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Supply Management, MRP 1 & Just-in-time

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Issues Resource Usage

Quality Speed Flexibility Cost

make or buy (contract out market-based purchasing? supply partnerships?

Reliabiity rmance objectives


Supply network relationships

Market competitiv

Process technology

Capacity Decisions

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On being a supply network manager

Strategy Concepts Supply Network Relationships


Vertical Integration Partnerships Market trading

Supply Network Behaviour Network dynamics Quantitative Qualitative Network Management Coordinate Differentiate Reconfigure

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What are Supply Networks?

supply networks vs. supply chains buyer-supplier relationship a supply network is a system of organisations connected by server-client links - upstream/downstream - that service processes & activities (operations) bringing added value to each client and ultimately the end customer.

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Flows of products, services & information


Supply side second-tier suppliers first-tier suppliers Demand side first-tier customers second-tier customers

Company B

p stream

Company C

Down str
X X

X X X
For Company A Internal supply network Immediate supply network Total supply network

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Measuring Supply Chain Performance

Delivery Quality Time Cost

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Structural Improvement

Basic Ways to Improve Supply Chain Structure:


Change structure o Capacity, Facilities, Process technology, vertical integration Change infrastructure o People, Information systems, Organization, Production and inventory control, Quality control systems

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Forms of Structural Change

Forward and Backward Integration Major process simplification Changing the configuration of factories, warehouses, or retail locations Major product redesign Outsourcing logistics to a third party.

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Supply relationships

a company can trade with first tier and second tier customers at the same time - but consider the % balance of each immediate suppliers vs suppliers of suppliers in the total network relationships between companies in the network need not be exclusive - multi-sourcing. Company C - seems to single source (exclusive supply) item X Types of relationship:
o

close and intimate? Make or contract in (outsource)? What items: strategic, trivial? Many suppliers or a few. Keiretsu? Transactional (arms-length only) or collaborative? Loyalty in buyers and sellers markets?

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From Aggregate to MPS to MRP1


Aggregate Plan (product groups) Firm orders MRP2 Forecast random orders

Design changes

Master production schedule Time-phased plan (MPS) how many + when we will build each end item. MRP1 Inventory record

Bill of material

Reports

Stock movements

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Material Requirements Planning

dependent demand info. system to determine o No. of parts, components, materials needed for a product order scheduling information - dates when o orders for materials should be released, based on lead times. o batches of materials, parts, components should be ordered/produced based on a master production schedule (MPS)

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Inventory Records Data

Bill of Materials complete product description


o o o o o

materials parts components production sequence modular BOM subassemblies planning BOM fractional options

Inventory record status according to time windows or buckets identify each parent item that created demand

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Product Structure Tree

No. of components for each product + when needed.


Lead Times A 1 week B 2 wks C 1 wk D 3 wks E 4 wks F 1 wk Demand wk 10 50 A wk 8 20 B (Spares) wk 6 15 D (Spares)

A B(4) D(2 ) E(1) D(3 ) C(2 ) F(2)

Product Structure Tree for Assembly A from bill of materials

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Material Requirements Planning

1. Schedule no. of units of A backwards to allow for lead time. 2. place order for 50 of A at week 8 to receive in week 10

Week: A Required Order Placement

9 50

10 50

Lot sizing Lot-for-lot (L4L) Economic order quantity (EOQ) Least total cost (LTC) Least unit cost (LUC)

LT = 1 week

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MRP
Week: A Required Order Placement B Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 10 50

20 20 200

surplus
schedule components of A. 4 Bs in each A (50x4) = 200Bs. back the schedule up for 2 weeks lead time.

LT = 2

A B(4)

C(2 )
E(1) D(3 ) F(2)

D(2 )

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MRP
Week: A LT=1 B LT=2 C LT=1 D LT=3 E LT=4 F LT=1 Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement Required Order Placement 1 2 3 4 5 6 7 8 9 50 200 100 55 55 20 200 200 200 400 300 20 200 400 100 300 10 50

20

20

200

A B(4) D(2 ) E(1) D(3 ) C(2 ) F(2)

Part D: Wk 6 40 + 15 spares

Repeat for all components ==> final MRP

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Time Fencing

Frozen o No schedule changes allowed within the time frame Moderately Firm o Specific changes allowed within product groups as long as parts are available. Flexible o Significant variation allowed as long as overall capacity requirements remain at the same levels.

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MRP Reports & Information Primary


o o o

o
o o

Planned orders - to release at a future time. Order release notices - execute planned orders Changes in due dates of open orders due to rescheduling Cancellations or suspensions of open orders due to cancellation or suspension in the MPS. Stock status data Planning reports e.g. forecasting inventory requirements over time. Performance reports e.g. actual vs. planned usage and costs. Exception reports e.g. serious discrepancies, late/overdue orders.

Secondary
o
o

Gross Requirements On-hand Net requirements Planned order receipt Planned order release

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MRP Example

X A(2) C(3 )
Spares

Item

On-Hand Lead Time (Weeks)

B(1)

X A B C D

50 75 25 10 20

2 3 1 2 2

C(2 )
1 2

D(5 )
3 4

Requirements include 95 units (80 firm orders and 15 forecast) of X in wk 10 plus the following spares:
5 6 7 7 10 8 9 12 10

A B C D

15

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MRP Example

C Gross Requirements LT=2 On-Hand=10 Net Requirements Planned Order Receipt Planner Order Release D Gross Requirements LT=2 On-Hand=20 Net Requirements Planned Order Receipt Planner Order Release

45 10 35 35 35 36

36 36 36 64 15 15

64 64 64 135 5 130 130

130

X A(2) C(3 ) B(1)

C(2 )

D(5 )

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Operating an MRP System

Should MRP carry safety stock? How much safety stock should be carried? Issue of safety lead time Danger of informal system driving out the formal system Expansion of MRP to other functions (finance, HRM, etc.) of business

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Manufacturing Resource Planning - MRP 2

Goal: Plan & monitor all resources of a manufacturing firm (closed loop):
o o o o

manufacturing marketing finance engineering

Simulate the manufacturing system

ERP

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JIT Requirements

Work with suppliers


reduce lead times frequent deliveries project usage requirements quality standards

Reduce inventory including o stores o WIP + W in transit o carousels & conveyors

Problem-solving
Root problem Long-term solution Team contribution Line-specialist cooperation Learning Measure performance CQI Monitor & report

Product Design Improvement


DFM & process design Modules & fewer parts Quality standards

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