1. Calculate a Production Plan with the Inventory Chain Template © 20111

2. What is a Forecast? plan A forecast is a plan for the future based on estimates, strategies and historical data standard Represents a standard for comparison to actual performance commitment Implies a commitment to an agreed-upon level of output at an agreed-upon cost Encourages “What-If?” scenarios May or may not be tied to the legal budget © 20112

3. Terminal Learning Objective Task: Calculate a Production Plan with the Inventory Chain Template Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy: Identify and enter relevant scenario data into macro enabled templates to calculate Production Needs, then Plan Direct Labor, Overhead and Forecast Material Purchases © 20113

4. Consider the Following Process Flow Building, manufacturing, and all other processes start with inputs and physically progress to outputs Purchase meat for freezer, move from freezer to refrigerator to defrost, move to grill, move to table © 20114

5. Planning’s Key Difference: Backward Chaining outputsend state goals inputs Planning starts with outputs and end state goals and logically works backwards to determine needed inputs If you are planning a menu with a desired output of ten burgers you will have to work backwards through the process If there is no inventory in the refrigerator and freezer, you will need to purchase hamburger meat for ten burgers If you wish to maintain inventories in the refrigerator and freezer for future cookouts you will need to specify output and inventory end states in order to plan properly © 20115

6. Input-Output Equation Input-Output Equation Beginning + Input – Output = End If you take more water out of the bucket than you put in, what happens to the level in the bucket? © 20116

7. Using the Equation Given any three of the Variables, can Solve for the fourth Example: How much Fuel did my Car Use? Start with a Full Tank Drive 300 miles Re-Fill Tank, using 10 gallons Full Tank + 10 gallons – Output = Full Tank Full Tank + 10 gallons = Output + Full Tank © 20117

8. The Input-Output Equation Inventory Beginning InputOutput Ending Beginning + Input – Output = Ending © 20118

9. Material Requirements Planning © 20119 Inventory Beginning InputOutput Ending Inventory Beginning InputOutput Ending Inventory Beginning InputOutput Ending

10. Learning Check How does a forecast differ from The Budget? Where does the planning process begin? © 201110

11. Demonstration Problem Planning assumptions Output goal is 10 Planned ending grill inventory is 0 Planned ending refrigerator inventory is 35 Planned ending freezer inventory is 20 Known facts Actual beginning grill inventory is 0 Actual beginning refrigerator inventory is 10 Actual beginning freezer inventory is 30 How many burgers should you plan to purchase and put into the freezer? © 201111 planned end states starting points planned action

12. Backward Chaining Demonstration Freezer Beg  Purchase ----------- End  To frig © 201112 Refrigerator Beg Defrost ----------- End  To grill

13. Backward Chaining Demonstration FreezerGrill Beg  Purchase ----------- End  To frig Beg 0 Cook 10 ----------- End 0 Beg 0 Cook 10 ----------- End 0 10  To table © 201113

14. Backward Chaining Demonstration Grill Beg 0 Cook 10 ----------- End 0 Beg 0 Cook 10 ----------- End 0 10  To table © 201114 Refrigerator Beg 10 Defrost 35 ----------- End 35 10  To grill

15. Bill of Materials Of course, the real world gets more complicated Rather than eating plain hamburgers you might specify the following bill of materials: Buns Cheese Pickles, onion, lettuce, and tomatoes Mustard, ketchup, mayo How would this affect your planning? © 201115

16. S’mores After the cookout you plan to make s’mores on the grill The bill of materials for each s’more is: 1 marshmallow 2 graham crackers 4 chocolate squares The process flow is: Pantry  Assembly  Grill © 201116

17. S’mores Planned production is 30 s’mores Beginning state of Assembly and Grill is zero units Planned ending state of Assembly and Grill is zero units © 201117

18. S’mores © 201118 Chocolate squares Grill Beg 30  Purchase 100 ----------- End 10 120 Beg 0 Cook ----------- End 0 Assembly Beg 0 Assemble ----------- End 0 Graham crackers Beg 6  Purchase 74 ----------- End 20 60 Marshmallows Beg 5  Purchase 37 ----------- End 12 30 Pantry

19. S’mores © 201119 Chocolate squares Beg 30  Purchase 100 ----------- End 10 120 Graham crackers Beg 6  Purchase 74 ----------- End 20 60 Marshmallows Beg 5  Purchase 37 ----------- End 12 30 Pantry

20. S’mores © 201120 Chocolate squares Grill Beg 30  Purchase 100 ----------- End 10 120 Beg 0 Cook 30 ----------- End 0 30  To table Assembly 30  To grill Graham crackers Beg 6  Purchase 74 ----------- End 20 60 Pantry 1 per unit

21. S’mores © 201121 Chocolate squares Grill Beg 30  Purchase 100 ----------- End 10 120 Beg 0 Cook 30 ----------- End 0 30  To table Assembly 30  To grill Marshmallows Beg 5  Purchase 37 ----------- End 12 Pantry 2 per unit

22. S’mores © 201122 Grill Beg 0 Cook 30 ----------- End 0 30  To table Assembly 30  To grill Graham crackers Beg 6  Purchase 74 ----------- End 20 60 Marshmallows Beg 5  Purchase 37 ----------- End 12 Pantry 4 per unit

23. Real World Complexities These simple concepts are applied through materials requirement planning (MRP) systems in much more complex situations Consider the complexities of: Automobile manufacturing Computer assembly Making and launching a space shuttle Can you see applications for ARFORGEN? © 201123 especially when you consider the lead times of purchasing and assembly!

24. But My Organization Doesn’t Have Inventory! What about staffing and training requirements? Ex. Air traffic controllers, Nuclear reactor operators Not having an adequate supply of trained workers can be costly Overtime, exhaustion, errors A “Just-in-Time” effort requires even more careful planning © 201124

25. Learning Check How does the Bill of Materials affect the materials planning process? What are the non-manufacturing applications of Materials Resource Planning? © 201125

26. Planning’s Impact on Cost Plans have financial consequences There are costs of our burger production process Fixed costs are energy and labor in this example Variable costs are dependent on the number of burgers produced Flexible Forecasting Uses same assumptions for fixed and variable costs per unit, only changing (flexing) volume © 201126

27. Flexible Forecast Example Assumptions: Fixed Cost = $20 Variable Cost per Burger = $5 © 201127

28. Flexible Forecast Example Assumptions: Fixed Cost = $20 Variable Cost per Burger = $5 © 201128

29. Flexible Forecast Example Assumptions: Fixed Cost = $20 Variable Cost per Burger = $5 © 201129

30. Flexible Forecast Example Assumptions: Fixed Cost = $20 Variable Cost per Burger = $5 © 201130

31. Flexible Forecast Example with Revenue Assumptions: Price per Unit = $10 Fixed Cost = $20 Variable Cost per Unit = $5 © 201131

32. Flexible Forecast Example with Revenue Assumptions: Price per Unit = $10 Fixed Cost = $20 Variable Cost per Unit = $5 © 201132

33. Learning Check How does total cost change as quantity produced increases? What is a flexible forecast? © 201133

34. Practical Exercise © 201134

35. Planning/Flexible Forecasting Spreadsheet © 201135 Enter basic cost information and various production levels to calculate the flexible forecast

36. Planning/Flexible Forecasting Spreadsheet © 201136 Enter Data in the Bill of Materials tab to calculate Production and Materials Purchase Plan

37. Practical Exercise Complete Practical Exercise © 201137