1 om3 chapter 13 resource management © 2012 cengage learning. all rights reserved. may not be...
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1OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
RESOURCE MANAGEMENT
CHAPTER 13
DAVID A. COLLIER AND JAMES R. EVANS
2OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
LO1 Describe the overall frameworks for resource planning framework in both goods-producing and service-providing organizations.
LO2 Explain options for aggregate planning.
LO3 Describe how to evaluate level production and chase demand strategies for aggregate planning.
LO4 Describe ways to disaggregate aggregate plans using master production scheduling and material requirements planning.
LO5 Explain the concept and application of capacity requirements planning.
3OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
t he corporate office just doesn’t get it! They set a budget
and staffing level that doesn’t fit this location. I can’t do the
work and ensure accuracy of the patient’s prescriptions when
the corporate office gives me an annual budget for only two
pharmacists and two pharmacy technicians,” exclaimed Bill
Carr, the manager of a retail pharmacy in a high-growth
suburban location. The store was part of a national
pharmaceutical chain with over 1,000 locations in the United
States. The pharmacy was open 16 hours a day on Monday
through Saturday and 10 hours on Sunday. Carr established
two shifts for these professionals but they were now
exhausted. The most senior pharmacist had already
threatened to quit if something wasn’t done to correct the
problem soon. Carr also had considered reducing the time the
store was open, but that would hurt store revenue.
4OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Think about planning a party or some student-related function. What resources do you need to pull it off, and how might you plan to ensure that you have everything at the right time and in the right quantity?
What do you think?
5OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
• Resource Management deals with the planning, execution, and control of all the resources that are used to produce goods or provide services in a value chain.
• Resources include materials, equipment, facilities, information, technical knowledge and skills, and of course, people.
Objectives:
1. Maximize profits and customer satisfaction.2. Minimize costs.3. Maximize benefits to stakeholders.
6OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.1
Framework for Resource Management Planning for Goods and Services
7OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Resource Planning Framework for Goods and Services
Aggregate planning is the development of a long-term output and resource plan in aggregate units of measure.
8OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Resource Planning Framework for Goods and Services
Disaggregation is the process of translating aggregate plans into short-term operational plans that provide the basis for weekly and daily schedules and detailed resource requirements.
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CHAPTER 13 RESOURCE MANAGEMENT
Resource Planning Framework for Goods and Services
Execution refers to moving work from one workstation to another, assigning people to tasks, setting priorities for jobs, scheduling equipment, and controlling processes.
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CHAPTER 13 RESOURCE MANAGEMENT
Resource Planning Framework for Goods and Services
• Most service organizations do not require as many levels of intermediate planning (Level 2) as goods-producing firms.
• Level 1 and 2 planning are often combined in service businesses.
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.2 Two Levels of Disaggregation for Many Service Organizations
12OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
13OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
- Demand management- Production-rate changes- Workforce changes- Inventory smoothing- Facilities, equipment, and transportation
Aggregate Planning Options
• Managers have a variety of options in developing aggregate plans in the face of fluctuating demand:
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.3
Example Aggregate Planning Variables and Revenue/Cost Implications
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CHAPTER 13 RESOURCE MANAGEMENT
Strategies for Aggregate Planning
• A level production strategy plans for the same production rate in each time period.
• A chase demand strategy sets the production rate equal to the demand in each time period.
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.4
Level Aggregate Production Plan for Golden Beverages
17OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.5
Chase Demand Strategy for Golden Beverages
18OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
19OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
• Three important techniques for disaggregating aggregate plans into executable operations plans:- Master production scheduling (MPS)- Materials requirements planning
(MRP)- Capacity requirements planning (CRP)
20OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.6
Disaggregation Framework for Manufacturing Plans and Schedules
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CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
Master Production Schedule (MPS)• A master production schedule (MPS)
is a statement of how many finished items are to be produced and when they are to be produced.
• Typically developed for weekly time periods over a 6- to 12-month horizon.
22OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.7 Eight-Week Master Production Schedule Example
23OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
Materials Requirements Planning (MRP)• Materials requirements planning (MRP) is
a forward-looking, demand-based approach for planning the production of manufactured goods and ordering materials and components to minimize unnecessary inventories and reduce costs.
• The output of an MRP system is a schedule for obtaining raw materials and purchased parts, a detailed schedule for manufacturing and controlling inventories, and financial information that drives cash flow, budget, and financial needs.
24OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
• MRP depends on understanding three basic concepts:
1. Dependent demand 2. Time-phasing
3. Lot sizing
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CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
• Dependent demand is demand that is directly related to the demand of other SKUs and can be calculated without needing to be forecasted.
• A bill of labor (BOL) is a hierarchical record analogous to a BOM that defines labor inputs necessary to create a good or service.
• End items are finished goods scheduled in the MPS or FAS that must be forecasted.
• A parent item is manufactured from one or more components.
• Components are any item (raw materials, manufactured parts, purchased parts) other than an end item that goes into a higher-level parent item(s).
• A subassembly always has at least one immediate parent and also has at least one immediate component.
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.8 Example of a Bill of Material and Dependent Demand
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.9 Dependent Demand Calculations
28OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
29OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
Time Phasing and Lot Sizing in MRP• Dependent demand requirements do not
need to be ordered at the same time, but are time-phased as needed.
• Orders may be consolidated to take advantage of ordering economies of scale; this is called lot sizing.
30OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
Time Phasing and Lot Sizing in MRP• MRP explosion is the process of using the
logic of dependent demand to calculate the quantity and timing of orders for all subassemblies and components that go into and support the production of finished goods.
• Time buckets are the time period size used in the MRP explosion process and usually are one week in length.
31OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
An MRP record consists of the following:• Gross requirements (GR) are the total demand for
an item derived from all of its parents. Scheduled or planned receipts (S/PR) are orders that are due or planned to be delivered.
• Planned order receipt (PORec) specifies the quantity and time an order is to be received.
• Planned order release (PORel) specifies the planned quantity and time an order is to be released to the factory or a supplier.
• Projected on-hand inventory (POH) is the expected amount of inventory on-hand at the beginning of the time period considering on-hand inventory from the previous period plus scheduled receipts or planned order receipts minus the gross requirements.
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CHAPTER 13 RESOURCE MANAGEMENT
Production of a single product (A), which requires the components B, C, and D.
Exhibit 13.10 Bill of Materials
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.11 Item Inventory File
Exhibit 13.12 Example MPS
34OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Disaggregation in Manufacturing
• Lot sizing is the process of determining the appropriate amount and timing of ordering to reduce costs.
Three common lot-sizing methods for MRP:
1. Lot-for-lot (LFL) 2. Fixed order quantity (FOQ) 3. Periodic order quantity (POQ)
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CHAPTER 13 RESOURCE MANAGEMENT
An ordering schedule that covers the gross requirements for each week is called lot-for-lot (LFL).
Exhibit 13.13 MRP Record for Item C Using the Lot-for-Lot (LFL) Rule
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CHAPTER 13 RESOURCE MANAGEMENT
The fixed order quantity (FOQ) rule uses a fixed order size for every order or production run.
Exhibit 13.14 Item B Fixed Order Quantity (FOQ) Lot Sizing MRP Record
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CHAPTER 13 RESOURCE MANAGEMENT
The periodic order quantity (POQ) orders a quantity equal to the gross requirement quantity in one or more predetermined time periods minus the projected on-hand quantity of the previous time period.
Exhibit 13.15 Item D Fixed Period Quantity (POQ) Lot Sizing and MRP Record
38OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.16
Summary of MRP Explosion for Bill of Materials in Exhibit in 13.10
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CHAPTER 13 RESOURCE MANAGEMENT
Capacity Requirements Planning (CRP)
• Capacity requirements planning (CRP) is the process of determining the amount of labor and machine resources required to accomplish the tasks of production on a more detailed level, taking into account all component parts and end items in the materials plan.
40OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
Capacity Requirements Planning (CRP)
• Capacity requirements are computed by multiplying the number of units scheduled for production at a work center by the unit resource requirements and then adding in the setup time.
Capacity required (Ci) = Setup time (Si) + [Processing time (Pi) Order size (Qi)]
• This is Equation 10.2 in Chapter 10.
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CHAPTER 13 RESOURCE MANAGEMENT
Exhibit 13.17 Work Center D Example Load Report
42OM3 Chapter 13 Resource Management© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 13 RESOURCE MANAGEMENT
In-Line Industries Case Study
1. Evaluate the costs of level and chase demand strategies.
2. Comment on potential operational and managerial impacts of these different strategies in a brief report not to exceed one page.
3. What strategy do you recommend and why?