system -- produces a master production schedule that encompasses the longest lead time plus the longest production time. 2. MRP system -- explodes the bill of materials. Converts the gross requirements into the net requirements. C-7

Material Requirements Planning (MRP) n Components (cont.): 3. Capacity requirements planning system works with MRP system to keep production within plant capacity. Produces outputs: reports and planned order schedule. 4. Order release system produces reports for shop floor and purchasing. C-8

Customer order file Sales forecast file Finished- goods inventory file Produc- tion capacity file Bill of material file Planned order schedule Raw materials inventory file 1.Production scheduling system 2. Material requirements planning system 3. Capacity requirements planning Purchasing system Order release report 4.Order release system Order release report Shop floor control system Performance reports Planning reports Exception reports Changes to planned orders An MRP System Master produc- tion schedule C-9

Manufacturing Resource Planning (MRP-II) n The purpose is to integrate MRP with all systems that affect materials management –Organizational systems –Accounting information system C-10

Material requirements planning Executive information system Order entry Accounts payable Accounts receivable General ledger An MRP II System Other functional information systems Purchasing ReceivingBilling C-11

MRP-II Benefits n More efficient use of resources –Reduced inventories –Less idle time –Fewer bottlenecks n Better priority planning –Quicker production starts –Schedule flexibility C-12

MRP-II Benefits [cont.] n Improved customer service –Meet delivery dates –Improved quality –Lower price possibility n Improved employee moral n Better management information C-13

Just-In-Time (JIT) n Faster material flow n Small lot size n Timing n Compare JIT to online processing and MRP to batch n Kanban pulls material as opposed to MRP push n Computer not emphasized C-14

Manufacturing Information System n Definition –A computer-based system that works in conjunction with other functional information systems to support the firm's management in solving problems that relate to manufacturing the firm's products C-15

DATABASEDATABASE Accounting information system Industrial engineering system Manufacturing intelligence subsystem Production subsystem Inventory subsystem Quality subsystem Cost subsystem Internal sources Environmental sources Inputsubsystems Outputsubsystems Users Data Information A Model of a Manufacturing System C-16

Accounting Information System [AIS] n Data collection terminals –Track material flow –Gather job data (job reporting) –Gather attendance data (attendance reporting) C-17

Terminal Receiving area Receiving area Raw-materials storeroom Receiving inspection Shop floor area Finished-goods storeroom Shipping area Location of Data Collection Terminals C-18

Industrial Engineering Subsystem n The industrial engineer (IE) n Studies physical and conceptual systems n Sets production standards C-19

Manufacturing Intelligence Subsystem n Can be viewed in terms of environmental contacts n Labor unions (personnel flow) –Formal and informal systems –Personnel information –Union contract compliance n Suppliers (material and machine flow) C-20

Labor Unions Suppliers Employment agencies College & universities Trade schools Government Global community Competitors Industrial relations department Strategic level management Human resources department Employees Manufacturing management Personnel requests requests Applicant data data Union contract performance Formal flow Informal flow Flow of Labor Information C-21

Units replaced or repaired because of defective parts, supplier spare parts availability, and so on Units rejected upon receipt, units rejected during production, reasons for rejection, and so on Customer service input Quality control input Supplier input Financial strength, quality control emphasis, past quality and delivery performance, and so on Supplier file Input to Supplier Records C-22

Production Subsystem n Used to: 1. Build production facilities 2. Operate production facilities n Production schedule determines when the production steps are performed n Track expected and actual completion times C-23

Job Flow Through the Plant Raw materials inventory Plastic top Plastic cylinder Step 1 Step 5 Step 6 Step 7 Step 8 Step 2 Step 3Step 4 Step 9 Finished goods inventory Flashlight Attach spring Install bulb Install reflector Install red lens Install clear lens Attach switch Attach strap Add batteries Put top on cylinder PRODUCTION AREA C-24

Inventory Subsystem n Importance of determining the inventory level n Maintenance cost (carrying costs) n Purchasing costs n Economic Order Quantity (EOQ) n Economic manufacturing quantity (EMQ) C-25

Safety stock Average inventory level Safety stock Average inventory level A. Order quantity of 20; average level is B. Order quantity of 16; average level is 13. Balance on hand Time The Effect of Order Quantity on Average Inventory Level C-26

Quality Subsystem n Deming’s fourteen points; maintained that it is not workers but management that determines quality n Total quality management (TQM) n Elements of TQM –Zero defects –Quality at the source C-27

TQM Philosophy *Customer-driven quality standards *Customer-supplier links *Prevention orientation *Quality at the source *Continuous improvement Total Quality Management Graphical Tools *Process flowcharts *Check sheets *Pareto analysis and histograms *Cause and effect (fishbone) diagrams *Run charts *Scatter diagrams *Control charts Statistical Tools *Sampling plans *Process capability *Taguchi methods C-28

Cost Subsystem n Periodic reports n Required ingredients 1. Standards 2. Information C-29

Subsystem User Inventory Quality Production Cost Vice president of manufacturing Other executives Plant Superintendent Manager of planning and control Manager of Engineering Manager of quality control Director of purchasing Manager of inventory control Other managers How Managers Use the Manufacturing Information System XXX X X X X X XXX XX XXXX XXX XXXX C-30

Summary n Manufacturing managers have applied computers –Physical –Conceptual n Inventory n MRP II n JIT n CIM is management philosophy aimed at integrating all CBIS plus factory automation C-31