Chapter 14

Resource
Planning
 Enterprise Resource
Planning (ERP)
 Organizes and manages a
company’s business processes by
sharing information across functional
areas
 Connects with supply-chain and
customer management applications
 Largest ERP provider SAP
ERP Modules
ERP Implementation
 First step is to analyze business
processes
 Which processes have the biggest
impact on customer relations?
 Which process would benefit the most
from integration?
 Which processes should be
standardized?
Customer Relationship
Management (CRM)
 Plans and executes business
processes that involve customer
interaction
 Changes focus from managing
products to managing customers
 Point-of-sale data is analyzed for
patterns used to predict future
behavior
Supply Chain Management

 Supply chain planning

 Supply chain execution
 Supplier relationships
 Distinctions between ERP and SCM
are becoming increasingly blurred
 ERP and MRP
 MRP (material requirements planning)
was the precursor to ERP
 Primarily a production planning and
control system
 MRP evolved to MRP II (manufacturing
resource planning)
 ERP and ERP II continue to extend the
links through all business processes
Material Requirements
Planning
 Computerized inventory control &
production planning system

 Schedules component items when

they are needed - no earlier and no
later
 When to Use MRP
 Dependent and discrete items
 Complex products
 Job shop production
 Assemble-to-order environments
Material Master

Requirements production
schedule

Planning
Product Material Item
structure requirements master
file planning file

Planned
order
releases

Work Purchase Rescheduling

orders orders notices
 Master Production
Schedule
 Drives MRP process with a schedule of
finished products
 Quantities represent production not demand
 Quantities may consist of a combination of
customer orders & demand forecasts
 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
Work orders
Purchase orders
 Changes to previous plans or
existing schedules
Action notices
Rescheduling notices
Capacity Requirements
Planning (CRP)

 Computerized system that projects

load from material plan
 Creates load profile
 Identifies underloads and overloads
 Capacity Terms
 Load profile
Compares released and planned orders
with work center capacity
 Capacity
Productive capability; includes utilization
and efficiency
 Utilization
% of available working time spent
working
More Capacity Terms
 Efficiency – how well the machine
or worker performs compared to
a standard output
 Load
The standard hours of work
assigned to a facility
 Load percent
The ratio of load to capacity
Load % = (load/capacity)x100%
Capacity Requirements
Planning
MRP planned
order
releases

Capacity Open
Routing
requirements orders
file
planning file

Load profile for

each machine center
 Initial Load Profile
120 –
110 –
100 –
Hours of capacity

90 –
80 –
70 –
60 –
50 –
40 –
Normal
capacity
30 –
20 –
10 –
0–
1 2 3 4 5 6
Time (weeks)
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
120 –
110 –
100 –
Hours of capacity

90 –
80 –
70 – Work
an
60 – extra Push back
Pull ahead
50 – shift
Overtime Push back Normal
40 –
capacity
30 –
20 –
10 –
0–
1 2 3 4 5 6
Time (weeks)
Chapter 16

Scheduling
 Scheduling
 Specifies when labor, equipment,
facilities are needed to produce a
product or provide a service

 Last stage of planning before

production occurs
 Scheduling by
Process Type
 Process Industry
 Linear programming
 EOQ with noninstantaneous replenishment
 Mass Production
 Assembly line balancing
 Project
 Project -scheduling techniques (PERT, CPM)
Objectives in Scheduling
 Meet customer due dates
 Minimize job lateness
 Minimize response time
 Minimize completion time
 Minimize time in the system
 Minimize overtime
 Maximize machine or labor utilization
 Minimize idle time
 Minimize work-in-process inventory
 Efficiency
 Shop Floor Control
Scheduling and monitoring day to day production of a job

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
 Loading
 Allocate work to machines
(resources)
 Perform work on most efficient
resources
 Use assignment method of linear
programming to determine allocation
 Sequencing
 Prioritize jobs assigned to a resource
 If no order specified use first-come
first-served (FCFS)
 Many other sequencing rules exist
 Each attempts to achieve to an
objective
 Sequencing Rules
 FCFS - first-come, first-served
 LCFS - last come, first served
 DDATE - earliest due date
 CUSTPR - highest customer priority
 SETUP - similar required setups
 SLACK - smallest slack
 CR - critical ratio
 SPT - shortest processing time
 LPT - longest processing time
 Critical Ratio Rule
CR considers both time and work remaining
time remaining due date - today’s date
CR = work remaining = remaining processing time

If CR > 1, job ahead of schedule

If CR < 1, job behind schedule
If CR = 1, job on schedule
Ties scheduling to Gantt Chart or PERT/CPM
and project crashing
Sequencing Jobs Through
Many Machines/Processes
 Facility is dynamic, new jobs added
 Develop global sequencing rules
First-in-system, first-served (FISFS)
Work-in-next-queue (WINQ)
Fewest # remaining operations (NOPN)
Slack per remaining operation (S/OPN)
Remaining work (RWK)
 Study system via simulation
 Monitoring
 Gantt Chart
Shows both planned and completed
activities against a time scale

 Input / Output Control

Monitors the input and output from
each work center
Advanced Planning and
Scheduling Systems
 Infinite - assumes infinite capacity
 Loads without regard to capacity
 Then levels the load and sequences jobs
 Finite - assumes finite (limited) capacity
 Sequences jobs as part of the loading
decision
 Resources are never loaded beyond capacity
 Advanced Planning and
Scheduling Systems
 Advanced planning and scheduling (APS)
 Add-ins to ERP systems
 Constraint-based programming (CBP) identifies a
solution space and evaluates alternatives
 Genetic algorithms based on natural selection
properties of genetics
 Manufacturing execution system (MES) monitors
status, usage, availability, quality
 Theory of Constraints
 Not all resources are used evenly
 Concentrate on the “bottleneck”
resource
 Synchronize flow through the
bottleneck
 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
 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
 What Is Quality?
 “The degree of excellence of a thing”
(Webster’s Dictionary)
 “The totality of features and
characteristics that satisfy needs”
(ASQ)
 Fitness for use
 Quality of design
 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
• 1-10-100 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
1. Features
 “Extra” items added to basic features
1. Reliability
 Probability product will operate over time
Dimensions of Quality (Garvin)

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

7. Aesthetics
 Look, feel, sound, smell or taste
7. Safety
 Freedom from injury or harm
7. Other perceptions
 Subjective perceptions based on
brand name, advertising, etc
 Service Quality
1. Time & Timeliness
 Customer waiting time, completed on
time
1. Completeness
 Customer gets all they asked for
1. Courtesy
 Treatment by employees
 Service Quality
4. Consistency
 Same level of service for all customers
4. Accessibility & Convenience
 Ease of obtaining service
4. Accuracy
 Performed right every time
4. Responsiveness
 Reactions to unusual situations
 Quality of
Conformance
 Ensuring product or service
produced according to design
 Depends on
Design of production process
Performance of machinery
Materials
Training
 Quality Philosophers
 Walter Shewhart – Statistical Process Control
 W. Edwards Deming
 Joseph Juran – strategic and planning based
 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)

4. Act 1. Plan
Institutionalize Identify the
improvement; problem and
continue the develop the
cycle. plan for
improvement.

3. Study/Check 2. Do
Assess the plan; is Implement the
it working? plan on a test
basis.

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 Made Famous by
• Analyze General Electric
• Improve 40% of GE executives’
bonuses tied to 6 sigma
• Control 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
 Clear strategic goal, vision, mission
 High quality goals
 Operational plans & policies
 Feedback mechanism
 Strong leadership
TQM in Service Companies

 Inputs similar to manufacturing

 Processes & outputs are different
 Services tend to be labor intensive
 Quality measurement is harder
 Timeliness is important measure
 TQM principles apply to services
 Cost of Quality
Cost of achieving good quality
Prevention
 Planning, Product design, Process,
Training, Information
Appraisal
 Inspection and testing,
Test equipment,
Operator
 Cost of Quality
Cost of poor quality
Internal failure costs
 Scrap, Rework, Process failure,
Process downtime, Price-
downgrading
External failure costs
 Customer complaints,
Product return,
Warranty, Product
liability, Lost sales
 Employees and
Quality Improvement
 Employee involvement
 Quality circles
 Process improvement teams
 Employee suggestions
Cause-and-Effect Diagram
Measurement
Measurement Human
Human Machines
Machines
Faulty
testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Quality
Inaccurate Problem
Problem
temperature
control Defective from vendor Poor process design
Ineffective quality
Not to specifications management
Dust and Dirt Material- Deficiencies
handling problems in product design

Environment
Environment Materials
Materials Process
Process

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
 Certification required by many foreign firms
 U.S. firms export more than
$150 billion annually to Europe
 Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others
 ISO Accreditation
 European registration
 3rd party registrar assesses quality program
 European Conformity (CE) mark authorized
 United States 3rd party registrars
 American National Standards Institute (ANSI)
 American Society for Quality (ASQ)
 Registrar Accreditation Board (RAB)
 Upcoming
• Final Exam
• Harley Paper