Manufacturing Planning
and Control for Supply
Chain Management
APICS/CPIM Certification Edition
F. Robert Jacobs
Indiana University
William L. Berry
The Ohio State University (Emeritus)
D.ClayWhybark
University of North Carolina (Emeritus)
Thomas E. Vollniann
International Institute for Management
Me
Gravu
Hill
New York Chicago San Francisco
Lisbon London Madrid Mexico City
Milan New Delhi San Juan
Seoul Singapore Sydney Toronto
Development
CONTENTS
Preface
Acknowledgments
CHAPTER 1
CHAPTER 2
Manufacturing Planning and Control
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1
The MPC System Defined
Typical MPC Support Activities
An MPC System Framework
MPC System Activities
Matching the MPC System with the Needs of the Firm
An MPC Classification Schema
Evolution of the MPC System
The Changing Competitive World
Reacting to the Changes
Concluding Principles
APICS/CPIM Certification Questions
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Enterprise Resource Planning (ERP)
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What Is ERP?
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Consistent Numbers
Software Imperatives
Routine Decision Making
Choosing ERP Software
How ERP Connects the Functional Units
Finance
Manufacturing and Logistics
Sales and Marketing
Human Resources
Customized Software
Data Integration
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How Manufacturing Planning and Control (MPC) Fits
within ERP
Simplified Example
Supply Chain Planning with mySAP SCM
Supply Chain Execution with mySAP SCM
Supply Chain Collaboration with mySAP SCM
Supply Chain Coordination with mySAP SCM
Performance Metrics to Evaluate Integrated System
Effectiveness
The "Functional Silo" Approach
Integrated Supply Chain Metrics
Calculating the Cash-to-Cash Time
What Is the Experience with ERP?
Eli Lilly and Company—Operational Standards
for Manufacturing Excellence
Concluding Principles
APICS/CPIM Certification Questions
CHAPTER 3
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Demand Management
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Demand Management in MPC Systems
Demand Management and the MPC Environment
The Make-to-Stock (MTS) Environment
The Assemble-to-Order (ATO) Environment
The Make (Engineer)-to-Order (MTO) Environment
Communicating with Other MPC Modules and Customers
Sales and Operations Planning
Master Production Scheduling
Dealing with Customers on a Day-to-Day Basis
Information Use in Demand Management
Make-to-Knowledge
Data Capture and Monitoring
Customer Relationship Management
Outbound Product Flow
Managing Demand
Organizing for Demand Management
Monitoring the Demand Management Systems
Balancing Supply and Demand
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Contents
CHAPTER 4
CHAPTER 5
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Collaborative Planning, Forecasting, and Replenishment (CPFR)
Nine-Step CPFR Process Model
Steps 1 and 2 of the CPFR Model
Steps 3 through 9 in the CPFR Model
Concluding Principles
APICS/CPIM Certification Questions
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Forecasting
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Providing Appropriate Forecast Information
Forecasting for Strategic Business Planning
Forecasting for Sales and Operations Planning
Forecasting for Master Production Scheduling and Control
Regression Analysis and Cyclic Decomposition Techniques
Example
Decomposition of a Time Series
Additive Seasonal Variation
Multiplicative Seasonal Variation
Seasonal Factor (or Index)
Example
•
Example
Decomposition Using Least Squares Regression
Error Range
Short-Term Forecasting Techniques
Moving-Average Forecasting
Exponential Smoothing Forecasting
Evaluating Forecasts
Using the Forecasts
Considerations for Aggregating Forecasts
Pyramid Forecasting.
Incorporating External Information
Concluding Principles
APICS/CPIM Certification Questions
Case Study: Forecasting at Ross Products
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Sales and Operations Planning
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Sales and Operations Planning in the Firm
Sales and Operations Planning Fundamentals
Sales and Operations Planning and Management
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CHAPTER 6
CHAPTER 7
Operations Planning and MPC Systems
Payoffs
The Sales and Operations Planning Process
The Monthly Sales and Operations Planning Process
Sales and Operations Planning Displays
The Basic Trade-Offs
Economic Evaluation ofAlternative Plans
The New Management Obligations
Top Management Role
Functional Roles
Integrating Strategic Planning
Controlling the Operations Plan
Concluding Principles
References
APICS/CPIM Certification Questions
Case Study: Delta Manufacturing Company's Integrated Sales
and Operations Planning Process
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Advanced Sales and Operations Planning
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Mathematical Programming Approaches
Linear Programming (LP)
Mixed Integer Programming
Company Example: Lawn King Inc
Company Background
Deciding on a Planning Model
The Linear Programming Model
Developing the Planning Parameters
Solving the Linear Programming Model and Understanding
the Results
Sales and Operations Planning Issues
Using Microsoft Excel Solver
;
Concluding Principles
APICS/CPIM Certification Questions
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Master Production Scheduling
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The Master Production Scheduling (MPS) Activity
The MPS Is a Statement of Future Output
The Business Environment for the MPS
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Contents I xiii
CHAPTER 8
Linkages to Other Company Activities
Master Production Scheduling Techniques
The Time-Phased Record
Rolling through Time
Order Promising and Available-to-Promise (ATP)
Planning in an Assemble-to-Order Environment
Managing Using a Two-Level MPS
Master Production Schedule Stability
Freezing and Time Fencing
Managing the MPS
The Overstated MPS
Concluding Principles
APICS/CPIM Certification Questions
Case Study: Customer Order Promising at Kirk Motors Ltd
Case Study: Hill-Rom's Use of Planning Bills of Materials
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Material Requirements Planning
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Material Requirements Planning in Manufacturing
Planning and Control
Record Processing
The Basic MRP Record
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Linking the MRP Records
Technical Issues
Processing Frequency
Bucketless Systems
Lot Sizing
Safety Stock and Safety Lead Time
Low-Level Coding.
Pegging
Firm Planned Orders
Service Parts
Planning Horizon
Scheduled Receipts versus Planned Order Releases
Using the MRP System
The MRP Planner
Exception Codes
Bottom-up Replanning
An MRP System Output
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CHAPTER 9
System Dynamics
Transactions during a Period
Rescheduling
Complex Transaction Processing
Procedural Inadequacies
Concluding Principles
APICS/CPIM Certification Questions
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Advanced MRP
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Determining Manufacturing Order Quantities
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Economic Order Quantities (EOQ)
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Periodic Order Quantities (POQ)
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Part Period Balancing (PPB)
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Wagner-Whitin Algorithm
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Simulation Experiments
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Buffering Concepts
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Categories of Uncertainty
260
Safety Stock and Safety Lead Time
262
Safety Stock and Safety Lead Time Performance Comparisons... 263
Scrap Allowances
265
Other"Buffering Mechanisms
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Nervousness
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Sources of MRP System Nervousness
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Reducing MRP System Nervousness
267
Concluding Principles
269
APICS/CPIM Certification Questions
270
CHAPTER 10
Capacity Planning and Management
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The Role of Capacity Planning in MPC Systems
Hierarchy of Capacity Planning Decisions
Links to Other MPC System Modules
Capacity Planning and Control Techniques
Capacity Planning Using Overall Factors (CPOF)
Capacity Bills
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Resource Profiles
Capacity Requirements Planning (CRP)
Scheduling Capacity and Materials Simultaneously
Finite Capacity Scheduling
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Contents
Finite Scheduling with Product Structures:
Using APS Systems
Management and Capacity Planning/Utilization
Capacity Monitoring with Input/Output Control
Managing Bottleneck Capacity
Capacity Planning in the MPC System
Choosing the Measure of Capacity
Choice of a Specific Technique
Using the Capacity Plan
Concluding Principles
APICS/CPIM Certification Questions
Case Study: Capacity Planning at Montell USA Inc
Case Study: Capacity Planning at Applicon
Case Study: Capacity Planning with APS at a Consumer
Products Company
CHAPTER 11
CHAPTER 12
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Production Activity Control
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A Framework for Production Activity Control
MPC System Linkages
TheLinkages between MRP and PAC ....
Just-in-Time Effect on PAC
The Company Environment
Production Activity Control Techniques
Basic Shop-Floor Control Concepts
Lead-Time Management
Gantt Charts^
Priority Sequencing Rules
Theory of Constraints (TOC) Systems
Vendor Scheduling and Follow-up
The Internet and Vendor Scheduling
Concluding Principles
APICS/CPIM Certification Questions
Case Study: Theory of Constraints (TOC) Scheduling
at TOSOH
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Advanced Scheduling
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Basic Scheduling Research
The One-Machine Case
The Two-Machine Case
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CHAPTER 13
Dispatching Approaches
Sequencing Rules
Advanced Procedures
Due Date-Setting Procedures
Dynamic Due Dates
Labor-Limited Systems
Group Scheduling and Transfer Batches
Concluding Principles
APICS/CPIM Certification Questions
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Just-in-Time
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JIT in Manufacturing Planning and Control
Major Elements of Just-in-Time
JIT's Impact on Manufacturing Planning and Control
The Hidden Factory
JIT Building Blocks in MPC
A JIT Example
Leveling the Production
Pull System Introduction
Product Design
Process Design
Bill of Materials Implications
JIT Applications
Single-Card Kanban
Toyota
Nonrepetitive JIT
A Service-Enhanced View of Manufacturing
Flexible Systems
Simplified Systems and Routine Execution
Joint-Firm JIT
TheBasics
Tightly Coupled JIT Supply
Less Tightly Coupled JIT Supply
JIT Coordination through Hubs
Lessons
JIT Software
The MRP-JIT Separation
JIT Planning and Execution
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Contents
CHAPTER 14
CHAPTER 15
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Managerial Implications
Information System Implications
Manufacturing Planning and Control
Scorekeeping
Pros and Cons
Concluding Principles
APICS/CPIM Certification Questions
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Distribution Requirements Planning
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Distribution Requirements Planning in the Supply Chain
DRP and the MPC System Linkages
DRP and the Marketplace
DRP and Demand Management
DRP and Master Production Scheduling.
DRP Techniques
The Basic DRP Record
Time-Phased Order Point (TPOP)
Linking Several Warehouse Records
Managing Day-to-Day Variations from Plan
Safety Stock in DRP
Management Issues with DRP
Data Integrity and Completeness
Organizational Support
Problem Solving
Concluding Principles
APICS/CPIM Certification Questions
Case Study: Abbott Laboratories
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Management of Supply Chain Logistics
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A Framework for Supply Chain Logistics
The Breadth of Supply Chain Logistics
The Total Cost Concept
Design, Operation, and Control Decisions
Supply Chain Logistical Elements
Transportation
Warehouses
Inventory
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Warehouse Replenishment Systems
ROP/EOQ Systems
Base Stock Systems
Distribution Requirements Planning
Warehouse Location Analysis
Simulation
Heuristic Procedures
Programming Procedures
Vehicle Scheduling Analysis
Traveling Salesman Problem
Solution Methodologies
Customer Service Measurement
Make-to-Stock Companies
Make-to-Order Companies
Concluding Principles
APICS/CPIM Certification Questions
CHAPTER 16
Order Point Inventory Control Methods
Basic Concepts
Independent- versus Dependent-Demand Items
Functions of Inventory
Management Issues
Routine Inventory Decisions
Determining Inventory System Performance
Implementing Changes in Managing Inventory
Inventory-Related Costs
Order Preparation Costs
Inventory Carrying Costs
Shortage and Customer Service Costs
Incremental Inventory Costs
An Example Cost Trade-Off.
Economic Order Quantity Model
Determining the EOQ
Order Timing Decisions
Using Safety Stock for Uncertainty
The Introduction of Safety Stock
Continuous Distributions
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Contents I xix
Probability of Stocking Out Criterion
Customer Service Criterion
Time Period Correction Factor
Forecast Error Distribution
Multi-Item Management
Concluding Principles
APICS/CPIM Certification Questions
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Strategy and MPC System Design
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MPC Design Options
Master Production Scheduling Options
Detailed Material Planning Options
Shop-Floor System Options
Choosing the Options
Market Requirements
The Manufacturing Task
Manufacturing Process Design
MPC System Design
The Choices in Practice
Mooglnc, Space Products Division
Kawasaki U.S.A
Applicon
Integrating MRP and JIT
The Need to Integrate
Physical Changes That Support Integration
Some Techniques for Integrating MRP and JIT
Extending MPC Integration to Customers and Suppliers
Concluding Principles
APICS/CPIM Certification Questions
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APPENDIX A
Answers to APICS/CPIM Certification Questions
525
APPENDIX B
Areas of the Standard Normal Distribution
529
Index
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CHAPTER 17