chapter 13 resource planning. enterprise resource planning (erp) organizes and manages a company’s...

Chapter 13Chapter 13

Resource Resource PlanningPlanning

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

Organizes and manages a Organizes and manages a company’s business processes by company’s business processes by sharing information across sharing information across functional areasfunctional areas

Connects with supply-chain and Connects with supply-chain and customer management customer management applicationsapplications

Largest ERP provider SAPLargest ERP provider SAP

ERP’s Central DatabaseERP’s Central DatabaseFinance &

Accounting

Sales &

Marketing

Human Resources

Production & Materials

ManagementERP Data

Repository

ERP ImplementationERP Implementation First step is to analyze business First step is to analyze business

processesprocesses Which processes have the biggest Which processes have the biggest

impact on customer relations?impact on customer relations? Which process would benefit the Which process would benefit the

most from integration?most from integration? Which processes should be Which processes should be

standardized?standardized?

Customer Relationship Customer Relationship Management (CRM)Management (CRM)

Plans and executes business Plans and executes business processes that involve customer processes that involve customer interactioninteraction

Changes focus from managing Changes focus from managing products to managing customersproducts to managing customers

Point-of-sale data is analyzed for Point-of-sale data is analyzed for patterns used to predict future patterns used to predict future behaviorbehavior

Supply Chain ManagementSupply Chain Management

Supply chain planningSupply chain planningSupply chain executionSupply chain executionSupplier relationshipsSupplier relationshipsDistinctions between ERP and Distinctions between ERP and

SCM are becoming increasingly SCM are becoming increasingly blurredblurred

ERP and MRPERP and MRP MRP (material requirements planning) MRP (material requirements planning)

was the precursor to ERPwas the precursor to ERP Primarily a production planning and Primarily a production planning and

control systemcontrol system MRP evolved to MRP II (manufacturing MRP evolved to MRP II (manufacturing

resource planning)resource planning) ERP and ERP II continue to extend the ERP and ERP II continue to extend the

links through all business processeslinks through all business processes

Material Requirements Material Requirements PlanningPlanning

Computerized inventory control & Computerized inventory control & production planning systemproduction planning system

Schedules component items when Schedules component items when they are needed - no earlier and no they are needed - no earlier and no laterlater

When to Use MRPWhen to Use MRP

Dependent and discrete itemsDependent and discrete itemsComplex productsComplex productsJob shop productionJob shop productionAssemble-to-order environmentsAssemble-to-order environments

Material Material Requirements Requirements PlanningPlanning

Materialrequirements

planning

Planned order

releases

Work orders

Purchase orders

Rescheduling notices

Itemmaster

file

Productstructure

file

Master production schedule

Master Production Master Production ScheduleSchedule

Drives MRP process with a schedule of Drives MRP process with a schedule of finished productsfinished products

Quantities represent production not Quantities represent production not demanddemand

Quantities may consist of a combination of Quantities may consist of a combination of customer orders & demand forecastscustomer orders & demand forecasts

Quantities represent what needs to be Quantities represent what needs to be produced, not what can be producedproduced, not what can be produced

Basic MRP Basic MRP ProcessesProcesses

1.1. Exploding the bill of materialExploding the bill of material

2.2. Netting out inventoryNetting out inventory

3.3. Lot sizingLot sizing

4.4. Time-phasing requirementsTime-phasing requirements

MRP OutputsMRP Outputs

Planned ordersPlanned ordersWork ordersWork ordersPurchase ordersPurchase orders

Changes to previous plans or Changes to previous plans or existing schedulesexisting schedules

Action noticesAction noticesRescheduling noticesRescheduling notices

Capacity Requirements Capacity Requirements Planning (CRP)Planning (CRP)

Computerized system that projects Computerized system that projects load from material planload from material plan

Creates load profileCreates load profile

Identifies underloads and overloadsIdentifies underloads and overloads

Capacity TermsCapacity TermsLoad profileLoad profile

Compares released and planned Compares released and planned orders with work center capacity orders with work center capacity

CapacityCapacityProductive capability; includes Productive capability; includes

utilization and efficiencyutilization and efficiencyUtilizationUtilization

% of available working time spent % of available working time spent workingworking

More Capacity TermsMore Capacity Terms

Efficiency – how well the Efficiency – how well the machine or worker performs machine or worker performs compared to a standard outputcompared to a standard output

LoadLoadThe standard hours of work The standard hours of work

assigned to a facilityassigned to a facility

Load percentLoad percentThe ratio of load to capacityThe ratio of load to capacity

Load % = Load % = ((load/capacityload/capacity)x100%)x100%

Capacity Requirements Capacity Requirements PlanningPlanning

MRP plannedorder

releases

Routingfile

Capacityrequirements

planning

Openorders

file

Load profile foreach machine center

Initial Load ProfileInitial Load ProfileH

ou

rs o

f ca

pac

ity

Ho

urs

of

cap

acit

y

11 22 33 44 55 66

Time (weeks)Time (weeks)

NormalNormalcapacitycapacity

120 120 –

110 110 –

100 100 –

90 90 –

80 80 –

70 70 –

60 60 –

50 50 –

40 40 –

30 30 –

20 20 –

10 10 –

0 0 –

Remedies for UnderloadsRemedies for Underloads

1.1. Acquire more workAcquire more work

2.2. Pull work ahead that is scheduled Pull work ahead that is scheduled for later time periodsfor later time periods

3.3. Reduce normal capacityReduce normal capacity

Remedies for OverloadsRemedies for Overloads1.1. Eliminate unnecessary requirementsEliminate unnecessary requirements

2.2. Reroute jobs to alternative machines or Reroute jobs to alternative machines or work centerswork centers

3.3. Split lots between two or more machinesSplit lots between two or more machines

4.4. Increase normal capacityIncrease normal capacity

5.5. SubcontractSubcontract

6.6. Increase the efficiency of the operationIncrease the efficiency of the operation

7.7. Push work back to later time periodsPush work back to later time periods

8.8. Revise master scheduleRevise master schedule

Adjusted Load ProfileAdjusted Load ProfileH

ou

rs o

f ca

pac

ity

Ho

urs

of

cap

acit

y

11 22 33 44 55 66

Time (weeks)Time (weeks)

NormalNormalcapacitycapacity

120 120 –

110 110 –

100 100 –

90 90 –

80 80 –

70 70 –

60 60 –

50 50 –

40 40 –

30 30 –

20 20 –

10 10 –

0 0 –

Pull aheadPull aheadPush backPush back

Push backPush backOvertime

Work an

extra shift

Chapter 16Chapter 16

SchedulingScheduling

SchedulingScheduling

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

Last stage of planning before Last stage of planning before production occursproduction occurs

Scheduling by Scheduling by Process TypeProcess Type

Process IndustryProcess Industry Linear programmingLinear programming EOQ with noninstantaneous replenishmentEOQ with noninstantaneous replenishment

Mass ProductionMass Production Assembly line balancingAssembly line balancing

ProjectProject Project -scheduling techniques (PERT, CPM)Project -scheduling techniques (PERT, CPM)

Objectives in SchedulingObjectives in Scheduling Meet customer due datesMeet customer due dates Minimize job latenessMinimize job lateness Minimize response timeMinimize response time Minimize completion timeMinimize completion time Minimize time in the systemMinimize time in the system Minimize overtimeMinimize overtime Maximize machine or labor utilizationMaximize machine or labor utilization Minimize idle timeMinimize idle time Minimize work-in-process inventoryMinimize work-in-process inventory EfficiencyEfficiency

Shop Floor ControlShop Floor Control

1.1. Loading - Check availability of Loading - Check availability of material, machines & labormaterial, machines & labor

2.2. Sequencing - Release work orders Sequencing - Release work orders to shop & issue dispatch lists for to shop & issue dispatch lists for individual machinesindividual machines

3.3. Monitoring - Maintain progress Monitoring - Maintain progress reports on each job until it is reports on each job until it is completecomplete

Scheduling and monitoring day to day production of a jobScheduling and monitoring day to day production of a job

LoadingLoadingAllocate work to machines Allocate work to machines

(resources)(resources)Perform work on most efficient Perform work on most efficient

resourcesresourcesUse assignment method of linear Use assignment method of linear

programming to determine programming to determine allocationallocation

SequencingSequencing

Prioritize jobs assigned to a Prioritize jobs assigned to a resourceresource

If no order specified use first-come If no order specified use first-come first-served (FCFS)first-served (FCFS)

Many other sequencing rules existMany other sequencing rules existEach attempts to achieve to an Each attempts to achieve to an

objectiveobjective

Sequencing RulesSequencing Rules

FCFS - first-come, first-servedFCFS - first-come, first-served LCFS - last come, first servedLCFS - last come, first served DDATE - earliest due dateDDATE - earliest due date CUSTPR - highest customer priorityCUSTPR - highest customer priority SETUP - similar required setupsSETUP - similar required setups SLACK - smallest slackSLACK - smallest slack CR - critical ratioCR - critical ratio SPT - shortest processing timeSPT - shortest processing time LPT - longest processing timeLPT - longest processing time

Critical Ratio RuleCritical Ratio Rule

CR considers both time and work remainingCR considers both time and work remaining

CR = =CR = =

If CR > 1, job ahead of scheduleIf CR > 1, job ahead of scheduleIf CR < 1, job behind scheduleIf CR < 1, job behind scheduleIf CR = 1, job on scheduleIf CR = 1, job on schedule

time remainingtime remaining due date - today’s datedue date - today’s date

work remainingwork remaining remaining processing timeremaining processing time

Ties scheduling to Gantt Chart or PERT/CPMTies scheduling to Gantt Chart or PERT/CPMand project crashingand project crashing

Sequencing Jobs Through Sequencing Jobs Through Many Machines/ProcessesMany Machines/ProcessesFacility is dynamic, new jobs addedFacility is dynamic, new jobs addedDevelop global sequencing rulesDevelop global sequencing rules

First-in-system, first-served (FISFS)First-in-system, first-served (FISFS)Work-in-next-queue (WINQ)Work-in-next-queue (WINQ)Fewest # remaining operations (NOPN)Fewest # remaining operations (NOPN)Slack per remaining operation (S/OPN)Slack per remaining operation (S/OPN)Remaining work (RWK)Remaining work (RWK)

Study system via simulationStudy system via simulation

MonitoringMonitoring

Gantt ChartGantt ChartShows both planned and completed Shows both planned and completed

activities against a time scaleactivities against a time scale

Input / Output ControlInput / Output ControlMonitors the input and output from Monitors the input and output from

each work centereach work center

Advanced Planning and Advanced Planning and Scheduling SystemsScheduling Systems

Infinite - assumes infinite capacityInfinite - assumes infinite capacity Loads without regard to capacityLoads without regard to capacity Then levels the load and sequences jobsThen levels the load and sequences jobs

Finite - assumes finite (limited) capacityFinite - assumes finite (limited) capacity Sequences jobs as part of the loading Sequences jobs as part of the loading

decisiondecision Resources are never loaded beyond Resources are never loaded beyond

capacitycapacity

Advanced Planning and Advanced Planning and Scheduling SystemsScheduling Systems

Advanced planning and scheduling (APS)Advanced planning and scheduling (APS) Add-ins to ERP systemsAdd-ins to ERP systems Constraint-based programming (CBP) Constraint-based programming (CBP)

identifies a solution space and evaluates identifies a solution space and evaluates

alternativesalternatives Genetic algorithms based on natural selection Genetic algorithms based on natural selection

properties of geneticsproperties of genetics Manufacturing execution system (MES) Manufacturing execution system (MES)

monitors status, usage, availability, qualitymonitors status, usage, availability, quality

Theory of ConstraintsTheory of Constraints

Not all resources are used evenlyNot all resources are used evenlyConcentrate on the “bottleneck” Concentrate on the “bottleneck”

resourceresourceSynchronize flow through the Synchronize flow through the

bottleneckbottleneckUse process and transfer batch sizes Use process and transfer batch sizes

to move product through facilityto move product through facility

Theory of ConstraintsTheory of Constraints

• What to Change

• What to Change to

• How to cause the change

Chapter 4Chapter 4

Quality Quality ManagementManagement

Quality is a measure of goodness that is inherent to a product or service.

Bottom line: perspective has to be from theCustomer – fitness for use

Out of the CrisisOut of the Crisis• “Failure of management to plan for

the future and to foresee problems has brought about waste of manpower, of materials, and of machine-time, all of which raise the manufacturer’s cost and price that the purchaser must pay.

More DemingMore Deming• The consumer is not always willing to

subsidize this waste. The inevitable result is loss of market. Loss of market begets unemployment. Performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by the quarterly dividend….

Deming’s solutionDeming’s solution

• The basic cause of sickness in American industry and resulting unemployment is failure to top management to manage. He that sells not can buy not.”

• The job of management is inseparable from the welfare of the company.

““The degree of excellence of a The degree of excellence of a thing” (Webster’s Dictionary)thing” (Webster’s Dictionary)

““The totality of features and The totality of features and characteristics that satisfy needs” characteristics that satisfy needs” (ASQ)(ASQ)

Fitness for useFitness for use

Quality of designQuality of design

What Is Quality?What Is Quality?

QualityQuality

• Quality Management – not owned by any functional area – cross functional

• Measure of goodness that is inherent to a product or service

FedEx and QualityFedEx 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 Product Quality DimensionsDimensions

• 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)Dimensions of Quality (Garvin)

1.1. Performance Performance Basic operating characteristicsBasic operating characteristics

2.2. Features Features ““Extra” items added to basic featuresExtra” items added to basic features

3.3. Reliability Reliability Probability product will operate over Probability product will operate over

timetime

Dimensions of Quality (Garvin)Dimensions of Quality (Garvin)

4.4. Conformance Conformance Meeting pre-established standardsMeeting pre-established standards

5.5. Durability Durability Life span before replacement Life span before replacement

6.6. Serviceability Serviceability Ease of getting repairs, speed & Ease of getting repairs, speed &

competence of repairscompetence of repairs

Dimensions of Quality (Garvin)Dimensions of Quality (Garvin)

7.7. AestheticsAesthetics Look, feel, sound, smell or tasteLook, feel, sound, smell or taste

8.8. SafetySafety Freedom from injury or harmFreedom from injury or harm

9.9. Other perceptionsOther perceptions Subjective perceptions based on Subjective perceptions based on

brand name, advertising, etcbrand name, advertising, etc

1.1. Time & Timeliness Time & Timeliness Customer waiting time, completed Customer waiting time, completed

on timeon time

2.2. Completeness Completeness Customer gets all they asked forCustomer gets all they asked for

3.3. CourtesyCourtesy Treatment by employeesTreatment by employees

Service QualityService Quality

4.4. ConsistencyConsistency

Same level of service for all customers Same level of service for all customers

5.5. Accessibility & Convenience Accessibility & Convenience Ease of obtaining serviceEase of obtaining service

6.6. AccuracyAccuracy Performed right every timePerformed right every time

7.7. ResponsivenessResponsiveness Reactions to unusual situationsReactions to unusual situations

Service QualityService Quality

Quality of Quality of ConformanceConformance

Ensuring product or service Ensuring product or service produced according to designproduced according to design

Depends onDepends onDesign of production processDesign of production processPerformance of machineryPerformance of machineryMaterialsMaterialsTrainingTraining

Quality PhilosophersQuality Philosophers Walter Shewhart – Statistical Process Walter Shewhart – Statistical Process

ControlControl W. Edwards DemingW. Edwards Deming Joseph Juran – strategic and planning basedJoseph Juran – strategic and planning based Armand Fiegenbaum – total quality control Armand Fiegenbaum – total quality control

“entire business must be involved in quality “entire business must be involved in quality improvement”improvement”

Deming’s 14 PointsDeming’s 14 Points1.1. Create constancy of purposeCreate constancy of purpose

2.2. Adopt philosophy of preventionAdopt philosophy of prevention

3.3. Cease mass inspectionCease mass inspection

4.4. Select a few suppliers based on Select a few suppliers based on qualityquality

5.5. Constantly improve system and Constantly improve system and workersworkers

6.6. Institute worker trainingInstitute worker training

Deming’s 14 PointsDeming’s 14 Points

7.7. Instill leadership among Instill leadership among supervisorssupervisors

8.8. Eliminate fear among employeesEliminate fear among employees9.9. Eliminate barriers between Eliminate barriers between

departmentsdepartments10.10. Eliminate slogansEliminate slogans11.11. Remove numerical quotasRemove numerical quotas

Deming’s 14 PointsDeming’s 14 Points

12.12. Enhance worker prideEnhance worker pride

13.13. Institute vigorous training and Institute vigorous training and education programseducation programs

14.14. Develop a commitment from top Develop a commitment from top management to implement these management to implement these 13 points13 points

The Deming WheelThe Deming Wheel(or PDCA Cycle)(or PDCA Cycle)

1. PlanIdentify the problem and develop the plan for improvement.

2. DoImplement the plan on a test basis.

3. Study/CheckAssess the plan; is it working?

4. ActInstitutionalize improvement; continue the cycle.

Also known as the Shewart CycleAlso known as the Shewart Cycle

Six SigmaSix 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 SigmaSix SigmaStarted By MotorolaStarted By Motorola

• Define

• Measure

• Analyze

• Improve

• Control

Made Famous by Made Famous by General ElectricGeneral Electric40% of GE executives’40% of GE executives’bonuses tied to 6 sigmabonuses tied to 6 sigmaimplementation implementation

Malcolm Baldrige Malcolm Baldrige National Quality Award 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 ManagementTotal Quality Management

1.1. Customer defined qualityCustomer defined quality2.2. Top management leadershipTop management leadership3.3. Quality as a strategic issueQuality as a strategic issue4.4. All employees responsible for qualityAll employees responsible for quality5.5. Continuous improvementContinuous improvement6.6. Shared problem solvingShared problem solving7.7. Statistical quality controlStatistical quality control8.8. Training & education for all employeesTraining & education for all employees

Strategic Implications of Strategic Implications of TQMTQM

Quality is key to effective strategyQuality is key to effective strategyClear strategic goal, vision, missionClear strategic goal, vision, missionHigh quality goalsHigh quality goalsOperational plans & policiesOperational plans & policiesFeedback mechanismFeedback mechanismStrong leadershipStrong leadership

TQM in Service CompaniesTQM in Service Companies

Inputs similar to manufacturingInputs similar to manufacturingProcesses & outputs are differentProcesses & outputs are differentServices tend to be labor intensiveServices tend to be labor intensiveQuality measurement is harderQuality measurement is harderTimeliness is important measureTimeliness is important measureTQM principles apply to servicesTQM principles apply to services

Cost of QualityCost of Quality

Cost of achieving good qualityCost of achieving good qualityPreventionPrevention

Planning, Product design, Planning, Product design, Process, Training, InformationProcess, Training, Information

AppraisalAppraisal Inspection and testing, Inspection and testing,

Test equipment, Test equipment, OperatorOperator

Cost of QualityCost of QualityCost of poor qualityCost of poor quality

Internal failure costsInternal failure costs Scrap, Rework, Process failure, Scrap, Rework, Process failure,

Process downtime, Price-Process downtime, Price-downgradingdowngrading

External failure costsExternal failure costs Customer complaints, Customer complaints,

Product return, Product return, Warranty, Product Warranty, Product liability, Lost salesliability, Lost sales

Employees and Employees and Quality ImprovementQuality Improvement

Employee involvementEmployee involvementQuality circlesQuality circlesProcess improvement teamsProcess improvement teamsEmployee suggestionsEmployee suggestions

Cause-and-Effect Diagram Cause-and-Effect Diagram

QualityProblemQuality

Problem

Out of adjustmentOut of adjustment

Tooling problemsTooling problems

Old / wornOld / worn

MachinesMachinesFaultyFaulty testing equipmenttesting equipment

Incorrect specificationsIncorrect specifications

Improper methodsImproper methods

MeasurementMeasurement

Poor supervisionPoor supervision

Lack of concentrationLack of concentration

Inadequate trainingInadequate training

HumanHuman

DeficienciesDeficienciesin product designin product design

Ineffective qualityIneffective qualitymanagementmanagement

Poor process designPoor process design

ProcessProcess

InaccurateInaccuratetemperature temperature controlcontrol

Dust and DirtDust and Dirt

EnvironmentEnvironment

Defective from vendorDefective from vendor

Not to specificationsNot to specifications

Material-Material-handling problemshandling problems

MaterialsMaterials

Also known as Ishikawa Diagram or Fish BoneAlso known as Ishikawa Diagram or Fish Bone

Hot House QualityHot House Quality

Lots of Hoopla and no follow through

ISO 9000:2000ISO 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 9000Implications Of ISO 9000

Truly international in scopeTruly international in scopeCertification required by many foreign Certification required by many foreign

firmsfirmsU.S. firms export more than U.S. firms export more than

$150 billion annually to Europe$150 billion annually to EuropeAdopted by U.S. Navy, Adopted by U.S. Navy,

DuPont, 3M, AT&T, and othersDuPont, 3M, AT&T, and others

ISO AccreditationISO Accreditation

European registrationEuropean registration 3rd party registrar assesses quality program3rd party registrar assesses quality program European Conformity (CE) mark authorizedEuropean Conformity (CE) mark authorized

United States 3rd party registrarsUnited States 3rd party registrars American National Standards Institute (ANSI)American National Standards Institute (ANSI) American Society for Quality (ASQ)American Society for Quality (ASQ) Registrar Accreditation Board (RAB)Registrar Accreditation Board (RAB)

Upcoming EventsUpcoming Events

• Final Exam due by Saturday

• Harley/Cabela’s Papers by Saturday

““I would ratherI would ratherattempt to do somethingattempt to do something

great and fail than great and fail than attempt to do nothing at attempt to do nothing at

all.” all.”

Operations and LifeOperations and Life

In your next assignmentIn your next assignmentremember the dead fish!remember the dead fish!

Zen and Operations ManagementZen and Operations Management

Even a dead fish can Even a dead fish can swim down streamswim down streamand give the illusion of and give the illusion of progress!!!progress!!!