O BJECTIVES To Explain the aim of production. To Explain the dynamics of Operating Environment. To identify manufacturing types and lead-time concept. To identify supply chain.

O BJECTIVES To Explain why we need materials management. To identify supply chain and explain the members of supply chain. To learn the need of production planning. To identify, BOM, Order winners concepts.

INTRODUCTION

A production function is needed to transform our resources into useful goods. Production is a transformation form like extracting minerals from the earth, lumbering, forming metals and etc., and using these resources into useful goods.

INTRODUCTION To get the most value out of our resources, we must design and manage the manufacturing process most efficiently. HOW?

INTRODUCTION We must manage and control the inputs of process as, labor, capital, and the flow of material.(Why material? ) If the right materials in the right quantities are not avaible at right time, the process cannot produce what it should.

O PERATING ENVIRONMENT Government Economy Competition Customers Quality Order qualifiers Order winners

O PERATING DYNAMICS Government: Government: Environmental, safety, taxation regulations,product liability. Economy: Economy: Economic recessions, labor and material shortages, low population growth, freer trade between countries. Competition: Competition: Globalization,Internet,transportation costs Customers: Customers: A fair price, high quality, delivery time, product and volume flexibility. Quality: Quality: Not only meeting expectations but also exceeding them. Order qualifiers: Order qualifiers: Price, quality, delivery..( Customer Requirements) Order winners: Order winners: A combination of competitive charecteristics, that pursuade a company’s customers to choose its products or services.(May be different for different markets)

L EAD TIME From the side of Supplier: From the side of Supplier: The time from receipt order to the delivery of product. They want it to be as long as possible. From the side of Customer: From the side of Customer: The time from order preparation to the delivery of product. They want it to be as short as possible. ( The part to be achieved)

M ANUFACTURING STRATEGIES Engineer to Order: Make to Order: Assemble to Order: Make to Stock:

M ANUFACTURING STRATEGY Engineer to Order: PURCHASEPRODUCTIONSHIPASSEMBLE DESIGN Delivery Lead Time

M ANUFACTURING STRATEGY Make to Order: INVENTORYPRODUCTIONSHIPASSEMBLE Delivery Lead Time

M ANUFACTURING STRATEGY Assemble to Order: PRODUCTIONINVENTORYSHIPASSEMBLE Delivery Lead Time

M ANUFACTURING STRATEGY Make to Stock: PRODUCTIONASSEMBLESHIP INVENTORY Delivery Lead Time

M ANUFACTURING STRATEGY ( COMPARISON OF STRATEGIES ) Production Type Lead TimeInventoryExampleExplanation Engineer to Order Long Material purchased and consumed Ship or Plane manufacturing Customer involves in designing and R&D Make to OrderReducedReady The product consists standart items but may include custom designed component.(automati ve industry) Starts after taking order Assemble to Order Reduced further Held ready for assembly. Automative Industry in Turkey Standart components are assembled according to the customer order. Make to stockShortest Finished goods inventory White Good Sector The customer has a little involvement in design process.

S UPPLY CHAIN CONCEPT ( SUPPLY P RODUCTION AND DISTRUBITION SYSTEM INBOUND SUPPLY CHAIN SUPPLIER PURCHASING (Physical Supply) MANUFACTURING (Planning and Control) PHYSICAL DISTRUBITION CUSTOMERS OUTBOUND SUPPLY CHAIN Information Flow Value-added Material Flow

S UPPLY CHAIN CONCEPT The supply chain includes all activities and processes to supply a product or service to a final customer. Any number of companies can be linked in the supply chain. A customer can be a supplier to another customer. Product or services usually flow from supplier to customer and information just the opposite.

S UPPLY CHAIN CONCEPT Although the distribution system can be direct from supplier to customer, depending on the products an markets, it can contain a number of distribuyors such as, wholesalers, warehouses and retailers. Supply-Produce-Distribute Although these systems vary from industry to industry or company to company, the basic elements are the same: Supply-Produce-Distribute

S UPPLY CHAIN CONCEPT To manage a supply chain, we must not only understand the network of suppliers and customer along the chain, but must also try to efficiently plan material and information flows to maximize cost efficiency, effectiveness, delivery and flexibility. This can be supplied by integrated information systems.

S UPPLY CHAIN CONCEPT Traditional System: Production provides lowest cost Purchasing supplies with a minimum cost and lowest delivery time. Warehouse provides lowest inventory and lowest distribution costs. Finance reduces inventory investment.. Materials Management Concept Every department is responsible.

M ATERIALS MANAGEMENT A coordinating function responsible for planning and controlling materials flow. ‘WHY DO WE NEED MATERIALS MANAGEMENT?’

M ATERIALS MANAGEMENT ( OBJECTIVES ) Maximizes the efficiency of using firm’s resources. Provides the required level of customer service. Reduces the material cost.(Scrap) A part that can improve profit.

M ATERIALS MANAGEMENT ( OBJECTIVES ) XYZ Manufacturing Company P&L Sales Revenue: $1,000,000 Direct Material Cost: $500,000 Direct Material Cost: $500,000 Direct Labor Cost: $200,000 Direct Labor Cost: $200,000 Overhead: $200,000 Overhead: $200,000 Total Cost : $900,000 Gross Profit: $100,000

M ATERIALS MANAGEMENT ( OBJECTIVES ) Sales Revenue: $1,000,000 Direct Material Cost: $450,000 (%10 Discount) Direct Material Cost: $450,000 (%10 Discount) Direct Labor Cost: $190,000 (%10 Discount) Direct Labor Cost: $190,000 (%10 Discount) Overhead: $200,000 (Fixed Cost) Overhead: $200,000 (Fixed Cost) Total Cost : $840,000 Gross Profit: $160,000 (%60 increase)

M ATERIALS MANAGEMENT ( OBJECTIVES ) Sales Revenue: $1,200,000 Direct Material Cost: $600,000 Direct Material Cost: $600,000 Direct Labor Cost: $240,000 Direct Labor Cost: $240,000 Overhead: $200,000 (Fixed Cost) Overhead: $200,000 (Fixed Cost) Total Cost : $1,040,000 Gross Profit: $160,000

W IP INVENTORY It replaces in the semi-finished products while production is going on (Work in Progress). WIP Product consists of not only material cost but also labor and other production costs. WIP reduces the time that inventory spends time in production. Thus, costs reduce by means of WIP.

( PLANNING & CONTROL TOOLS ) Production Planning: Production Planning:Forecasting, masterplanning, material requirements planning,capacity planning. Implementation&Control: Implementation&Control: Shop floor control. Inventory Management: Inventory Management: Supports of production or the result of production

INPUTS OF PLANNING AND CONTROL SYSTEM Product Description : Product Description : Engineering drawings, technical specifications, BOM(Bill of Material). Process Stages Process Stages :Operations required to make the product, sequence of operation,production tools and standart time for producing. Quantities required: Quantities required: Forecasts, orders,inventories,material requirement plan

A MATERIAL MANAGEMENT TOOL P HYSICAL SUPPLY ( DISTRIBUTION ) Transportation Distribution Inventory Warehousing Packaging Materials Handling. Order Entry Materials management is a balancing act by using these tools.