Chapter 13 Resource Planning

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

ERP Modules

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

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

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

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

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

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

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

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

Basic MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

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

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

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

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

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

Initial Load Profile Hours of capacity Time (weeks) Normalcapacity – – – – – – – – – – – – 0 0 –

Remedies for Underloads 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

Remedies for Overloads 1.Eliminate unnecessary requirements 2.Reroute jobs to alternative machines or work centers 3.Split lots between two or more machines 4.Increase normal capacity 5.Subcontract 6.Increase the efficiency of the operation 7.Push work back to later time periods 8.Revise master schedule

Adjusted Load Profile Hours of capacity Time (weeks) Normalcapacity – – – – – – – – – – – – 0 0 – Pull ahead Push back Overtime Work an extra shift

Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes

Chapter 16 Scheduling

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

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

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

Shop Floor Control 1.Loading - Check availability of material, machines & labor 2.Sequencing - Release work orders to shop & issue dispatch lists for individual machines 3.Monitoring - Maintain progress reports on each job until it is complete Scheduling and monitoring day to day production of a job

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

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

Sequencing Rules FCFS - first-come, first-served FCFS - first-come, first-served LCFS - last come, first served LCFS - last come, first served DDATE - earliest due date DDATE - earliest due date CUSTPR - highest customer priority CUSTPR - highest customer priority SETUP - similar required setups SETUP - similar required setups SLACK - smallest slack SLACK - smallest slack CR - critical ratio CR - critical ratio SPT - shortest processing time SPT - shortest processing time LPT - longest 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 remainingdue date - today’s date work remainingremaining 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 Facility is dynamic, new jobs added Develop global sequencing rules Develop global sequencing rules First-in-system, first-served (FISFS) First-in-system, first-served (FISFS) Work-in-next-queue (WINQ) Work-in-next-queue (WINQ) Fewest # remaining operations (NOPN) Fewest # remaining operations (NOPN) Slack per remaining operation (S/OPN) Slack per remaining operation (S/OPN) Remaining work (RWK) Remaining work (RWK) Study system via simulation Study system via simulation

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

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

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

Theory of Constraints Not all resources are used evenly Not all resources are used evenly Concentrate on the “bottleneck” resource Concentrate on the “bottleneck” resource Synchronize flow through the bottleneck Synchronize flow through the bottleneck Use process and transfer batch sizes to move product through facility 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 4 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

Out of the Crisis “Failure of management to plan for the future and to foresee problems has brought about waste of manpower, of materials, and of machine-time, all of which raise the manufacturer’s cost and price that the purchaser must pay.

More Deming The consumer is not always willing to subsidize this waste. The inevitable result is loss of market. Loss of market begets unemployment. Performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by the quarterly dividend….

Deming’s solution The basic cause of sickness in American industry and resulting unemployment is failure to top management to manage. He that sells not can buy not.” The job of management is inseparable from the welfare of the company.

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

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 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) 1.Performance Basic operating characteristics Basic operating characteristics 2.Features “Extra” items added to basic features “Extra” items added to basic features 3.Reliability Probability product will operate over time Probability product will operate over time

Dimensions of Quality (Garvin) 4.Conformance Meeting pre-established standards Meeting pre-established standards 5.Durability Life span before replacement Life span before replacement 6.Serviceability Ease of getting repairs, speed & competence of repairs Ease of getting repairs, speed & competence of repairs

Dimensions of Quality (Garvin) 7.Aesthetics Look, feel, sound, smell or taste Look, feel, sound, smell or taste 8.Safety Freedom from injury or harm Freedom from injury or harm 9.Other perceptions Subjective perceptions based on brand name, advertising, etc Subjective perceptions based on brand name, advertising, etc

1.Time & Timeliness Customer waiting time, completed on time Customer waiting time, completed on time 2.Completeness Customer gets all they asked for Customer gets all they asked for 3.Courtesy Treatment by employees Treatment by employees Service Quality

4.Consistency Same level of service for all customers Same level of service for all customers 5.Accessibility & Convenience Ease of obtaining service Ease of obtaining service 6.Accuracy Performed right every time Performed right every time 7.Responsiveness Reactions to unusual situations Reactions to unusual situations Service Quality

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

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

Deming’s 14 Points 1.Create constancy of purpose 2.Adopt philosophy of prevention 3.Cease mass inspection 4.Select a few suppliers based on quality 5.Constantly improve system and workers 6.Institute worker training

Deming’s 14 Points 7.Instill leadership among supervisors 8.Eliminate fear among employees 9.Eliminate barriers between departments 10.Eliminate slogans 11.Remove numerical quotas

Deming’s 14 Points 12.Enhance worker pride 13.Institute vigorous training and education programs 14.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 1.Customer defined quality 2.Top management leadership 3.Quality as a strategic issue 4.All employees responsible for quality 5.Continuous improvement 6.Shared problem solving 7.Statistical quality control 8.Training & education for all employees

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

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

Cost of Quality Cost of achieving good quality Cost of achieving good quality Prevention Prevention Planning, Product design, Process, Training, Information Planning, Product design, Process, Training, Information Appraisal Appraisal Inspection and testing, Test equipment, Operator Inspection and testing, Test equipment, Operator

Cost of Quality Cost of poor quality Cost of poor quality Internal failure costs Internal failure costs Scrap, Rework, Process failure, Process downtime, Price- downgrading Scrap, Rework, Process failure, Process downtime, Price- downgrading External failure costs External failure costs Customer complaints, Product return, Warranty, Product liability, Lost sales Customer complaints, Product return, Warranty, Product liability, Lost sales

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

Cause-and-Effect Diagram Quality Problem Quality Problem Out of adjustment Tooling problems Old / worn Machines Faulty testing equipment 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 Inaccuratetemperaturecontrol Dust and Dirt Environment Defective from vendor Not to specifications Material- handling problems Materials Also known as Ishikawa Diagram or Fish Bone

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

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

Upcoming Events Final Exam due by Saturday Harley/Cabela’s Papers by Saturday

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

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