1. Production Concepts

2. Let’s assume we are a manufacturer of bicycles What do we need to make a bicycle?

3. For example, to build this bicycle (an assembly), we need: Seat

4. For example, to build this bicycle (an assembly), we need: Seat Frame

5. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars

6. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars Brakes

7. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars Wheels (2) Brakes

8. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars Wheels (2) Brakes Tires (2)

9. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly

10. For example, to build this bicycle (an assembly), we need: Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly Chain

11. For example Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly Chain Gear Assembly

12. Bills of Materials bill of materials (BOM) - the term used to describe the "parts list" of components needed to build another assembled item or part.

13. SO, my BOM for this bicycle is: Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly Chain Gear Assembly

14. SO, my BOM for this bicycle is: Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly Chain Gear Assembly PART How Many Bicycle1 Seat1 Frame1 Handle Bars1 Brakes2 Wheels2 Tires2 Pedal Assembly1 Chain1 Gear Assembly1

15. But, two of the parts in this list are assemblies too: Seat Frame Handle Bars Wheels (2) Brakes Tires (2) Pedal Assembly Chain Gear Assembly

16. So, I have actually created 3 bills of materials (BOMs) Part How Many Bicycle1 Seat1 Frame1 Handle Bars1 Brakes2 Wheels2 Tires2 Pedal Assembly1 Chain 1 Gear Assembly1

17. With this BOM, building 2 bicycles would require: Sub-assembly

18. With this BOM, building 1000 bicycles would require:

19. Now, consider the factory where we build the bicycles Receiving Dock Inventory Storeroom General Assembly Area Shipping Dock Pedal Assembly Area Wheel Assembly Area Rims Pedals Seats Spokes Brakes Chains Frames WheelsH.B. Red denotes purchased inventory, Black denotes manufactured inventory

20. Purchased inventory is received at the receiving dock: Receiving Dock Inventory Storeroom General Assembly Area Shipping Dock Pedal Assembly Area Wheel Assembly Area Rims Pedals Seats Spokes Brakes Chains Frames WheelsH.B. Red denotes purchased inventory, Black denotes manufactured inventory

21. Sub-assemblies need to be manufactured before we begin manufacturing the bicycle Receiving Dock Inventory Storeroom General Assembly Area Shipping Dock Pedal Assembly Area Wheel Assembly Area Rims Pedals Seats Spokes Brakes Chains Frames WheelsH.B. Red denotes purchased inventory, Black denotes manufactured inventory

22. Lead Time For manufactured items, lead time is the period of time between the initiation of any process of production and the completion of that process. For vendor supplied items, lead time is the period of time between placing the order and its receipt.

23. Let’s make a bicycle! Let’s assume: ◦ bicycle lead time = 7 days ◦ wheel assembly lead time = 4 days ◦ pedal assembly lead time = 6 days ◦ rim order lead time = 14 days ◦ spokes order lead time = 20 days Need the bicycle by November 30

24. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. October (timeline) November 31 5 10 15 20 25 30 Bicycle

25. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle

26. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle

27. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. October (timeline) November 31 5 10 15 20 25 30 Wheels Bicycle Ped A

28. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. October (timeline) November 31 5 10 15 20 25 30 Ped A Spokes Wheels Bicycle

29. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. To insure we have the Rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. October (timeline) November 31 5 10 15 20 25 30 Ped A Rims Spokes Wheels Bicycle

30. Material Requirements Planning Materials Requirements Planning (MRP) is a systematic production planning and inventory management system used to manage manufacturing processes by meeting these three objectives: ◦ Ensure materials and products are available for production and delivery to customers. ◦ Maintain the lowest possible level of inventory. ◦ Plan manufacturing activities, delivery schedules and purchasing activities.

31. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the Rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. October (timeline) November 31 5 10 15 20 25 30 Ped A Rims Spokes Wheels Bicycle So if you tell your MRP system that you need a bicycle produced by November 30…

32. Here is the process Shop order is placed for a bicycle to be finished by November 30. Since lead time for the bicycle is 7 days, we need to begin the manufacturing process for the bicycle by November 23. Of course, all parts in the BOM need to be available as we start the process. To insure we have the wheels available on November 23, we need to create a shop order for the wheels on Nov. 17 since its lead time is 6 days. To insure we have the pedal assembly available on November 23, we need to create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days. To insure we have the rims before we build the wheel, we need to place an order with the vendor on Nov. 5 since it has a lead time of 14 days. To insure we have the spokes before we build the wheel, we need to place an order with the vendor on Oct. 31 since it has a lead time of 20 days. October (timeline) November 31 5 10 15 20 25 30 Ped A Rims Spokes Wheels Bicycle So if you tell your MRP system that you need a bicycle produced by November 30… It will handle the remaining steps to produce that bicycle.

33. Master Production Schedule The input to your MRP system is the Master Production Schedule (MPS). The MPS is the list of all shop orders for the company’s “end items.” An “end item” is an item that my company sells that is NOT used in another assembly (for example, the bicycle is an end item.)

34. It can be quite complicated… Suppose I make two types of bicycles, one blue and one green. PART How Many BicycleB1 Seat1 FrameB1 Handle Bars1 Brakes2 Wheels2 Tires2 Pedal Assembly1 Chain1 Gear Assembly1 PART How Many BicycleG1 Seat1 FrameG1 Handle Bars1 Brakes2 Wheels2 Tires2 Pedal Assembly1 Chain1 Gear Assembly1

35. Other complications What my company makes 150 different types of bicycles?

36. Other complications What my company makes 150 different types of bicycles? What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs ?

37. Other complications What my company makes 150 different types of bicycles? What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? What about items that have customer ordered options?

38. Other complications What my company makes 150 different types of bicycles? What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? What about items that have customer ordered options? What if there are other “end items” that are not really “end items”? For example, spare parts….

39. Other complications What my company makes 150 different types of bicycles? What if I’m a manufacturer of automobiles that have 70-80 levels in their BOMs? What about items that have customer ordered options? What if there are other “end items” that are not really “end items”? For example, spare parts…. I’m ultimately dependent upon my suppliers for some of the purchased items that are crucial to my production schedule. Wouldn’t it be nice if I could work closely with them to manage our relationship to mutual benefit.?