Supply chain management I: Production control within a firm

1
Supply chain management IProduction control
within a firm

• MRP, JIT, ERP

2
History of production planning

• 50s stone age
• 60s mainframe computers, centralized planning,
  Materials requirements planning(MRP)
• 70s shift towards Just In Time
• 80 renewed interest in MRP, Manufacturing
  Resource Planning (MRPII)
• 90s Enterprise Resource Planning (REP)
• 00s Supply chain Management

3
MRP principles

• Input
• Aggregate plan, specifying how many products will
  be delivered to customers (booked demand and/or
  forecast)
• Bill of Materials, specifying how products are
  (recursively) build from components
• Lead times, times required for each of the
  processing steps

4
Bill Of Materials (BOM)
T
V(3)
U(2)
Y(2)
W(2)
X(2)
W(1)
5
Lead Times

• T 1 week
• U 2 weeks
• V 2 week
• W 3 weeks
• X 1 weeks
• Y 1 weeks

6
MRP Explosion
7
MRP principles

• Demand is based on forecast and orders
• Explosion translates demand to required materials
  per department per time slot
• Planning horizon must be at least as long as the
  highest sum of the lead times

8
MRP properties

• master production scheduling (MPS) is the process
  of determining demand such that the production
  capacities are respected
• MRP explosion itself doesnt take capacity into
  account
• Master production scheduling is therefore a
  nontrivial task

9
Just In Time (logistics)

• Pull Principe

sup- plier
prod 1
prod 3
assem- blage
Cust omer
sup- plier
prod 2
10
Just In Time environment

• Mass production (mass customization)
• Smooth demand
• High process quality
• Close ties with suppliers
• eliminate waste, quality at the source, lean
  manufacturing

11
Kanban systems

• Kanban means instruction card
• A kanban system coordinates orders and
  replenishments by means of a card system

12
Kanban systemen (2)
stp 1assembly operator carrying a assembly
kanban card A takes a container type A from the
assembly in-item enventory and removes the ship
kanban kaart A from this A container step 2 He
walks to the production end item inventory and
places the ship kanban Card A on a type A
container on which there is a production kanban
card A.
inventory
inventory
A
A
production
assembly
B
B
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Kanban systemen (2)
step 3 assembly operators removes the production
kanban card A from this container and places it
in the card rack. step 4 A production operator
removes the production kanban card A from the
rack and produces to replenish a type A container.
inventory
inventory
A
A
production
assembly
B
B
14
Kanban systemen (3)
step 5assembly operator assembles 1 type A
container, puts the assembly kanban card A, on
it and brings them to the assemlby end item
inventory step 6 The production operator takes
a container of the required goods from the
production in item inventory, triggering another
step of the process just completed.
inventory
inventory
A
A
production
assembly
B
B
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Properties of kanban systems

• Production is only allowed when inventory has
  decreased (pull)
• Production is in quantities of 1 container
• Inventory (safety stock?) never exceeds number of
  kanban cards container content
• Continuous improvement is possible by reducing
  the number of containers

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MRP versus JIT

• MRP works well in markets with unstable demand,
  JIT is better for stable demand
• JIT has build in continuous improvement
  inventives, MRP installs bad performance
• JIT is locally organized, MRP centrally
• MRP is technology based, JIT relies on humans and
  paper cards

17
MRP II (closed loop MRP)

• 1. Has checks on capacity in variuous dimensions
  (people, machines.)!!
• 2. Link with procurement

18
Enterprise resource planning

• Enterprise resource planning systems can be
  viewed as MRP systems that extended to finance,
  sales, procurement, human resource management.

19
Old software architecture
A MRP II appl.
Appl. Z
Appl. X
Appl. Y
Appl. W
prod
mrkt
financ
HRM
Log.
20
New software architecture
ERP appl.
MRP II module
Mrkt module
HRM module
Finance module
Log module
prod
mrkt
financ
HRM
Log.
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Properties of ERP systems

• 1 system for entire enterprise
• 1 database, 1 data item per real life item
• Can be bought per module
• Integrates functional departments
• Has standard interfaces to outside world
  (suppliers, customers..)

22
ERP properties

• Is an elefant (heavy and inflexible)
• Competitors buy the same system, and hence is not
  a source of sustainable competitive advantage
• Limited customization possible

23
MRP and ERP systems

• MRP en ERP systems can be viewed as a set of
  database tables and predefined data processing
  procedures.
• MRP en ERP systems keep track of what happens,
  but are not necessarily very intelligent. The
  intelligence can be provided once the ERP systems
  are properly functioning.