Supply chain focused manufacturing planning and control

www.ebook3000.com This is an electronic version of the print textbook Due to electronic rights restrictions, some third party content may be suppressed Editorial review has deemed that any suppressed content does not materially affect the overall learning experience The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Supply Chain Focused Manufacturing Planning and Control W C BENTON, Jr Department of Management Sciences Fisher College of Business The Ohio State University Australia • Brazil • Mexico • Singapore • United Kingdom • United States Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Supply Chain Focused Manufacturing Planning and Control W C Benton, Jr Senior Vice President, LRS/Acquisitions & Solutions Planning: Jack W Calhoun Editorial Director, Business & Economics: Erin Joyner Publisher: Joe Sabatino Senior Acquisition Editor: Charles McCormick Developmental Editor: Conor Allen Editorial Assistant: Anne Merrill Brand Management Director: Jason Sakos Senior Brand Manager: Robin LeFevre © 2014 Cengage Learning ALL RIGHTS RESERVED No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be e-mailed to permissionrequest@cengage.com Market Development Director: Lisa Lysne Art and Cover Direction, Production Management, and Composition: PreMediaGlobal Library of Congress Control Number: 2013932184 ISBN 13: 978-1-133-58671-5 ISBN 10: 1-133-58671-6 Media Editor: Chris Valentine Rights Acquisition Director: Audrey Pettengill Rights Acquisition Specialist, Text and Image: John Hill Cengage Learning 200 First Stamford Place, 4th Floor Stamford, CT 06902 USA Manufacturing Planner: Ron Montgomery Cover Image: © Rosemary Calvert/Getty Images Cengage Learning is a leading provider of customized learning solutions with office locations around the globe, including Singapore, the United Kingdom, Australia, Mexico, Brazil, and Japan Locate your local office at www.cengage.com/global Cengage Learning products are represented in Canada by Nelson Education, Ltd To learn more about Cengage Learning Solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Printed in the United States of America 17 16 15 14 13 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com In memory of my brother Rod Benton Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Brief Contents Preface xv About the Author xxi Note to Students xxiii Chapter Supply Chain Focused Manufacturing Planning and Control Chapter Forecasting Demand 17 Chapter Sales and Operations Planning/Aggregate Production Planning 49 Chapter Master Production Scheduling 77 Chapter Supply Chain Focused Inventory Management 109 Chapter Material Requirements Planning Production Systems 147 Chapter Just-in-Time/Lean Production 185 Chapter Push and Pull Production Systems 201 Chapter Capacity Management 215 Chapter 10 Production Planning and Control for Remanufacturing 237 Chapter 11 Supply Chain Focused Outsourcing 257 Chapter 12 Manufacturing Focused Supply Chain Integration 281 Appendix A: Quantity Discounts and Supply Chain Integration 303 Appendix B: Glossary 319 Index 381 v Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com Contents Preface xv About the Author xxi Note to Students xxiii Chapter Supply Chain Focused Manufacturing Planning and Control Introduction The Focused Supply Chain Manufacturer–Supplier Relationship The Lean Philosophy Historical Perspective Push Manufacturing Lean (Pull) Manufacturing Flexible Manufacturing Adaptive Manufacturing Different Manufacturing Environments 10 Make-to-Stock 10 Make-to-Order 10 Assemble-to-Order 11 Engineer-to-Order 11 Implications for Alternative Manufacturing Environments 11 Manufacturing Return on Investment Drivers 13 Example 1.1 13 The Association for Operations Management (APICS) 14 Summary 15 Discussion Questions and Exercises 15 References 16 Chapter Forecasting Demand 17 Introduction 18 Supply Chain Management 18 The Forecasting Criteria 18 The Conceptual Forecasting Framework 19 The Forecasting Problem 20 Forecasts versus Prediction 20 A Systematic Forecasting Process 21 Measures of Forecast Accuracy 21 Qualitative Forecast Models 23 Quantitative Forecasting Models 24 Quantitative Forecasting Approaches 25 Linear Regression 26 vii Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com viii Contents Simple Moving Averages 28 Weighted Moving Averages 30 The Exponential Smoothing Model 32 Example 2-1 34 Operationalizing the Trend and Seasonality Forecasting 38 Tracking Signal Monitoring 41 Initializing a Forecasting Model 42 Summary 43 Exercises 44 Chapter Sales and Operations Planning/Aggregate Production Planning 49 Introduction 50 The Evolutionary Trends 51 Outsourcing of Supply and Globalization of Demand 51 The Complexity and Speed of Product Innovation 51 Demand Volatility and Uncertainty 52 The Benefits of S&OP 52 The Framework for an Effective S&OP 52 Plan (Planning) 55 Source (Buyer–Supplier Relationship) 55 Make (Transformation Process) 56 Deliver (Outbound Logistics) 56 Implementation Process for the Sales and Operations Plan 56 Aggregate Production Planning 56 Aggregate Planning Strategies 60 Pure Level Strategy 60 Pure Chase Strategy 60 Hybrid Aggregate Planning Strategy 61 Solution Methods 61 Cost and Productivity Data 61 Linear Programming (LP) Solution 62 Pure Level Strategy Solution 65 Pure Chase Strategy Solution 65 Chase Strategy with Overtime and Idle Time (Hybrid) Solution 65 Comparing the Results of the Alternative Aggregate Production Planning Strategies 66 Resource Requirements Planning 70 Summary 70 Appendix 3A Free Range, Inc 71 Simulating the Aggregate Planning Process 72 Exercises 74 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.ebook3000.com 372 Glossary fit for use with minimal corrective action and inspection According to J M Juran, nine primary activities are needed: (1) define product and program quality requirements, (2) evaluate alternative suppliers, (3) select suppliers, (4) conduct joint quality planning, (5) cooperate with the supplier during the execution of the contract, (6) obtain proof of conformance to requirements, (7) certify qualified suppliers, (8) conduct quality-improvement programs as required, and (9) create and use supplier quality ratings supplies Materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape Synonyms: general stores, indirect materials supply (1) The quantity of goods available for use (2) The actual of planned replenishment of a product of component The replenishment quantities are created in response to a demand for the product or component or in anticipation of such a demand supply chain design The determination of how to structure a supply chain Design decisions include the selection of partners, the location and capacity of warehouse and production facilities, the products, the modes of transportation, and supporting information systems supply chain execution Execution-oriented software applications for effective procurement and supply of goods and services across a supply chain It includes manufacturing, warehouse, and transportation execution systems and systems providing visibility across the supply chain supply chain management The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally supply chain planning The determination of a set of policies and procedures that govern the operation of a supply chain Planning includes the determination of marketing channels, promotions, respective quantities and timing, inventory and replenishment policies, and production policies Planning establishes the parameters within which the supply chain will operate support costs In activity-based cost accounting, activity costs not directly related with producing a product, such as the cost of the information system surge capacity The ability to meet sudden, unexpected increases in demand by expanding production with existing personnel and equipment surplus A situation in which an oversupply exists at a given price and a decline in price would eliminate the surplus sustaining activity In activity-based cost accounting, an activity that is not directly beneficial to any specific cost object but does benefit the organization as a whole SWOT analysis An analysis of the strengths, weaknesses, opportunities, and threats of and to an organization SWOT analysis is useful in developing strategy synchronized production A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques in which every action is evaluated in terms of the global goal of the system Both kanban, which is a part of the JIT philosophy, and drum-buffer-rope, which is a part of the theory-of-constraints philosophy, represent synchronized production control approaches Synonym: synchronous manufacturing See: drum-buffer-rope, kanban, synchronous scheduling synchronous scheduling Scheduling processes (kanban in just-in-time and drum-buffer-rope in theoryof-constraints environments) that focus on synchronizing all operations to the constraint of the system See: synchronized production T tactical buying The purchasing process focused on transactions and nonstrategic material buying It is closely aligned with the “ordering” portion of executing the purchasing transaction process The characteristics for tactical buying include stable, limited fluctuations, defined standard specifications, noncritical to production, no delivery issues, and high reliability concerning quality standard material with very little concern for rejects See: strategic sourcing tactical planning The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan, and so on) Two approaches to tactical planning exist for linking tactical plans to strategic plans—production planning and sales and operations planning See: operational planning, strategic planning, tactical plan Taguchi methodology A concept of offline quality control methods conducted at the product- and process-design stages in the product development cycle This concept, expressed by Genichi Taguchi, encompasses three phases of product design: system design, parameter design, and tolerance design The goal is to reduce quality loss by reducing the variability of the product’s characteristics during the parameter phase of product development Synonym: Taguchi methods takt time Sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean production system It is computed as the available production time divided by the rate of customer demand For example, assume demand is 10,000 units per month, or 500 units per day, and planned available capacity is 420 minutes per day The takt time − 420 minutes per day/500 units per day = 0.84 minutes per unit This takt time means that a unit should be planned to exit the production system on average every 0.84 minutes Synonym: tact time Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Glossary 373 tangibles Things that can be quantitatively measured or valued, such as the costs of physical assets organization, business, or entity to another country, organization, business, or entity tank inventory Goods stored in tanks Theses goods may be raw materials, intermediates, or finished goods The description of inventory as tank inventory indicates the necessity of calculating the quantity on hand from the levels within the tanks theory of constraints (TOC) A management philosophy developed by Dr Eliyahu M Goldratt that can be viewed as three separate but interrelated areas—logistics, performance measurement, and logical thinking Logistics include drumbuffer-rope scheduling, buffer management, and VAT analysis Performance measurement includes throughput, inventory and operating expense, and the five focusing steps Thinking process tools are important in identifying the root problem (current reality tree), identifying and expanding win-win solutions (evaporating cloud and future reality tree), and developing implementation plans (prerequisite tree and transition tree) Synonym: constraint theory See: constraint management tardiness For jobs that are late, the delivery date minus the due date See: earliness, lateness tare weight The weight of a substance, obtained by deducting the weight of the empty container from the gross weight of the full container target costing The process of designing a product to meet a specific cost objective Target costing involves setting the planned selling price, then subtracting the desired profit as well as marketing and distribution costs, thus leaving the required manufacturing or target cost target inventory level In a min-max inventory system, the equivalent of the maximum The target inventory is equal to the order point plus a variable order quantity It is often called an order-up-to inventory level and is used in a periodic review system Synonym: order-up-to level target market (1) A fairly homogenous group of customers to whom a company wishes to appeal (2) A definable group of buyers to which a marketer has decided to market target marketing The process of focusing marketing activities specifically on those people who are most likely to buy a company’s products and services Data gathered on people who use the Internet are enabling companies to identify and focus on more likely candidates task (1) In project management, the lowest level to which work can be subdivided on a project (2) In activity-based cost accounting, a task, a subdivision of an activity, is the least amount of work Tasks are used to describe activities team A cross-functional group of employees assembled for a period of time to accomplish either a specific task or ongoing production of goods and services See: team oriented team design/engineering engineering Synonym: participative design/ teardown bill of material material Synonym: disassembly bill of teardown time The time needed to remove a setup from a machine or facility Teardown is an element of manufacturing lead time, but it is often allowed for in setup or run time rather than separately See: teardown technologies The terms, concepts, philosophies, hardware, software, and other attributes used in a field, industrial sector, or business function technology transfer The transmission of technology (e.g., knowledge, skills, software, hardware, etc.) from one country, third-party logistics A buyer and supplier team with a third party that provides product delivery services This third party may provide added supply chain expertise third-party logistics company A company that manages all or part of another company’s product delivery operations third-party warehousing The outsourcing of the warehousing function by the seller of the goods Thomas Register A privately produced reference set that includes a listing of part suppliers by product type and geographic area throughput (1) The total volume of production through a facility (machine, work center, department, plant, or network of plants) (2) In the theory of constraints, the rate at which the system (firm) generates money through sales Throughput is a separate concept from output See: machine-limited capacity time bucket A number of days of data summarized into a columnar display A weekly time bucket would contain all of the relevant data for an entire week Weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP time buffer The amount of time that materials are released to the production process ahead of the scheduled due date Time buffers protect against uncertainty time card A document recording attendance time, often used for indicating the number of hours for which wages are to be paid Synonym: clock card time fence A policy or guideline established to note where various restrictions or changes in operating procedures take place For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point at which changes should be resisted Time fences can be used to define these points See: demand time fence, hedge, planning time fence Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 374 Glossary time-period safety stock A safety stock that is based on usage over a designated time frame The period can be set as days, weeks, or months Safety stock varies directly with the demand This differs from statistical-based safety stocks in that the amount is not based on deviation from demand time series A set of data that is distributed over time, such as demand, supply, and inventories, by time period Various patterns of demand must be considered in time series analysis: seasonal, trend, cyclical, and random time series analysis Analysis of any variable classified by time in which the values of the variable are functions of the time periods Time series analysis is used in forecasting A time series consists of seasonal, cyclical, trend, and random components See: cyclical component, random component, seasonal component, trend component time standard The predetermined times allowed for the performance of a specific job The standard will often consist of two parts, that for machine setup and that for actual running The standard can be developed through observation of the actual work (time study), summation of standard micromotion times (predetermined or synthetic time standards), or approximation (historical job times) time ticket ticket An operator-entered labor claim Synonym: job time value of money (1) The cumulative effect of elapsed time on the money value of an event, based on the earning power of equivalent invested funds See: future worth, present value (2) The interest rate that capital is expected to earn time-based competition (TBC) A corporate strategy that emphasizes time as the vehicle for achieving and maintaining a sustainable competitive edge Its characteristics are (1) it deals only with those lead times that are important to the customers; (2) the lead-time reductions must involve decreases in both the mean and the variance; and (3) the lead-time reductions must be achieved through system/process analysis (the processes must be changed to reduce lead times) TBC is a broad-based strategy Reductions in lead times are achieved by changing the processes and the decision structures used to design, produce, and deliver products to the customers TBC involves design, manufacturing, and logistical processes time-based order system inventory model Synonym: fixed-reorder-cycle time to market The total time required to design, build, and deliver a product (timed from concept to delivery) See: procurement lead time time to product The total time required to receive, fill, and deliver an order for an existing product to a customer, timed from the moment that the customer places the order until the customer receives the product See: purchasing lead time TOC Abbreviation for theory of constraints TOC performance measures In the theory of constraints, throughput, inventory, and operating expense are considered performance measures that link operational decisions to organizational profit tolerance Allowable departure from a nominal value established by design engineers that is deemed acceptable for the functioning of the good or service over its life cycle tolerance limits (1) The upper and lower extreme values permitted by the tolerance (2) In work measurement, the limits between which a specified operation time value or other work unit will be expected to vary See: lower specification limit, upper specification limit tool Any instrument, such as a saw blade, that is the working part of a machine tool calibration frequency The recommended length of time between tool calibrations It is normally expressed in days tool number The identification number assigned to reference and control a specific tool top management commitment (quality) In the totalquality-management philosophy, participation of the highestlevel official in the organization’s quality-improvement efforts Participation includes establishing and serving on a quality committee, establishing quality policies and goals, deploying those goals to lower levels of the organization, providing the resources and training that the lower levels need to achieve the goals, participating in qualityimprovement teams, reviewing organizationwide progress, recognizing those who have performed well, and revising the current reward system to reflect the importance of achieving the quality goals total cost concept In logistics, the idea that all logistical decisions that provide equal service levels should favor the option that minimizes the total of all logistical costs and not be used on cost reductions in one area alone, such as lower transportation charges total cost curve (1) In cost-volume-profit (breakeven) analysis, the total cost curve is composed of total fixed and variable costs per unit multiplied by the number of units provided Breakeven quantity occurs when the total cost curve and total sales revenue curve intersect See: break-even chart, break-even point (2) In inventory theory, the total cost curve for an inventory item is the sum of the costs of acquiring and carrying the item See: economic order quantity total costs All the costs of operating a firm; total variable costs plus total fixed costs total float In project management, the length of time an activity can be late without delaying succeeding activities See: float, free float, independent float total lead time Synonym: lead time Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Glossary total productive maintenance (TPM) Preventive maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows It is operator-oriented maintenance with the involvement of all qualified employees in all maintenance activities total quality control (TQC) The process of creating and producing the total composite good and service characteristics by marketing, engineering, manufacturing, purchasing, and the like, through which the good and service will meet the expectations of consumers total quality engineering (TQE) The discipline of designing quality into the product and manufacturing processes by understanding the needs of the customer and performance capabilities of the equipment See: design for quality total quality management (TQM) A term coined to describe Japanese-style management approaches to quality improvement Since then, total quality management (TQM) has taken on many meanings Simply put, TQM is a management approach to long-term success through customer satisfaction TQM is based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work The methods for implementing this approach are found in teachings of such quality leaders as Philip B Crosby, W Edwards Deming, Armand V Feigenbaum, Kaoru Ishikawa, J M Juran, and Genichi Taguchi total value analysis A method of economic analysis in which a model expresses the dependent variable of interest as a function of independent variables, some of which are controllable tracking signal The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation Used to signal when the validity of the forecasting model might be in doubt See: forecast error, mean absolute deviation transactions Individual events reported to the computer system, for example, issues, receipts, transfers, adjustments transfer batch The quantity of an item moved between sequential work centers during production See: batch, overlap quantity transfer price Price that one segment (subunit, department, division, etc.) of an organization charges for a good or service supplied to another segment of the same organization transfer pricing The pricing of goods or service transferred from one segment of a business to another See: interplant transfer transformation process The process of converting inputs into finished goods or services In a service firm, the input may be a customer Synonym: transformation system See: manufacturing process, production process 375 transit inventory Inventory in transit between manufacturing and stocking locations See: transportation inventory transit time A standard allowance that is assumed on any given order for the movement of items from one operation to the next Synonym: travel time transport stocks A carrier material to move solids in solution or slurry or to dilute ingredients to safe levels for reactions transportation inventory Inventory that is in transit between locations See: pipeline stock, transit inventory traveling purchase requisition A purchase requisition designed for repetitive use After a purchase order has been prepared for the goods requisitioned, the form is returned to the originator, who holds it until a repurchase of the goods is required The name is derived from the repetitive travel between the originating and purchasing departments Synonym: traveling requisition traveling requisition requisition Synonym: traveling purchase trend General upward or downward movement of a variable over time, for example, demand or process attribute trend analysis An analysis to determine whether trend (general upward or downward change) exists in data See: trend forecasting models trend component A component of demand, usually describing the impact of increasing or decreasing growth on demand trend control chart A control chart in which the deviation of the subgroup average, X-bar, from an expected trend in the process level is used to evaluate the stability of a process trend forecasting models Methods for forecasting sales data when a definite upward or downward pattern exists Models include double exponential smoothing, regression, and triple smoothing trigger level Synonym: order point triple smoothing A method of exponential smoothing that accounts for accelerating or decelerating trends, such as would be experienced in a fad cycle Synonym: third-order smoothing truckload lot A truck shipment that qualifies for a lower freight rate because it meets a minimum weight and/or volume turnover (1) Synonym: inventory turnover (2) In the United Kingdom and certain other countries, annual sales volume turnover ratio An indicator of whether a company is using its assets efficiently It is measured by dividing sales by average assets during a particular period Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 376 Glossary two-bin inventory system A type of fixed-order system in which inventory is carried in two bins A replenishment quantity is ordered when the first bin (working) is empty During the replenishment lead time, material is used from the second bin When the material is received, the second bin (which contains a quantity to cover demand during lead time plus some safety stock) is refilled and the excess is put into the working bin At this time, stock is drawn from the first bin until it is again exhausted This term is also used loosely to describe any fixed-order system even when physical “bins” not exist Synonym: bin reserve system See: visual review system two-card kanban system A kanban system in which a move card and production card are employed The move card authorizes the movement of a specific number of parts from a source to a point of use The move card is attached to the standard container of parts during movement to the point of use of the parts The production card authorizes the production of a given number of parts for use or replenishment Synonym: dual-card kanban system See: one-card kanban system two-level master schedule A master scheduling approach in which a planning bill of material is used to master schedule an end product or family, along with selected key features (options and accessories) See: hedge, multilevel master schedule, production forecast U U chart A control chart for evaluating the stability of a process in terms of the average count of events of a given classification per unit occurring in a sample Synonym: count-per-unit chart U-lines Production lines shaped like the letter U The shape allows works to easily perform several nonsequential tasks without much walk time The number of workstations in a U-line is usually determined by line balancing U-lines promote communication UCL Abbreviation for upper control limit unattainable capability The portion of the production capability that cannot be attained This is typically caused by factors such as equipment unavailability, suboptimal scheduling, or resource limitations uncertainty Unknown future events that cannot be predicted quantitatively within useful limits, such as an accident that destroys facilities, a major strike, or an innovation that makes existing products obsolete undertime A condition occurring when more personnel are on the payroll than are required to produce the planned output uniform-delivered pricing A type of geographic pricing policy in which all customers pay the same delivered price regardless of their location A company allocates the total transportation cost among all customers unit cost Total labor, material, and overhead cost for one unit of production, for example, one part, one gallon, one pound units-of-production depreciation A method of depreciation whereby the amount to be recovered (written off as a period expense) is calculated based on estimated life of the equipment in units to be produced over the life and the number of units produced in a given time period See: depreciation universe The population, or large set of data, from which samples are drawn Usually assumed to be infinitely large or at least very large relative to the sample upstream Used as a relative reference within a firm or supply chain to indicate moving in the direction of the raw material supplier URL Abbreviation for uniform resource locator usage The number of units or dollars of an inventory item consumed over time usage variance Deviation of the actual consumption of materials as compared to the standard user-friendly Characteristic of computer software or hardware that makes it easy for the user or operator to use the programs or equipment with a minimum of specialized knowledge or recourse to operating manuals utilization (1) A measure (usually expressed as a percentage) of how intensively a resource is being used to produce a good or service Utilization compares actual time used to available time Traditionally, utilization is the ratio of direct time charged (run time plus setup time) to the clock time available Utilization is a percentage between percent and 100 percent that is equal to 100 percent minus the percentage of time lost due to unavailability of machines, tools, workers, and so forth See: efficiency, lost time factor, productivity (2) In the theory of constraints, utilization is the ratio of the time the resource is needed to support the constraint to the time available for the resource, expressed as a percentage See: activation V value added (1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation It is the cost rollup as a part goes through a manufacturing process to finished inventory (2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer The objective is to eliminate all non-value-added activities in producing and providing a good or service Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Glossary value analysis The systematic use of techniques that identify a required function, establish a value for that function, and finally provide that function at the lowest overall cost This approach focuses on the functions of an item rather than the methods of producing the present product design value chain The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment value chain analysis An examination of all links a company uses to produce and deliver its product and services, starting from the origination point and continuing through delivery to the final customer value engineering and/or analysis A disciplined approach to the elimination of waste from products or processes through an investigative process that focuses on the functions to be performed and whether such functions add value to the good or service value stream The processes of creating, producing, and delivering a good or service to the market For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of the good, and the distribution network For a service, the value stream consists of suppliers, support personnel and technology, the service “producer,” and the distribution channel The value stream may be controlled by a single business or a network of several businesses variable A quantity that can assume any of a given set of values Antonym: constant variable cost An operating cost that varies directly with a change of one unit in the production volume, for example, direct materials consumed or sales commissions variable costing An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product Traditionally, variable production costs are direct labor, direct material, and variable overhead costs Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting For inventoryorder-quantity purposes, however, the unit costs must include both the variable and allocated fixed costs to be compatible with the other terms in the order quantity formula For make-or-buy decisions, variable costing should be used rather than full-absorption costing Synonym: direct costing variable overhead All manufacturing costs, other than direct labor and direct materials, that vary directly with production volume Variable overhead is necessary to produce the product but cannot be directly assigned to a specific product variable yield The condition that occurs when the output of a process is not consistently repeatable either in quantity, quality, or combinations of these 377 variables data Measurement information Control charts based on variables data include average (X-bar) charts, range (R) charts, and sample standard deviations charts variance (1) The difference between the expected (budgeted or planned) value and the actual (2) In statistics, a measurement of dispersion of data See: estimate of error variation A change in data, a characteristic, or a function that is caused by one of four factors: special causes, common causes, or structural variation VAT analysis In the theory of constraints, a procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure) A V logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through divergent points in its routing The shape of an A logical structure is dominated by converging points Many raw materials are fabricated and assembled into a few finished products A T logical structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts Once the general parts flow is determined, the system control points (gating operations, convergent points, divergent point, constraints, and shipping points) can be identified and managed velocity (1) The rate of change of an item with respect to time See: inventory turnover, lead time (2) In supply chain management, a term used to indicate the relative speed of all transactions, collectively, within a supply chain community A maximum velocity is most desirable because it indicates higher asset turnover for stockholders and faster orderto-delivery response for customers vendor Any seller of an item in the marketplace See: supplier vendor managed inventory (VMI) A means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer This activity is accomplished by a process in which resupply is done by the vendor through regularly scheduled reviews of the on-site inventory The on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels The vendor obtains a receipt for the restocked inventory and accordingly invoices the customer See; continuous replenishment vendor measurement The act of measuring the vendor’s performance to a contract Measurements usually cover delivery reliability, lead time, quality, and price vendor-owned inventory (VOI) Synonym: consigned stock vertical dependency The relationship between a parent item and a component in its bill of material that defines the need for the component based on producing the parent, without regard to the availability of other components Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 378 Glossary at the same level in the bill of material See: horizontal dependency vertical display A method of displaying or printing output from an MRP system in which requirements, scheduled receipts, projected balance, and so forth are displayed vertically Vertical displays are often used in conjunction with bucketless systems Antonym: horizontal display vertical integration The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer The more steps in the sequence, the greater the vertical integration A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated See: backward integration, forward integration vertical merger An alliance of two firms in which one firm is a supplier to the other virtual corporation The logical extension of outpartnering With the virtual corporation, the capabilities and systems of the firm are merged with those of the suppliers, resulting in a new type of corporation in which the boundaries between the suppliers’ systems and those of the firm seem to disappear The virtual corporation is dynamic in that the relationships and structures formed change according to the changing needs of the customer virtual factory A changed transformation process most frequently found under the virtual corporation It is a transformation process that involves merging the capabilities and capacities of the firm with those of its suppliers Typically, the components provided by the suppliers are those that are not related to a core competency of the firm, while the components managed by the firm are related to core competencies One ability found in the virtual factory is that it can be restructured quickly in response to changing customer demands and needs vision The shared perception of the organization’s future: what the organization will achieve and a supporting philosophy This shared vision must be supported by strategic objectives, strategies, and action plans to move it in the desired direction See: vision statement visual inspection instruments Inspection performed without test volume flexibility The ability of the transformation process to quickly accommodate large variations in production levels W Wagner-Whitin algorithm A mathematically complex, dynamic lot-sizing technique that evaluates all possible ways of ordering to cover net requirements in each period of the planning horizon to arrive at the theoretically optimum ordering strategy for the entire net requirements schedule See: discrete order quantity, dynamic lot sizing wait time The time a job remains at a work center after an operation is completed until it is moved to the next operation It is often expressed as a part of move time Synonym: idle time waiting line theory Synonym: queuing theory waiver Authorization to accept an item that, during production or upon inspection, is found to depart from specified requirements, but nevertheless is considered suitable for use as is or after rework walkthrough Synonym: pilot test wall-to-wall inventory An inventory-management technique in which material enters a plant and is processed though the plant into finished goods without ever having entered a formal stock area Synonym: four-wall inventory wandering bottleneck Describes the problem of a bottleneck seeming to move around from one resource to another Wandering bottlenecks are “pseudoconstraints.” Wandering bottlenecks can be caused by policies such as large lot sizes or transfer batch that is equal to process batch warranty A commitment, either expressed or implied, that a certain fact regarding the subject matter of a contract is presently true or will be true The word should be distinguished from guarantee, which means a contract or promise by an entity to answer for the performance of a product or person Synonyms: general warranty, special warranty See: guarantee waste (1) In just-in-time, any activity that does not add value to the good or service in the eyes of the consumer (2) A by-product of a process or task with unique characteristics requiring special management control Waste production can usually be planned and somewhat controlled Scrap is typically not planned and may result from the same production run as waste See: hazardous waste waybill A document containing a list of goods with shipping instructions related to a shipment weighted moving average An averaging technique in which the data to be averaged are not uniformly weighted but are given values according to their importance See: moving average, simple moving average withdrawal (1) Removal of material from stores (2) A transaction issuing material to a specific location, run, or schedule work breakdown structure In project management, a hierarchical description of a project in which each lower level is more detailed work center A specific production area, consisting of one or more people and/or machines with identical capabilities, that can be considered as one unit for purposes of capacityrequirement planning and detailed scheduling Synonym: load center Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Glossary 379 work center where-used A listing (constructed from a routing file) of every manufactured item that is routed (primary or secondary) to a given work center X work in process (WIP) A good or goods in various stages of completion throughout the plant, including all material from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory Many accounting systems also include the value of semifinished stock and components in this category Synonym: in-process inventory Y work order (1) An order to the machine shop for tool manufacture or equipment maintenance; not to be confused with a manufacturing order Synonym: work ticket (2) An authorization to start work on an activity (e.g., maintenance) or product See: manufacturing order work rules (1) Compensation rules concerning such issues as overtime, vacation, and shift premiums (2) Employee and employer job rights and obligation rules, such as performance standards, promotion procedures, job descriptions, and layoff rules Work rules are usually a part of a union contract and may include a code of conduct for workers and language to ensure decent conditions and health standards work sampling The use of a number of random samples to determine the frequency with which certain activities are performed workers’ compensation The replacement of an employee’s loss of earnings capacity caused by an occupational injury or disease Formerly known as workmen’s compensation working capital Synonym: net working capital workstation The assigned location in which a worker performs the job; it could be a machine or a workbench world-class quality A term used to indicate a standard of excellence: the best of the best X-bar chart Synonym: average chart yield The amount of good or acceptable material available after the completion of a process Usually computed as the final amount divided by the initial amount converted to a decimal or percentage In manufacturing planning and control systems, yield is usually related to specific routing steps or to the parent item to determine how many units should be scheduled to produce a specific number of finished goods For example, if 50 units of a product are required by a customer and a yield of 70 percent is expected, then 72 units (computed as 50 units divided by 0.7) should be started in the manufacturing process See: scrap factor, yield factor yield factor A measurement of the yield of a process For a specific process or operation, yield factor ỵ scrap factor = Synonym: material yield See: scrap factor, yield Z zero defects A performance standard developed by Philip B Crosby to address a dual attitude in the workplace: People are willing to accept imperfection in some areas, while in other areas, they expect the number of defects to be zero This dual attitude has developed as a result of the condition that as people commit themselves to watching details and avoiding errors, they can move closer to the goal of zero defects The performance standard that must be set is “zero defects,” not “close enough.” zero-based budgeting A budget procedure used primarily by governmental agencies in which managers are required to justify each budgetary expenditure anew, as if the budget were being initiated for the first time rather than being based on an adjustment of prior-year data Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index A ABC classification of inventory, 101, 112–115 accuracy defined, 19 forecasting measures, 21–23, 254–255 adaptive manufacturing, 9–10 aggregate planning strategies, 60–61, 69f See also aggregate production planning (APP) disaggregating, 78–81 hybrid, 61 aggregate production planning (APP), 56–59, 58f See also aggregate planning strategies; sales and operations planning (S&OP) alternative, strategies for comparing results of, 66–70 remanufacturing production planning and control, 242 solution methods, 61–66 aggregate resources, 57 Airborne Express, 294 Airbus, 54, 289 all-units discounts, 315 alternative master production scheduling, 94–103 covering sets, 99–100, 100t, 101t critical comparison of approaches to, 100–101 demand variability, 102–103 product commonality, 102, 102t superbills, 94–99, 96f, 101t American Production and Inventory Control Society, 164 APICS See Association for Operations Management (APICS) APP See aggregate production planning (APP) Apple, 51–52 assemble-to-order (ATO), 11, 81–82, 85, 86, 87–88, 90, 94, 112 assets, return on, 13 Association for Operations Management (APICS), 14–15, 221 CPIM certification program, 14–15 ATO See assemble-to-order (ATO) ATP See available-to-promise (ATP) available-to-promise (ATP), 78, 90–94, 93f, 101 B backflushing of inventory, 186–187 backlog, 60 backorder, 59, 60, 120, 121f bill of material (BOM), 81–83, 89f, 95f, 152–153, 153f, 186, 205 BMW, 20–21 BOM See bill of material (BOM) BOR See buyers’ outsourcing risks (BOR) BPO See business processes outsourcing (BPO) breakpoint, 304, 308 business performance, 297–300, 298t business processes outsourcing (BPO), 259f, 260 buyers’ outsourcing risks (BOR), 271–272 buyer-supplier relationship, 55, 290–293 C capacity See also capacity management design, 219 measurement, 219–220 planning and supply chain management, 216–217 capacity management capacity requirements planning, 225–230 factors of, 219 input-output analysis, 230–231 managerial factors, 219 manufacturing capacity planning and control, elements of, 217–218 resource capacity planning, 220–221 rough-cut capacity planning, 221–225 supplier capacity planning, 231–234 capacity planning See also capacity planning and control systems concept, 216 detailed, 243 framework, 216, 216f interrelated hierarchical plans, 216 load-leveling method, 230 long-range, 217 manufacturing capacity planning and control system, effective, 217 medium-range, 217–218 primary problem with, 230 process of, 216 resource, 220–221 short-range, 217, 218 capacity planning and control systems defined, 216 effective, 217 elements of, 217–218 capacity requirements planning (CRP), 164, 225–230 inputs, 225–226, 226f outputs, 226–230, 226f purpose, 230 systematic, casual labor, 59 cellular manufacturing, 284 Cisco, 287 closed-loop material requirements planning, 166 close supplier relationships, 254 coefficient of determination, 27 communication for buy-in, 198 external sourcing model, criteria for transition to, 269 for understanding, 198 complete transfer, 258 component remanufacturing, 244–245 computerized material requirements planning, 149 concurrency concept, 266, 266f conditional economic order quantity, 308 CONstant Work in Progress (CONWIP) system, 204 containers, 207–209 continuous distributions, 126–128, 128t continuous flow, concept of, continuous improvement programs, 190, 294 contract/contracting, 258 development of, 268–269 terms of, 265–266 control costs, 274–275 control systems See also capacity planning and control systems inventory, 134, 149, 151 just-in-time production, elements of, 198–199 pull production, 205–207 CONWIP See CONstant Work in Progress (CONWIP) system coordination costs, 274–275 core capabilities, 265 core forecasting methods, 249–250 core forecasting timing, 251–252f core supply uncertainty, 249 costs See also operating costs control, 273–275 coordination, 273–275 data, 61–64 direct operating, 260 of inventory, 116–120, 117–118f minimization of, 260 of outsourcing, hidden, 260–264 of parts, reduced, 194 quality of, 260–261 covering sets, 99–100, 100t, 101t CPIM certification program, 14–15 cross-training, 59 CRP See capacity requirements planning (CRP) CSL See customer service level (CSL) approach culture, 195, 198, 275–276 customer and provider, distance between, 275–276 customer pull, concept of, customer service, 78, 124, 126 customer service level (CSL) approach, 124, 126, 129 cycle stocks, 116, 135 D DDLT See demand and lead time (DDLT) uncertainty decision tree for demand and lead time, 130, 131f decoupling stocks, 116 Degussa, 289 381 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 382 Index delivery systems, 56, 294 Internet-based, 294 just-in-time production, 287 schedules, frequent and “on-time,” 191 supply chain, 282–283 Dell Computer, 3, 286–287 just-in-time production, 56, 294 Deloitte Consulting, 259 Delphi method, 24 demand analysis, 53 dependent, 110, 148 distribution, 130, 130t forecasting, 18, 21, 41–42, 42–43f (See also forecasting) globalization of, 51 independent, 110, 148, 149 management, 241–242 new, 59 types of, 148 variability, 102–103 demand and lead time (DDLT) uncertainty, 125f, 129–134 decision tree for, 130, 131f Q, R procedure, 132–134, 132f safety stock, determining level of, 124–129 volatility and, 52 demand determination, part, 245 demand push, departure, points of, 305–313 dependent demand, 110, 148 design capacity, 219 design decisions, 158–159 determination, coefficient of, 27 direct operating costs, 260 disaggregating aggregate plan, 78–81 disassembly, 240 discounts See also quantity discounts all-units, 315 incremental, 304, 316 discrete distributions, 128–129, 129t distributions continuous, 126–128, 128t demand, 130, 130t discrete, 128–129, 129t lead time, 130, 130t normal, 126–128, 128t dual-card kanban production system, 206–207 DuPont, 54, 289 E economic order quantity (EOQ) model, 116–119, 119f, 304 conditional, 308 feasible, 308 with quantity discounts, 121–123 with stockouts allowed, 120–123 undiscounted, 314 ECU See effective capacity utilization (ECU) EDI See Electronic Data Interchange (EDI) effective capacity utilization (ECU), 220 Electronic Data Interchange (EDI), 284 empowerment, 198 end-item bill of material, 81 engineer-to-order (ETO), 11 enterprise resource planning (ERP) advantages of, 167 development of, 167 disadvantages of, 167 function of, 167 to manufacturing planning and control system, transformation to, 167 EOQ See economic order quantity (EOQ) model ERP See enterprise resource planning (ERP) ETO See engineer-to-order (ETO) exponential smoothing model, 32–38 seasonality, 36–37 simple exponential smoothing model, 33–35 trend and seasonal enhancements, 37–38 trend enhancement, 35–36 extending chair example, 156–158 external sourcing model, implementation of, 262 See also outsourcing seasonality, 38–41 supply chain planning, 283 systematic, 21 time series, 24 forecasting demand See also forecasting supply chain management, 18 systematic forecasting process, 21 tracking signal monitoring, 41–42, 42–43f F Harley-Davidson, 186 heijunka, 186 Hewlett-Packard, 186, 196, 216–217, 283 hiring, 59 Honda, 195, 288 Hoovers Financial, 289 HRM See human resource management (HRM) human resource management (HRM), 56, 293, 294 Hutchinson Technology, 195 hybrid aggregate planning, 61 FAS See final assembly schedule (FAS) feasible economic order quantity, 308 FG See finished goods (FG) final assembly schedule (FAS), 86–89, 94, 96–99 financial analysis, 53 financial considerations, hidden costs of outsourcing, 264 financial evaluation, 267 financial statement implications of justin-time production, 197 finished goods (FG), 13 firm strategy, 295–297 fixed-interval periodic review, 115 fixed-interval reorder system, 134 fixed order quantities (FOQ), 115, 149 fixed-time period model with service level, 135–137, 136f flexible manufacturing, 8–9, 9t flexible manufacturing system (FMS), FMS See flexible manufacturing system (FMS) FOQ See fixed order quantities (FOQ) Ford, 196, 288, 294 forecasting See also forecasting demand; specific types of models accuracy, measures of, 21–23, 254–255 conceptual framework, 19–20, 19f core methods, 249–250 core timing, 251–252f criteria, 18–19 elements of good, 18 information used for, 250–251 initializing model, 42–43 judgment (See qualitative forecasting models) of needs, 81 operationalizing trend, 38–41 performance, 254–255 prediction vs., 20–21 problem with, 20 product return rates, 254 qualitative models, 23–24 quantitative models, 20, 24–41 G General Electric, 54, 289, 294 General Electronic, 289 General Motors, 57, 196, 288 global business process, 259 globalization of demand, 51 government-related expenses, 263 GR See gross requirements (GR) gross requirements (GR), 155 guiding team, assembly of, 198 H I IAOP See International Association of Outsourcing Professionals (IAOP) IBM, 54, 289 idle time, 65–66 incremental discounts, 304, 316 indented bill time chart, 96–97, 97f independent demand, 110, 148, 149 information content, 284–285 forecasting, used for, 250–251 quality, 285 sharing, 284–285 information flow, 203–204 information-sharing support technology, 284 information systems, material requirements planning as, 148 information technology (IT), 282 outsourcing, 258, 262 initializing forecasting model, 42–43 input-output analysis, 218, 230–231 inputs capacity requirements planning, 225–226 material requirements planning, 152–153 integrated manufacturing See adaptive manufacturing Intel, 53–54, 289 internal coordination, 261–262 International Association of Outsourcing Professionals (IAOP), 258–259 Internet-based delivery system, 294 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index inventory, 59 ABC classification of, 112–115 backflushing of, 186–187 costs of, 116–120, 117–118f levels of, reduced, 193 manufacturing business, importance in, 110 pipeline, 116 primary functions of, 116 seasonal, 116 inventory control systems, 149 periodic review of, 134–137 inventory management models, 115–120 See also supply chain focused inventory management importance of, 110 inventory, costs of, 116–120, 117–118f overview, 110–111 Inventory Records File, 153 IT See information technology (IT) J JIT See just-in-time (JIT) production judgment forecasts See qualitative forecasting models judoka, 188 just-in-time (JIT) production, 56, 164 See also lean production system conceptual framework, 186–188, 187f, 197 critical analysis, 195–197 delivery systems, 287 Dell Computer, 56, 294 design, 186 financial statement implications of, 197 goals of, 188 implementation, 198–199 kanban-controlled, 189–190, 204, 210, 210f manufacturing planning and control philosophy, 197, 197f operational problems with, 190 philosophy of, 191 practices, 56, 284 pragmatic version, 196 product demand, 196–197 as pull production control system, 203 purchasing, 190–193, 191f as push production system, 203 radical proponents, 196 shop-floor scheduling system, 243 success testimonials, 186 supply chain operations reference model, 293 supply chain planning, 56, 284, 287 supply management benefits, 193–194 Toyota, 189–190 traditional purchasing vs., 193, 193t transition to, 196 K kaizen, 188 kanban production system, 188, 205–206 dual-card, 206–207 just-in-time production, 189–190, 204, 210, 210f pull production control system, 206–207 383 rules for, 208–209 types of, 206 kanbans, 207–209 L layoffs, 59 lead time (LT), 129 See also demand and lead time (DDLT) uncertainty distribution, 130, 130t production, 85–87 reduced, 191–192, 192f reliability, improved, 194 short, 187–188 stocking out during any cycle of, 124–126 Lean, 195 lean manufacturing, 7–8 areas that drive, benefits of, defined, elements enabling, lean philosophy, 5–6 lean production system, 188–190 See also just-in-time (JIT) production culture, role of, 195 “lean thinking,” 186 LFL See lot-for-lot (LFL) lot-sizing method linear programming (LP), 62–64 linear regression, 26–28 load-leveling method, 230 long-range capacity planning, 217 lot-for-lot (LFL) lot-sizing method, 156, 313 lot-sizing methods, 159 aggregation, 313, 316–317 lot-for-lot, 156, 313 material requirements planning production systems, 149–151 small, 187, 190–191 LP See linear programming (LP) LT See lead time (LT) M MAD See mean absolute deviation (MAD) make-to-order (MTO), 10, 81, 85, 112 make-to-stock (MTS), 10, 81, 85, 87–88, 112 MAN (material-as-needed), 195 management See also capacity management analysis of, 53 demand, 241–242 implications of, 253–255 information sharing, 288 inventory models, 115–120 problems with, 90 recommendations, 253–255 of remanufacturing, 253–255 supply chain, 14, 18, 284, 285f, 288 total quality, 56, 293, 294 manufacturing See also manufacturing environments adaptive, 9–10 cellular, 284 environments, alternative, 87–88 flexible, 8–9, 9t integrated (See adaptive manufacturing) inventory, importance in, 110 lean, 5–8 pull, 7–8, 8t push, 7, 8, 8t supply chain focused, 4f, manufacturing environments, 10–11 alternative, 11–12, 12f, 12t, 87–88 assemble-to-order, 11 engineer-to-order, 11 make-to-order, 10 make-to-stock, 10 manufacturing planning and control system (MP&CS) Association for Operations Management, 14–15 enterprise resource planning to, framework for, 2–3 hierarchical, 2, 3f historical perspective, 6–10, 7t lean philosophy, 5–6 manufacturing environments, 10–12, 12f, 12t philosophy, 197, 197f primary objective of, push and pull production systems, 204 return on investment drivers, 13 supply chain focused, 204 supply chain manufacturer-supplier relationship, 4–5 trends in, manufacturing resource planning II (MRPII), 164–165, 165f, 167 manufacturing waste, 188–189, 189f, 202 market shares, increased, 260 master production scheduling (MPS), 152, 243–244 See also alternative master production scheduling assemble-to-order, 88–89, 90 available-to-promise, 90–94 bill of material, 82–83 capacity planning, 243 controlling, 103 creating, 103 customer-relationship management process, 3–4 design for, 103 disaggregating aggregate plan, 78–81 environment for, 81–82 final assembly schedule, 85–87 forecasting, 81, 85 interfaces, 78, 79–80t, 79f managing, 80t, 104 manufacturing environments, alternative, 87–88 master scheduler, 104 material requirements planning, 57–58, 243 planning horizon, 83–84 process of, 85 production lead time, 85–87 production smoothing, 186 shop-floor systems, 243–244 sourcing systems, 244 supplier-relationship management process, 3–4 master scheduler, 104 material inspection, 192 material requirements planning (MRP) production systems basics for, 151–155, 152f benefits of, 148 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 384 Index material requirements planning (MRP) production systems (continued ) closed-loop, 166 computerized, 149 concept of, 150, 150f, 151 demand, types of, 148 design decisions, 158–159 detailed, 243 development, 148 emergence of, enterprise resource planning, transformation to, 167 illustrative example, 155–158 implementation case study, 159–163 as information system, 148 inputs, 152–153 inventory control systems, 149 just-in-time production vs., 204, 205f limitations of, 164 logic of, 148 lot-sizing method, 149–151, 150f manufacturing resource planning II, 164–165, 165f master production scheduling, 57–58, 243 outputs, 154 shop-floor scheduling system, 243 time-phased, 154, 154f, 244, 244t mathematical techniques, 255 mean absolute deviation (MAD), 21, 22–23, 23f, 38, 39, 41, 43 mean error (bias), 21–22, 38, 41 medium-range capacity planning, 217–218 moving averages, 28–29 weighted, 30–32 MP&CS See manufacturing planning and control system (MP&CS) MPS See master production scheduling (MPS) MRP See material requirements planning (MRP) production systems MRPII See manufacturing resource planning II (MRPII) MTO See make-to-order (MTO) MTS See make-to-stock (MTS) muda, 188 multifaceted work force, 188 N NCR, 193 nervousness, 159 net requirements (NR), 155 non-assemble-to-order, 87 noncore capabilities, 265 nonrandom conditions, 20–21 non-time-phased reorder-point system, 151 normal distribution, 126–128, 128t “no stockouts allowed” assumption, 120 NR See net requirements (NR) O OEM See original equipment manufacturer (OEM) OLS See ordinary least squares (OLS) operating costs, 260 See also costs operating performance improvement, 260 operational precision, 19 opinion forecasting See qualitative forecasting models order acceptance ratio for assemble-to-order environment, 88–89 ordinary least squares (OLS), 27 original equipment manufacturer (OEM), 2, 238, 253 outbound logistics, 56, 294 See also delivery systems outputs capacity requirements planning, 226–230 material requirements planning, 154 work, 206 outsourcing See also outsourcing manager; supply chain focused outsourcing benefits of, 260 business processing, 258, 259f, 260 categories of, 258, 258t concept of, 258–259 concurrency concept, 266, 266f contract terms, 265–266 defining, 258 global business process, 259 hidden costs of, 260–264 information technology, 258, 262 relationship failures, 259 risks of, 272 strategic, elements of, 265–266 of supply, 51 trends, 265–266 outsourcing manager, 273–276 control costs, 273–275 coordination costs, 273–275 culture of customer and provider, 275–276 overtime, 59, 65–66, 227–230 P PA See projected available on hand (PA) PAC See production activity control (PAC) paper kaizen, 188–189 part commonality, 102 part demand determination, 245 part supply determination, 245 part-time labor, 59 performance business, 297–300, 298t forecasting, 254–255 operating, improvement of, 260 periodic-reorder system, 134 periodic review of inventory control system, 134–137 fixed-interval, 115 fixed-time, 135–137, 136f guidelines for, 134–135 period-level data, 240 personnel criteria for transition to external sourcing model, 269–270 Philips Lighting, 289 pipeline inventory, 116 planned order releases (POR), 155 plan/planning, 55, 290 See also capacity planning; specific types of plan/ planning aggregate strategies for, 60–61 capacity requirements, 164, 225–230 detailed, 14 master production scheduling, 83–84 resource requirements, 70 rough-cut capacity, 164, 166, 221–225 supplier capacity, 231–234 supply chain, 56, 216–217, 282–283, 287–288 systematic capacity requirements, points of departure, 305–313 politics-related expenses, 263 POR See planned order releases (POR) POS See purchase-order schedule (POS) precision, 19 prediction vs forecasting, 20–21 preventive maintenance, 188 pricing, 59 problem framework assumptions, 304–313 points of departure, 305–313 production activity control (PAC), 164 production lead time, 85–87 production planning activities, 255 production smoothing, 186 productivity data, 61–64 products analysis of, 53 commonality, 102, 102t demand for, 196–197 design of, 262–263 development of, 262–263 innovation of, 51–52 return rates, 254 projected available on hand (PA), 155 promotion, 59 provider and customer, distance between, 275–276 pull manufacturing, 7–8, 8t pull production system, 205–207 See also push and pull production systems just-in-time production as, 203 kanban production system, 206–207 objective of, 210 principle of, 210 work output, 206 purchased materials, 110, 111f purchase-order schedule (POS), 231–233, 232f purchasing vs just-in-time production, 193, 193t pure chase strategy, 60–61, 65 pure level strategy, 60, 65 with overtime and idle time, 65–66 push and pull production systems See also pull production system; push production system advantages of, 202–203 comparison of, 209–210, 209f defining, 203 disadvantages of, 202–203 information flow, 203–204 kanbans, determining number of, 207–209 manufacturing planning and control systems, 204 work-in-process approach, 204 push manufacturing, 7, 8, 8t push production system, 205 See also push and pull production systems bill-of-material, 205 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index just-in-time as, 203 manufacturing activities, 205 objectives of, 205 purpose of, 205 Q Q, R procedure, 132–134, 132f qualitative forecasting models, 23–24 quality of available-to-promise, 101 costs of, 260–261 of cover, 248 customer satisfaction and, improved, 194 quality-at-the-source program, 188 quantitative forecasting models, 24–41 approaches to, 25–26 exponential smoothing model, 32–38 linear regression, 26–28 moving averages, 28–29 time series forecasting, 24–25, 24–26f weighted moving averages, 30–32 quantity discounts, 304 classical fixed-order quantity model with, 121–123 economic order quantity with, 121–123 supply chain integration and, 304–313 quick setup times, 187 R raw material (RM), 13 RCCP See rough-cut capacity planning (RCCP) RCCR See rough-cut capacity using routings (RCCR) RCOF See rough-cut capacity check using overall factors (RCOF) RCP See resource capacity planning (RCP) RCV See rough-cut capacity and production volume (RCV) reassembly, 240 relationships buyer-supplier, 55, 290–293 management of, supply chain focused outsourcing and, 271–273 outsourcing, failures with, 259 sourcing, 249 with suppliers, 254 supply chain manufacturer-supplier, 4–5 reliability lead time, improved, 194 of supplies, 192–193 remanufacturing complications to, 241, 241t component, 244–245 core acquisition study, 245–246 defined, 238–239, 239f disassembly, 240 framework, 240, 242f management of, 253–255 master production scheduling, 243–244 production planning and control, 240–243 reassembly, 240 study results, 246–253 Remanufacturing Institute, reorder point (ROP), 128–129, 131, 133, 149 385 reorder-point inventory control system fixed-interval, 134 inventory control systems, types of, 149 non-time-phased, 151 periodic-reorder system, 134 resource capacity planning (RCP), 220–221 resource profile method (RPM), 224–225, 224t resource requirements planning, 70 resources, 14–15, 57 respondent demographics, 246 return on assets, 13 return on investment (ROI) drivers, 13, 13f return rates of products, 254 revenue, increased, 260 risk, defining, 271 RM See raw material (RM) ROI See return on investment (ROI) drivers ROP See reorder point (ROP) rough-cut capacity and production volume (RCV), 221 rough-cut capacity check using overall factors (RCOF), 221–222, 222f rough-cut capacity planning (RCCP), 164, 166, 221–225 resource profile method, 224–225 rough-cut capacity and production volume, 221 rough-cut capacity check using overall factors, 221–222, 222f rough-cut capacity using routings, 222–224 rough-cut capacity using routings (RCCR), 222–224, 223f RPM See resource profile method (RPM) S safety stocks, 116, 159 design, 135 determining level of, 123–129 impact of, 124–125f sales and operations planning (S&OP) See also aggregate production planning (APP) benefits of, 52 evolutionary trends, 50, 51–52 framework for effective, 52–56, 54f implementation process for, 56 typical cycle, 57, 57f scheduled receipts (SR), 155 schedules/scheduling detailed, 14 final assembly, 86–89, 94, 96–99 flexibility, 194 orders, 135 SCM See supply chain management (SCM) SCOR See supply chain operations reference (SCOR) model SCP See supplier capacity planning (SCP) SCR See supplier capacity report (SCR) seasonal inventory, 116 seasonality exponential smoothing model, 36–37 forecasting, 38–41 sense of urgency, 198 service customization, 274 SFC See shop floor control (SFC) SFMPC See supply chain focused manufacturing planning control (SFMPC) system shop floor control (SFC), 164, 204, 218 See also production activity control (PAC) shop-floor scheduling system, 243–244 short lead times, 187–188 short-range capacity planning, 217, 218 short-term wins, producing, 198 Six Sigma, 294 Sony, 286 S&OP See sales and operations planning (S&OP) sourcing relationships, 249 SPC See statistical process control (SPC) SR See scheduled receipts (SR) statistical process control (SPC), 294 statistical techniques, 255 stockouts during any lead time cycle approach, 124–126 classical fixed-order quantity model with, 120–123 economic order quantity with, 120–123 stocks See also safety stocks cycle, 116, 135 decoupling, 116 strategy, development of, 198 subcontracting, 59 superbills, 94–99, 96f, 101t superbill time chart, 97–98, 98f supplier capacity planning (SCP), 231–234 purchase-order schedule, 231–233, 232f supplier capacity report, 233, 233f supplier capacity report (SCR), 233, 233f suppliers close relationships with, 254 constructive synergies with, 194 development, 188 selection of, 267–269 supply chain manufacturer relationship, 4–5 vendor relationship management with, 261 supplies analysis of, 53 management benefits, 193–194 outsourcing of, 51 part determination, 245 uncertainty, core, 249 supply chain, 282 See also supply chain operations reference (SCOR) model business performance, 297–300, 298t delivery system, 282 environmental dynamism, 286 impact of, 286–287 information sharing, 284–285, 288 just-in-time production, 282 manufacturer-supplier relationship, 4–5 manufacturing planning and control, 282 planning, 282 practicing, 283–284 quantity discounts, 304–317 risk management, 263–264 strategy clusters, 295–296f, 295–297 Supply Chain Council, 289 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 386 Index supply chain focused inventory management See also inventory management models ABC classification of inventory, 112–115, 113–115f demand, dependent vs independent, 110 demand and lead time uncertainty, 129–134 economic order quantity model, 120–123 periodic review of inventory, 134–137 safety stock, determining level of, 123–129 supply chain focused manufacturing network, 4f, supply chain focused manufacturing planning control (SFMPC) system, 204 supply chain focused outsourcing See also outsourcing contract development, 267–269 core competencies, 265 external sourcing model, transition to, 269–271 financial evaluation, 267 relationship management, 271–273 strategic evaluation, 267 supplier selection, 267–269 supply chain management (SCM), 14, 18, 284, 285f supply chain operations reference (SCOR) model, 291–292f, 292t benefits of implementing, 54 defining, 290 firm strategy and, 295–297 framework, 53, 55f, 290 General Electric, 289 human resource management, 293, 294 Intel, 53–54 just-in-time production, 293 review of, 290–294 supply chain integration and, 289–290 total preventive maintenance, 293 total quality management, 293, 294 supply chain planning Cisco, 287 delivery systems, 283 Dell, 287 just-in-time (JIT) production, 56, 284, 287 management, 288 objectives, 283 supply chain practice, 283 supply chain practice, 283–284 delivery systems, 283 impact of, 286–287 information sharing and, 282 just-in-time production, 284 supply chain planning, 283 SWOT (strengths, weaknesses, opportunities, threats) analysis, 267 systematic capacity requirements planning, systematic forecasting, 21 T TBR See Time Between Review (TBR) Time Between Review (TBR), 135 time bucket, 155, 158–159 time-phased material requirements planning, 154, 154f, 244, 244t time series forecasts, 24 total preventive maintenance (TPM), 56, 293 total quality management (TQM), 56, 293, 294 Toyota, 7, 186, 189–190, 205, 282, 288 TPM See total preventive maintenance (TPM) TQM See total quality management (TQM) tracking signal monitoring, 41–42 U undiscounted economic order quantity, 314 uniform production, 186 UPS, 56, 283, 294 U.S Army, 238 V Valencia facility, 199 value-stream making (VSM), 189 variability, demand, 102–103 vendor relationship management, 261 vision, development of, 198 volatility, 52 VSM See value-stream making (VSM) W weighted moving averages, 30–32 WIP See work-in-process (WIP) workforce capability, 294 work-in-process (WIP), 13, 204 work output, 206 X Xerox, 192, 196 Z ZIPS (zero inventory production system), 195 Copyright 2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... provide an understanding of the supply chain focused manufacturing planning and control function The primary objective of a supply chain focused manufacturing planning and control system (MPCS)... Supply Chain Focused Manufacturing Planning and Control Figure Manufacturing Planning and Control Framework Planning Systems Information Systems Strategic Planning Aggregate Planning Sales and. .. information across the supply chain to monitor, control, and enhance overall manufacturing and supply chain performance Manufacturing planning and control across the supply chain involves the coordination