1 Session 9 Master Production Scheduling lecture session 8 Mr. Tim Loar Manager, Production Planning Ross Products Division of Abbott Laboratories

2 Agenda Ross/Abbott background Operations structure at Ross Production planning: theory Production drivers Production planning: reality Inventory Management Conclusion

3 Ross Productions Division: Primary Focus Nutritionals –Infant formula –Adult nutritionals Pharmaceuticals –Growth area Feeding devices –Pumps and sets

4 Ross Products Division: Manufacturing Five manufacturing plants –Produce 888 sku’s –27 different mfg. lines Third party manufacturers –For expertise/capabilities don’t have in-house –Product 674 sku’s –33 different mfg. lines 87% of Ross sales produced in Ross Plants

5 Ross Products Division: Operations

6 Ross Products Division: Production Planning

7 Production Planning: Theory

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9 Ross Products Division: Production Drivers Forecasting Customer service Inventory days-on-hand Plant SVP (stnd. value of production) Warehouse space Sales history Mfg. lead times

10 Daily Case Shipments Report

11 Aggregate Forecast Accuracy

12 Forecast Accuracy – September, xxxx

13 Production Planning: Reality Ongoing products –Compiling the “realistic” forecast Monthly meetings with Marketing Sku by sku review Agree to forecast for next 6-12 months (2 financial plans look out further, up to 18 months) Marketing forecastForecast administratorFinance Operations forecast

14 Production Planning: Reality New products/Promotions –Strong reliance on Marketing/Sales No history for a forecast base Consumer research –Bi-weekly/monthly promotions meetings Review planned promotions Understand demand impact on promotion item and cannibalization of other sku’s Marketing forecastForecast administratorFinance Operations forecast

15 Production Planning: Reality MPS generation: most trouble-free portion –Base Accounting system is 17 years old –MPS module is 10 years old Numerous limitations Driven by forecasts and target levels Bill-of-MaterialForecasting system MPS Production Plan by plant/TPM Plan passed to plants

16 Production Planning: Reality Tough decisions –Production trade-offs Limited capacity Long commodity lead times Management anxiety over backorders potential in competitive environment Overall game plan High levels of MPS interaction/“what-ifs” Reality… Plant fills product Product is incubated Product is released

17 MPS Planning Horizon Detail

18 Production Planning: Reality Tough decisions –prioritization Which customer base has biggest impact When to contact the customer Which unaffected products can survive a period of neglect? –Fallout Daily attention to detail put on hold Plant fills product Product is incubated Product is released

19 Production Planning: Reality Developing recovery game plan –True RPD team effort Must be a team player Supply chain perspective What’s best for entire organization …not Production Planning, not Purchasing, etc. –MPS is the tool to facilitate trade-off decisions Foundation for recovery projections Plant fills product Product is incubated Product is released

20 Production Planning: Reality Performance measures –Production to Schedule +/- 2% to frozen schedule Reported monthly –Batch Release Tracking % of on-time releases Reported monthly –Batch Delivery Performance Based on one week frozen schedule Plant fills product Product is incubated Product is released

21 Production Planning: Reality Very close interaction with MPS –Logistics manages inventory by DC/warehouse site –Logistics utilizes MPS to determine deployment plan For example, short supply out West: –Move product from the East (high trans. $’s) –Evaluate MPS (& finite plant schedule) to determine next production run and product release timing Product is deployed

22 Production Planning: Reality Biggest daily impact on MPS management –Variance to forecasted sales –Pull production forward for oversells –Push production out for undersells Orders Received Sales results feed Back into MPS

23 Inventory Management and MPS The focus is on DOH Two budget processes per year –MPS generates projected inventory value Based on established target levels –Forms basis for inventory investment accountability –MPS used to assure compliance with the inventory plan Inventory Plan MPS Production plan by plant/TPM

24 Inventory Management and MPS (continued) MPS-related issues with inventory plan –Tendency is to want to keep lines running –MPS data allows for monitoring of adherence to plan –Production must move with sales to forecast variances –MPS keeps planner appraised of variances to inventory target levels based on sales results Inventory Plan MPS Production plan by plant/TPM

25 Inventory Management Tools Data Warehouse –Comparisons of actuals vs. projections –Comparisons of current future projections to plan –Variance detail down to sku level –…or aggregated up for an entire line Inventory Plan MPS Production plan by plant/TPM

26 DOH By Year (1989 – 2002 Plan) Ross Products Division