Tara PlasticsTara Plastics

Business Process Planning WorkshopBusiness Process Planning Workshop

Presented by:The Georgia Tech

Center for Manufacturing Information Technology

Course Instructors:Greg HollandTarun Kataria

Mackenzie Stevenson

Workshop ObjectivesWorkshop Objectives

• Identify issues, tasks, and business and software requirements for future system implementation

• Review best practices and begin business and system process definition

• Define how you want to run your company and what tools you’ll need to do it

TEAM Process ChartTEAM Process Chart

Shipping / Receiving

Master Scheduling

Capacity Planning

Shop Orders

Shop Floor & Inventory Control

Customer MasterVendor Master

Company MasterWarehouse Master

Location Master

Item MasterOperation Master

Product Config. Master

Work Center MasterShop Calendar

Customer Order EntryPeachtree

® Accountin

g

Finite Schedule

MRP

Sales Tax Codes

Chart of Accounts

A/R A/P

Material Planning

Purchasing

TEAM Database

Bill / Route StructureBill / Route Structure

MAKE TO STOCK

Stock end items & fill orders from stock Limited number of end items Forecast

MAKE TO ORDER

Produce subs, components, & end items on receipt of order Combination of standard and custom subs/components Customer orders

ASSEMBLE TO ORDER

Stock subs/components; assemble end items per order Large number of end items Forecast subs/components Customer orders for end items

ENGINEER TO ORDER

Unique parts/subs/components per order Unlimited number of end items Customer orders

Manufacturing EnvironmentsManufacturing Environments

Supermarket LocationsSupermarket LocationsSupply Chain Lead Times (Weeks)

Customer Lead Times (Weeks)

BagExtrudeTreatBlendPurchase Raw Material

9 717 4 1

<1

<4

<7

<9

<17

RoutingRouting

• Describes how an item is manufactured Operations Sequence of operations Work center data (available capacity) Standards (run time, set-up time, move time, queue

time) Testing might also be included

Bill of MaterialBill of Material

EndItem A

PurchasedPart E

SubassemblyB

PurchasedPart F

ComponentC

Raw MaterialD

Level 0

Level 1

Level 3

Level 2

Bill of MaterialBill of Material

• Raw Materials• Purchased components• Shipping materials• Instructions• Manufacturing Subassemblies• Semi-finished Items

Sheeting RouteSheeting Route

Blend Treat Pack Roll

Sheeting BOMSheeting BOM

Extruded Film

Resins Additives Colors

Wicketed Bag RouteWicketed Bag Route

Blend Treat Pack Roll Wicket

Wicketed Bag BOMWicketed Bag BOM

Extruded Film

Resins Additives Colors

Wicketed Bag

Bag - Rolls RouteBag - Rolls Route

Blend Treat Pack Roll Convert

Bag – Rolls BOMBag – Rolls BOM

Extruded Film

Resins Additives Colors

Bags on Roll

• Low volume, high variety• Functional layout• Spaghetti flow• Multi-level BOM• High WIP• High setup / large batches• Long lead times• MRP

Job Shop vs. FlowJob Shop vs. Flow

Job Shop Flow

• High volume, low variety• Cellular layout• Continuous flow• Flat BOM• Low WIP• Low setup / small lots• Short lead times• Kanban

BOM AccuracyBOM Accuracy• For each BOM item verify:

Item number Unit of measure Parent quantity Quantity per parent item

• Audit methods Floor audit Office/factory review Product teardown Variance analysis of issue vs. receipt variance Product cost rollup

Route AccuracyRoute Accuracy• For each route verify:

Operations Sequence numbers Work centers Run rate

• Audit methods Floor audit Office/factory review Variance analysis of actual labor vs. standard Product cost rollup

BOM / Route AccuracyBOM / Route Accuracy

• Bill of Material Audit BOMs (# parent items correct / total #

of parent items audited)

• Route Audit routings (# correct routings / total # of

routings checked)

Master SchedulingMaster Scheduling

MRP without MPSMRP without MPS

Extruded Film

Resins Additives Colors

Wicketed Bag

1 2 3 4

Item Forecast 200 200 100 100Customer Orders 100 120 80 Gross Requirements 100 200 100 100

Week

MRP with MPSMRP with MPS

Extruded Film

Resins Additives Colors

Wicketed Bag

1 2 3 4

Item Forecast 200 200 100 100Customer Orders 100 120 80 Gross Requirements 100 200 100 100Master Schedule 150 150 100 100

Week

Master Schedule LevelMaster Schedule Level

End Items

Raw Materials

Subs/Components

Goal: Master schedule at narrowest sensible point

System Planning HorizonSystem Planning Horizon

• The greater of… Maximum cumulative lead time from bill of

material, or

Time needed to make capacity changes for work centers or suppliers

Time FencesTime Fences

• Points in time in the planning horizon used to: Define and restrict the degree of allowable

changes within the planning horizon Regulate changes to the schedule that may

adversely affect: component lead times capacity plans customer deliveries cost

MPS Change PolicyMPS Change Policy

Zone AEmergency

Changes

Zone BTrades

Material & Capacity

Committed

Material & CapacityPlanned

Today

Zone CAdds &

ChangesMaterial & Capacity

Scheduled

Cum. LT

Demand Fence 1 Demand Fence 2

Item LT

System Planning Horizon

Releasable Period

Analyzing Change RequestsAnalyzing Change Requests

• Has demand really changed?• What is the impact on the production plan?• Is capacity available?• Is material available?• What are the costs and risks associated with

making the change?• What are the costs and risks associated with

not making the change?

Material PlanningMaterial Planning

How To Do It What We Have Done

Plan To Do

Calculate Material

Requirements

What We Need To Do & When

Materials Required

On-Hand Inventory & Open OrdersBill of Material

Demand

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

MRP FrequencyMRP Frequency

• Advantages: Updates requirements based on most recent

demand information Ensures material and capacity are used to meet

actual demand

• Disadvantages: MRP regeneration time Could cause nervousness in the schedule if

schedule change policies lax

MRP DatesMRP Dates• Due Date

Expected receipt date for a shop order or purchase order indicating when it’s available to use.

• Release Date Planned or scheduled releases determined by subtracting

the lead time from the planned or scheduled receipt date• Need Date

Required date for intended use; in MRP the release date for a parent item determines the need date for the component child item

• Receipt Date When an order is planned or scheduled to be received

usually as a result of a planned or scheduled release

Buffer TypesBuffer Types• Safety Stock

Material buffer exceeding that which is needed to satisfy gross requirements Used when there is uncertainty about quantity

• Safety Lead Time Time buffer which requires early release and

receipt dates for shop orders and purchase orders Used when there is uncertainty about timing

Buffer ComparisonBuffer Comparison

OpeningBalance 1 2 3 4 5

Gross Requirements 40 20 20 0 30Scheduled Receipts 50Proj. Avail. Balance 40 50 30 60 60 30Planned Receipt 50 Planned Release 50

Period

Safety Stock = 20 unitsLead Time = 2 periodsOrder quantity = 50 units

Buffer ComparisonBuffer Comparison

OpeningBalance 1 2 3 4 5

Gross Requirements 40 20 20 0 30Scheduled Receipts 50Proj. Avail. Balance 40 50 30 10 60 30Planned Receipt 50Planned Release 50

Period

Safety Lead Time = 1 periodLead Time = 2 periodsOrder quantity = 50 units

Buffer IssuesBuffer Issues• Buffer Size

How should I determine the right amount of safety stock and safety lead time?

• Buffer Location Where do I place buffers to offer the highest

protection at the lowest cost?

• Buffer Conflicts How do I avoid the problem of working on

orders to satisfy safety stock or safety lead time requirements instead of actual orders?

Buffer SizeBuffer Size• Safety Stock Calculation

Uncertainty in supply and demand quantity SS = Zs

Z = Value from normal table to match desired service levels = Standard deviation of supply or demand per period

s can be approximated by 1.25 MAD (mean absolute deviation)

Safety FactorsSafety Factors

Desired Service Level Z MAD

90% 1.28 1.60

95% 1.65 2.06

98% 2.05 2.56

99% 2.33 2.91

Safety Stock CalculationSafety Stock Calculation

Item # 12345

Month DemandAverage Demand

Absolute Deviation

January 94 114 20February 110 4March 130 16April 120 6

Sum 454 46

Average past demand 114

Mean Absolute Deviation 114 / 46 = 11.5

Safety Stock @ 90% SL 1.60 x 11.5 = 18.4

Safety Stock @ 95% SL 2.06 x 11.5 = 23.7

Safety Stock @ 98% SL 2.56 x 11.5 = 29.4

Capacity PlanningCapacity Planning

Capacity TypesCapacity Types

• Demonstrated Capacity Capacity available in the past and expected in the future;

based on actual output (standard hours) per week• Available Capacity

Based on shop calendar and work center setup. Syn. Planned capacity

• Required Capacity The expected hours from the item routing to process all

planned and scheduled requirements in a work center

Objective: Balance available capacity with required capacity

Available CapacityAvailable Capacity

Available Capacity =(Loading Time) x (Utilization) x (Efficiency)

Loading Time = (available hours) - (scheduled downtime)

Utilization = (actual hours run)/(loading time)

Efficiency = (standard hours produced)/(actual hours charged)

Infinite vs. Finite CapacityInfinite vs. Finite Capacity

• Infinite Resource is loaded without regard to

capacity available to perform the work in a given time period

• Finite Resource is loaded with no more work than

it can be expected to complete in a given time period

Infinite Capacity PlanningInfinite Capacity Planning

Capaci

ty

Planned Capacity

open orders

open orders

plannedorder

s1 3 5 7

open orders

open orders

plannedorder

s

plannedorder

splannedorder

splannedorder

s

plannedorder

s

Required Capacity

2 4 6

Resource Capacity Profile

Time Period

Finite Capacity Scheduling (FCS)Finite Capacity Scheduling (FCS)

Creates a realistic production schedule that recognizes and respects resource

limits

Creates a realistic production schedule that recognizes and respects resource

limits

Capacity Planning DecisionsCapacity Planning Decisions

• Infinite Capacity Tool: Resource Capacity Profile

• Finite Capacity Tool: Late Orders Report

Adjust schedule and / or capacity Adjust schedule and / or capacity to ensure supply meets demand to ensure supply meets demand

and schedule is realisticand schedule is realistic

Production PlanningProduction Planning

Production Planning Production Planning Process

Demand

SupplyMaster

Production

ScheduleWhat are we going to make?

MRP & CRP

What do we need to make it?

When do we have to have it?

Plant Schedule

When and where are we going to make it?

Releasable OrdersReleasable Orders

Shop Orders

Lead TimeDue Date

Demand Fence 1

Today = Release

Date

Firm Planned Orders

Release

Releasable OrdersReleasable Orders

• Caveat 1: Don’t release an order before it’s time Orders released before they’re needed…

Use capacity and materials planned for other orders Cause confusion on the shop floor regarding order

priorities Increase the number of shop orders that need to be

rescheduled if the MPS is changed Increase WIP and FG inventory

Identifying ShortagesIdentifying Shortages

• Caveat 2: Make sure you’re not counting inventory twice in the release process Multiple orders may use the same component

Software summarizes total demand requirements for all releasable orders and compares to on-hand inventory

Demand pegging report identifying the demand from all shop orders for an item

Shortage report identifying allocations greater than on-hand inventory

Manual

Manual

Automatic

Production ControlProduction Control

Production Control ProcessProduction Control Process

1. Shop order release

2. Material issue• Removes inventory from issue location and places into WIP

3. Labor entry• Hours and quantity posted against shop order route to

update hours completed

4. Shop order receipt• Receives shop order item into inventory at work center

location• Material issue occurs for backflush items

5. Inventory transfer

Transaction Reporting MetricsTransaction Reporting Metrics• Quantity received vs. quantity ordered• Quantity issued vs. quantity required• Actual vs. standard operation quantity or hours• Purchase order receipts vs. quantity ordered• QOH vs. cycle count• % of negative location balances

Requires feedback and control mechanisms to not only Requires feedback and control mechanisms to not only correct the errors, but also prevent them from reoccurring.correct the errors, but also prevent them from reoccurring.

Event MonitoringEvent Monitoring

Monitor Exceptions

• Past due shop orders• Past due purchase orders• Downtime• Material shortages• Production delays

Buffers Exceeded?

No

AnalyzeAdjustNotify

Yes

Schedule PerformanceSchedule Performance

• Metrics % shop orders completed by due date / total

shop orders # schedule changes during releasable period Setup costs WIP value

Inventory ControlInventory Control

Controlling Inventory AccuracyControlling Inventory Accuracy• For each inventory location area, determine:

What transactions need to be reported (issues, receipts, adjustments, transfers)

How transactions should be reported (mode) When the transaction should be reported (timing) Who should have authority to move inventory Who should have responsibility for accuracy Who should enter inventory transaction What are the hardware, software, and procedural

requirements to support inventory activities

Multi-location StorageMulti-location Storage

• Item count by multiple locations is a necessary software tool Random location can provide 40% greater space

utilization Supports the need to quickly locate material Set-up a location for any space that material can

placed Avoid assigned locations by item

Cycle CountingCycle Counting

• The systematic counting of parts to: Correct errors Eliminate root causes Maintain inventory accuracy

Cycle Counting MethodsCycle Counting Methods

• Cycle Counting Methods Control Group Random Sample ABC Method Process Control

• The difference in these methods is how the sample is chosen

Measuring AccuracyMeasuring Accuracy

Item Physical QOH Tolerance

Number Count Record (%) Hit Miss

4000 99 100 +\- 2 X

1373 103 100 +\- 5 X

4881 91 100 +\- 5 X

2019 102 100 +\- 2 X

3626 104 100 +\- 2 X

6122 100 100 +\- 0 X

5784 108 100 +\- 5 X

3908 99 100 +\- 0 X

3232 98 100 +\- 2 X

5784 96 100 +\- 5 X

Totals 1000 1000 6 4

Setting TolerancesSetting Tolerances

• Tolerances are a function of: Dollar Value Usage Lead Time Handling Criticality Bill of Material Level Combination of the above

Record AccuracyRecord Accuracy

X 100%Total # of Accurate Records

Total # of Records Counted

Inventory Record Accuracy

Inventory Control Best PracticesInventory Control Best Practices• Capture transactions as soon after the activity is

performed as possible• Restrict authority for conducting activities and

reporting transactions to those with a stake in the accuracy of the data

• Understand and address the impact of backflush transactions on inventory accuracy

• Assign locations and enter transactions only to the level of detail required to support business decisions

• Implement cycle-counting and investigate root causes of inaccuracy