Introduction to operations and supply chain management 3e bozarth chapter 12

Managing Production across the
Supply Chain
Chapter 12


Chapter Objectives
Be able to:

Explain the activities that make up planning and control in a typical
manufacturing environment.
Explain the linkage between sales and operations planning (S&OP) and master
scheduling.
Complete the calculations for the master schedule record and interpret the
results.
Explain the linkage between master scheduling and material requirements
planning (MRP).
Complete the calculations for the MRP record and interpret the results.
Discuss the role of production activity control and vendor order management
and how these functions differ from higher-level planning activities.
Explain how distribution requirements planning (DRP) helps synchronize the
supply chain and complete the calculations for a simple example.

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Planning and Control
 Planning and control – A set of tactical and execution-level
business activities that includes master scheduling, material
requirements planning, and some form of production

activity control and vendor order management.

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Top-Down Model of Manufacturing
Planning and Control Systems

Figure 12.1
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Master Scheduling
 Master Scheduling – A detailed planning process that
tracks production output and matches this output to
actual customer orders.
 Controls the timing and quantity of production for products or
product families.
 Serves as the primary interface point for actual customer
orders.
 Coordinates forecasted demand and actual orders with
production activity.
 Serves as a tool for agreement between marketing and
operations (but at a different level than S&OP).
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Link between S&OP
and MPS
Month:
Output:

January
200

February
300

March
400

January (weeks)

1

2

3

4

Push Mowers
Self-propelled
Riding

25

25
35

25

25
40

12

13

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S&OP

MPS
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Master Schedule Record
 Forecasted demand
 Booked orders
 Projected inventory levels
 Production quantities
 Units still available to meet customer needs (Available to
Promise)

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Forecasted Demand
vs. Booked Orders
 Forecasted demand – A company’s best estimate of the
demand in any period.
 Booked orders – Confirmed demand for products
Projected Requirements =

Maximum (Forecasted demand, Booked orders)

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Master Production Schedule (MPS)
 Master Production Schedule (MPS) – The amount of product
that will be finished and available for sale at the beginning of
each week.
 The MPS quantities drive more detailed planning activities,
such as material requirements planning.

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Ending Inventory
 Projected Ending Inventory – Best estimate of what
inventory levels will look like at the end of each week based
on current information.

EI t = EI t −1 + MPSt − max( Ft , OBt )

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Available to Promise (ATP)
 Available to Promise – A field in the master
schedule record that indicates the number of units
that are available for sale each week, given those
that have already been promised to customers.

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Available to Promise (ATP)
 Calculating ATP for the first week of the master
schedule record:

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Available to Promise (ATP)
 Calculating ATP for any subsequent week in which MPS > 0:

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Partial Master Schedule Record
(Snowblowers)

Figure 12.4

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Calculating ATP

Figure 12.5

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Calculating ATP

Figure 12.6

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Complete Master Schedule Record
(Snowblowers)

Figure 12.7

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MPS Example (Backpacks)

Figure 12.8

Now Calculate Projected Ending Inventory and
Available to Promise
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Calculations (Backpacks)
 Calculating Ending Inventory:

 Calculating ATP:

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MPS Example (Backpacks)
with ATP

Figure 12.9

What are the implications of the Master Production Schedule?

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Planning Horizon
 Planning Horizon – The amount of time the master schedule
record or MRP record extends into the future.
 The longer the production and supplier lead times, the
longer the planning horizon must be.

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Material Requirements Planning
 Material Requirements Planning (MRP) – A planning process
that translates the master production schedule into planned
orders for the actual parts and components needed to
produce the master schedule items.
 Manages dependent demand inventory

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Material Requirements Planning
 MRP is based on:
 The bill of material (BOM)
 Backward Scheduling
 Explosion of the bill of material

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Bill of Material for Chair
 Bill of material (BOM) – A listing of all the
subassemblies, intermediates, parts, and raw

materials that go into a parent assembly showing
the quantity of each required to make an assembly.
© 2010 APICS Dictionary

Figure 12.12
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Product Structure Tree

Figure 12.13

Planning Lead Time – The time from when a component is ordered
until it arrives and is ready to use.
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