Appendix CManufacturing Information Systems

MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell

Copyright 2001 Prentice-Hall, Inc.C-1

Manufacturing Information Manufacturing Information SystemSystem

Used to support efforts to produce productsUsed to support efforts to produce products Evolution of computer use in manufacturingEvolution of computer use in manufacturing

– Systems keyed on reorder pointsSystems keyed on reorder points– MRP MRP – JITJIT

Consists of three input and four output Consists of three input and four output subsystemssubsystems

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The Computer as Part The Computer as Part of the Physical Systemof the Physical System

Focuses on computer-controlled machines Focuses on computer-controlled machines in the production areain the production area– CAD (computer-aided engineering)CAD (computer-aided engineering)– Design databaseDesign database– CAM (computer-aided manufacturing)CAM (computer-aided manufacturing)– RoboticsRobotics

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The Computer As an The Computer As an Information SystemInformation System

Term “manufacturing information system” Term “manufacturing information system” used to describe the CBIS subsystem that used to describe the CBIS subsystem that provides information concerning the provides information concerning the production operationsproduction operations

Goes by many other namesGoes by many other names– ROP, MRP, MRP IIROP, MRP, MRP II– JIT, CIMJIT, CIM

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Reorder Point (ROP) Reorder Point (ROP) SystemsSystems

Key TermsKey Terms– Reorder point, stockout, lead time, safety stockReorder point, stockout, lead time, safety stock

ROP formula: R = LU+SROP formula: R = LU+S Still used by many firmsStill used by many firms

– Well suited to retail inventoriesWell suited to retail inventories

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Reorder Point With No Safety StockReorder Point With No Safety Stockand With a Safety Stockand With a Safety Stock

Reorder point

Lead time Time

Safety stock

Balanceon hand

Balanceon hand

A. No safety stock

B. Safety stock C-6

Material Requirements Material Requirements Planning (MRP)Planning (MRP)

Looks to the future and identifies the Looks to the future and identifies the materials neededmaterials needed

Components:Components:1. Production scheduling system -- produces a master 1. Production scheduling system -- produces a master

production schedule that encompasses the longest lead production schedule that encompasses the longest lead time plus the longest production time.time plus the longest production time.

2. MRP system -- explodes the bill of materials. Converts 2. MRP system -- explodes the bill of materials. Converts the gross requirements into the net requirements.the gross requirements into the net requirements.

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Material Requirements Material Requirements Planning (MRP)Planning (MRP)

Components (cont.):Components (cont.):

3. Capacity requirements planning system works with 3. Capacity requirements planning system works with MRP system to keep production within plant capacity. MRP system to keep production within plant capacity. Produces outputs: reports and planned order schedule.Produces outputs: reports and planned order schedule.

4. Order release system produces reports for shop floor 4. Order release system produces reports for shop floor and purchasing.and purchasing.

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Customerorder file

Sales forecast

file

Finished-goods

inventory file

Produc-tion

capacityfile

Bill ofmaterial

file

Plannedorder

schedule

Rawmaterialsinventory

file

1.Productionscheduling

system

2. Materialrequirements

planning system

3. Capacityrequirements

planning

Purchasingsystem

Order releasereport

4.Order releasesystem

Order releasereport

Shop floorcontrolsystem

Performance reports

Planning reports

Exception reports

Changes to planned orders

An MRP SystemAn MRP System

Masterproduc-

tionschedule

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Manufacturing Resource Manufacturing Resource Planning (MRP-II)Planning (MRP-II)

The purpose is to integrate MRP with all The purpose is to integrate MRP with all systems that affect materials managementsystems that affect materials management– Organizational systemsOrganizational systems– Accounting information systemAccounting information system

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Materialrequirements

planning

Executive information

system

Orderentry

Accounts payable

Accountsreceivable General

ledger

An MRP II SystemAn MRP II SystemOther functional information systems

Purchasing

ReceivingBilling

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MRP-II BenefitsMRP-II Benefits

More efficient use of resourcesMore efficient use of resources– Reduced inventoriesReduced inventories– Less idle timeLess idle time– Fewer bottlenecksFewer bottlenecks

Better priority planningBetter priority planning– Quicker production startsQuicker production starts– Schedule flexibilitySchedule flexibility

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MRP-II Benefits [cont.]MRP-II Benefits [cont.]

Improved customer serviceImproved customer service– Meet delivery datesMeet delivery dates– Improved qualityImproved quality– Lower price possibilityLower price possibility

Improved employee moralImproved employee moral Better management informationBetter management information

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Just-In-Time (JIT)Just-In-Time (JIT)

Faster material flowFaster material flow Small lot sizeSmall lot size TimingTiming Compare JIT to online processing and MRP Compare JIT to online processing and MRP

to batchto batch Kanban pulls material as opposed to MRP Kanban pulls material as opposed to MRP

pushpush Computer not emphasizedComputer not emphasized

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Manufacturing Information Manufacturing Information SystemSystem

DefinitionDefinition– A computer-based system that works in A computer-based system that works in

conjunction with other functional information conjunction with other functional information systems to support the firm's management in systems to support the firm's management in solving problems that relate to manufacturing solving problems that relate to manufacturing the firm's productsthe firm's products

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DATABASE

Accountinginformation

system

Industrialengineering

system

Manufacturingintelligencesubsystem

Productionsubsystem

Inventorysubsystem

Qualitysubsystem

Costsubsystem

Internalsources

Environmentalsources

InputInputsubsystemssubsystems

OutputOutputsubsystemssubsystems

Users

Data Information

A Model of a Manufacturing SystemA Model of a Manufacturing System

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Accounting Information Accounting Information System [AIS]System [AIS]

Data collection terminalsData collection terminals– Track material flowTrack material flow– Gather job data (job reporting)Gather job data (job reporting)– Gather attendance data (attendance reporting)Gather attendance data (attendance reporting)

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TerminalTerminal

Receiving areaReceiving area

Raw-materialsRaw-materialsstoreroomstoreroom

ReceivingReceivinginspectioninspection

Shop floor areaShop floor area

Finished-goodsFinished-goodsstoreroomstoreroom

Shipping areaShipping area

1

2

3 4 5

6

7

8

9

10

11

12

Location of Location of Data Collection TerminalsData Collection Terminals

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Industrial Engineering Industrial Engineering SubsystemSubsystem

The industrial engineer (IE)The industrial engineer (IE) Studies physical and conceptual systemsStudies physical and conceptual systems Sets production standardsSets production standards

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Manufacturing Intelligence Manufacturing Intelligence SubsystemSubsystem

Can be viewed in terms of environmental Can be viewed in terms of environmental contactscontacts

Labor unions (personnel flow)Labor unions (personnel flow)– Formal and informal systemsFormal and informal systems– Personnel informationPersonnel information– Union contract complianceUnion contract compliance

Suppliers (material and machine flow)Suppliers (material and machine flow)

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Labor Unions

•Suppliers•Employment agencies •College &universities•Trade schools

Government

Global community

Competitors

Industrial relationsdepartment

Strategic levelmanagement

Human resourcesdepartment

Employees

Manufacturing management

Personnel Personnel requestsrequests

ApplicantApplicant datadata

Union contractUnion contractperformanceperformance

Formal flowFormal flowInformal flowInformal flow

Flow of Labor InformationFlow of Labor Information

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Units replaced or repaired becauseof defective parts, supplier spareparts availability, and so on

Units rejected upon receipt, unitsrejected during production, reasons for rejection, and so on

Customerservice input

Qualitycontrol input

Supplierinput

Financial strength, quality controlemphasis, past quality and deliveryperformance, and so on

Supplierfile

Input to Supplier RecordsInput to Supplier Records

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Production SubsystemProduction Subsystem

Used to:Used to:1. Build production facilities1. Build production facilities

2. Operate production facilities2. Operate production facilities Production schedule determines when the Production schedule determines when the

production steps are performedproduction steps are performed Track expected and actual completion timesTrack expected and actual completion times

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Job Flow Through the PlantJob Flow Through the Plant

Rawmaterialsinventory

Plastic top

Plasticcylinder

Step 1

Step 5

Step 6

Step 7

Step 8

Step 2

Step 3 Step 4Step 9

Finishedgoods

inventory

Flashlight

Attach springAttach spring

Install bulbInstall bulb

Install reflectorInstall reflector

Install red lensInstall red lens

Install clear lensInstall clear lens

Attach switchAttach switch

Attach strapAttach strap Add batteriesAdd batteriesPut top onPut top oncylindercylinder

PRODUCTION AREAPRODUCTION AREA

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Inventory SubsystemInventory Subsystem

Importance of determining the inventory Importance of determining the inventory levellevel

Maintenance cost (carrying costs)Maintenance cost (carrying costs) Purchasing costsPurchasing costs Economic Order Quantity (EOQ)Economic Order Quantity (EOQ) Economic manufacturing quantity (EMQ)Economic manufacturing quantity (EMQ)

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---------------------------------------------------

Safety stock

Average inventory level

Safety stock

Average inventory level ------------------------------------------------------

A. Order quantity of 20; average level is 15.

0

5

15

25

0

13

5

21

B. Order quantity of 16; average level is 13.

Bal

ance

on

h

and

Bal

ance

on

han

d

Time

Time

The Effect of Order Quantity on Average The Effect of Order Quantity on Average Inventory LevelInventory Level

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Quality SubsystemQuality Subsystem

Deming’s fourteen points; maintained that it Deming’s fourteen points; maintained that it is not workers but management that is not workers but management that determines qualitydetermines quality

Total quality management (TQM)Total quality management (TQM) Elements of TQMElements of TQM

– Zero defectsZero defects– Quality at the sourceQuality at the source

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TQM Philosophy

*Customer-driven quality standards*Customer-supplierlinks*Preventionorientation*Quality at the source*Continuous improvement

TotalQuality

Management

Graphical Tools

*Process flowcharts*Check sheets*Pareto analysisand histograms*Cause and effect (fishbone) diagrams*Run charts*Scatter diagrams*Control charts

Statistical Tools

*Sampling plans*Process capability*Taguchi methods

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Cost SubsystemCost Subsystem

Periodic reportsPeriodic reports Required ingredientsRequired ingredients

1. Standards1. Standards

2. Information2. Information

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SubsystemSubsystem

User Inventory Quality Production CostUser Inventory Quality Production Cost

Vice president of manufacturingVice president of manufacturing

Other executivesOther executives

Plant SuperintendentPlant Superintendent

Manager of planning and control Manager of planning and control

Manager of EngineeringManager of Engineering

Manager of quality controlManager of quality control

Director of purchasing Director of purchasing

Manager of inventory controlManager of inventory control

Other managers Other managers

How Managers Use the How Managers Use the Manufacturing Information SystemManufacturing Information System

XX XX XX

XX

XX

XX

XX

XX

XXXX XX

XX XX

XXXXXX XX

XXXX XX

XX XX XX XX

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SummarySummary Manufacturing managers have applied computers Manufacturing managers have applied computers

– Physical Physical – ConceptualConceptual

Inventory Inventory MRP IIMRP II JITJIT CIM is management philosophy aimed at CIM is management philosophy aimed at

integrating all CBIS plus factory automationintegrating all CBIS plus factory automation

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