Chapter 4 Learning Objectives

1
Chapter 4
2
Chapter 4 Learning Objectives

• Describe steps in the production planning process
  of a high volume manufacturer like Fitter Snacker
• Describe Fitter Snackers production and
  materials management problems
• Describe how a structured process for production
  and materials management planning enhances
  efficiency and decision making

3
Chapter 4 Learning Objectives

• Describe how production planning data in an ERP
  system can be shared with suppliers to increase
  supply-chain efficiency

4
Production and Materials Management at Fitter
Snacker

• Must answer the following questions
• How much of each bar should be produced?
• What quantities of raw materials should be
  ordered?
• When should raw materials be ordered

5
General Approaches to Production

• Make-to-stock Items produced in anticipation of
  orders
• Make-to-order Items produced to meet specific
  customer orders
• Assemble to order Final product assembled from
  make-to-stock items

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Fitter Snacker Manufacturing Process
7
Fitter Snacker Production Problems

• Communications
• Marketing does not share data with production
  (sales promotions and large, unexpected orders)
• Inventory
• True inventory status not known
• No real-time data on actual sales
• Accounting and Purchasing
• Difficulty forecasting raw material and labor
  costs
• Adjusting accounts for actual vs. standard costs
  time consuming and done infrequently

8
Production Planning Process

• Work from sales forecast to create aggregate
  production plan
• Break down aggregate plan into more specific
  plans
• Use production plan to determine raw material
  requirements

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SAP R/3 Approach to Production Planning
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Sales Forecasting
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Sales and Operations Planning
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Sales and Operations Planning
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Sales and Operations Planning
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Sales and Operations Planning
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Sales and Operations Planning
16
Demand Management
17
Demand Management

• Calculation for Week 5

4,134 cases in Jan. x 3 days in week 5 22
working days in Jan. 563.7 cases
4,1984 cases in Feb. x 3 days in week 5 20
working days in Feb. 419.8 cases
Total 983.5 cases
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MRP

• Bill of Material

19
MRP

• MRP Record

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MRP List in SAP R/3
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Stock Requirements List in SAP R/3
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Detailed Production Scheduling

• Snack bar production line is bottleneck
• Scheduling of production line is key to
  determining detailed production schedule

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Detailed Production Scheduling

• Length of production runs
• Longer runs reduces cost of setups
• Longer runs increase capacity utilization
• Shorter runs reduces cost of inventory

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Providing Production Data to Accounting

• Production data does not get entered into an ERP
  system directly
• Many methods of gathering shop floor data are
  available
• ERP allows shop floor data to be collected once
  for production and accounting purposes, and data
  is consistent in both areas

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ERP in Supply Chain Management





Goods
Goods
Goods
Goods
Goods
Raw Materials
Customer
Supplier
Manufacturer
Wholesaler
Retailer
Information
Information
Information
Information
Information
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Supply Chain Management and ERP

• ERP not required for Supply Chain Management
  (SCM)
• ERP can facilitate sharing information in real
  time
• Use of internet can reduce communication costs

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Supply Chain Metrics

• Total Supply Chain
• Cash-to-cash cycle time Time from paying for
  raw materials to the time when cash is collected
  from the customer
• Total supply chain costs

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Supply Chain Metrics

• Buyer-Supplier
• Initial fill rate
• Initial-order lead-time
• On-time performance

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Chapter Summary

• An ERP system can improve the efficiency of the
  production and purchasing processes. Efficiency
  begins with Marketing sharing sales forecasts
  with Production, which shares its production
  plans with Purchasing

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Chapter Summary continued

• Production planning can be done without an ERP
  system, but and ERP system allows production to
  be linked to Purchasing and Accounting. This
  data sharing increases a companys overall
  efficiency

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Chapter Summary continued

• Companies are building on their ERP systems to
  practice supply chain management. In doing this,
  the company looks at itself as part of a large
  process that includes customers and suppliers.
  Using information more efficiently along the
  supply chain can significantly reduce costs.