Manufacturing Planning
and Control Systems
Thomas E. Vollmann
International Institute for Management Development
William L. Berry
The Ohio State University
D. Clay Whybark
University of North Carolina
V liH
Fourth Edition
Ftanctfco, ^ '
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Irwin/McGraw-HUI
New York • St. Louis • San Francisco • Aucl<iand • Bogota
Caracas • Lisbon • London • Madrid • Mexico City • Milan
Montreal • New Delhi • San Juan • Singapore
Sydney • Tokyo • Toronto
Contents
Chapter 1
Manufacturing
Planning and Control
Bucketless Systems
Lot Sizing
31
2
Safety Stock and Safety Lead Time
32
Typical MPC Support Tasks
2
Low-Level Coding
33
Costs and Benefits of MPC Systems
2
Pegging
33
3
Firm Planned Orders
34
MPC System Activities
4
Service Parts
34
The System and the Framework
4
Planning Horizon
35
Matching the MPC System with the
Needs of the Firm
6
Scheduled Receipts versus Planned
Order Releases
35
An MPC Classification Schema
7
EVOLUTION OF THE MPC SYSTEM
9
THE MPC SYSTEM DEFINED
AN MPC SYSTEM FRAMEWORK
The Changing Competitive World
9
Reacting to the Changes
9
CONCLUDING PRINCIPLES
10
USING THE MRP SYSTEM
Material Requirements
Planning
MATERIAL REQUIREMENTS PLANNING
IN MANUFACTURING PLANNING
AND CONTROL
MRP and MRPII
13
14
16
36
The MRP Planner
36
Exception Codes
38
Bottom-Up Replanning
39
An MRP System Output
40
SYSTEM DYNAMICS
Chapter 2
30
42
Transactions during a Period
42
Rescheduling
43
Complex Transaction Processing
44
Procedural Inadequacies
45
THE MRP DATA BASE
The Item Master File
47
47
RECORD PROCESSING
17
The Subordinate Item Master File
47
p ; ^ The Basic MRP Record
17
The Bill of Material File
47
] ^
25
The Location File
48
29
The Calendar File
48
29
Open Order Files
48
Unking the MRP Records
"^^^^^CHNICAL ISSUES
Processing Frequency
wll
v%iii
Other File Linkages
MRP SYSTEM EXAMPLES
Ethan Allen Furniture Company
A Manual Application
.me
Jet Spray—An Integrated On-Line
Example
CONCLUDING PRINCIPLES
Chapter 3
Justin-Time
48
48
49
MANAGERIAL IMPLICATIONS
Information System Implications
109
Manufacturing Planning and Control
109
Scorekeeping
no
Pros and Cons
111
4 f\
49
108
CONCLUDING PRINCIPLES
111
Chapter 4
120
52
Capacity Planning
68
CAPACITY PLANNING'S ROLE IN MPC
SYSTEMS
JIT IN MANUFACTURING PLANNING
AND CONTROL
69
Major Elements of Just-in-Time
70
JIT's Impact on Manufacturing
Planning and Control
71
The Hidden Factory
73
JIT Building Blocks in MPC
74
121
Hierarchy of Capacity Planning
Decisions
121
Links to Other MPC System Modules
122
CAPACITY PLANNING AND CONTROL
TECHNIQUES
124
78
Capacity Planning Using Overall
Factors (CPOF)
124
Leveling the Production
78
Capacity Bills
126
Pull System Introduction
79
Resource Profiles
128
Product Design
83
Process Design
85
Capacity Requirements Planning
(CRP)
135
Bill of Material Implications
87
Input/Output Control
137
89
The Capacity "Bath Tub"
140
A JIT EXAMPLE
JIT APPLICATIONS
Single-Card Kanban
89
Toyota
91
Hewlett-Packard
96
NONREPETITIVE JIT
99
A Service-Enhanced View of
Manufacturing
Flexible Systems
Simplified Systems and Routine
Execution
99
100
101
JIT IN PURCHASING
The Basics
Lessons
102
SOFTWARE
HP JIT Software
fiiJIT Using MRP Software
102
MANAGEMENT AND CAPACITY
PLANNING
141
Capacity Planning in the MPC
System
141
Choosing the Measure of Capacity
142
Choice of a Specific Technique
144
Using the Capacity Plan
145
DATA BASE REQUIREMENTS
146
Data Base Design Considerations
EXAMPLES OF APPLICATIONS
146
147
105
Capacity Planning at Montell
USA, Inc.
147
105
Capacity Planning at Twin Disc
148
105
Capacity Planning at Applicon
152
108
CONCLUDING PRINCIPLES
153
Cfmtmts
Chapter 5
Production Activity
Control
A FRAMEWORK FOR PRODUCTION
ACTIVITY CONTROL
MPC System Linkages
165
166
167
The Linkages between MRP and
PAC
167
Just-in-Time Impact on PAC
168
The Company Environment
169
PRODUCTION ACTIVITY CONTROL
TECHNIQUES
Basic Shop-Floor Control Concepts
Gantt Charts
169
169
172
Priorrty Sequencing Rules
173
Finite Loading
174
Vendor Scheduling and Follow-Up
178
Lead Time Management
179
PRODUCTION ACTIVITY CONTROL
EXAMPLES
180
MASTER PRODUCTION SCHEDULING
TECHNIQUES
The Time-Phased Record
Rolling through Time
Order Promising
Consuming the Forecast
Key Definitions
224
The Modular Bill of Material
225
The Planning Bill of Material
227
THE FINAL ASSEMBLY SCHEDULE
Relation to the MPS
229
The Hill-Rom FAS
THE MASTER PRODUCTION
SCHEDULER
The MPS as a Set of Firm Planned
Orders
231
233
234
The Job
186
Vendor Scheduling at Steelcase
188
PAC Procurement Practices under
"World Class" Manufacturing
188
THE PRODUCTION ACTIVITY CONTROL
DATA BASE
191
The Ethan Allen Master Production
Schedule
Master Production Scheduling at
Jet Spray
MASTER PRODUCTION SCHEDULE
STABILITY
238
238
242
244
192
Ethan Allen Stability
244
246
194
Freezing and Time Fencing
MANAGING THE MPS
THE MASTER PRODUCTION
SCHEDULING ACTIVITY
217
222
The CAPOSS System at Swissair
Master Production
Scheduling
213
BILL OF MATERIAL STRUCTURING FOR
THE MPS
EXAMPLES
Chapter 6
210
220
181
CONCLUDING PRINCIPLES
210
Mitel Corporation: Order Promising
with ATP
Critical Ratio Shop-Floor Control at
Twin Disc
Data Acquisition and Feedback
\\x
205
206
The Anticipated Build Schedule
206
Linkages to Other Company Activities
207
The Business Environment for the
MPS
208
247
The Overstated MPS
247
MPS Measures
Monitoring the MPS at Ethan Allen
248
248
CONCLUDING PRINCIPLES
251
Chapter 7
269
Production Planning
PRODUCTION PLANNING IN THE FIRM
Sales and Operations Planning
270
270
f^-^ents
Productfon Planning and
Management
Production Planning and MPC
Systems
Payoffs
THE PRODUCTION-PLANNING
PROCESS
Routinizing Production and Game
Planning
The Basic Trade-Offs
Evaluating Alternatives
THE NEW MANAGEMENT
OBLIGATIONS
Top-Management Role
272
274
275
276
278
282
286
286
Functional Roles
287
Integrating Strategic Planning
288
Controlling the Production Plan
289
OPERATING PRODUCTION-PLANNING
SYSTEMS
Production Planning at
Compugraphic
Demand Management and
Production Planning
Demand Management and Master
Production Scheduling
Make to Demand
Outbound Product Flow
Data Capture
Dealing with Day-to-Day Customer
Orders
Make-to-Order Demand Management
MANAGING DEMAND
Organizing for Demand Management
Managing Service Levels
330
Using the System
COMPANY EXAMPLES
335
Forecasting at Ross Laboratories
Customer Order Promising at Kirk
Motors, Ltd.
Make-to-Order Products at Elliott
Company, Division of Carrier
Corporation
Chapter 9
300
DEMAND MANAGEMENT IN
MANUFACTURING PLANNING AND
CONTROL SYSTEMS
325
290
Hill-Rom's Use of Planning Bills of
Material
Demand Management
Make-to-Stock Demand Management
Assemble-to-Order Demand
Management
CONCLUDING PRINCIPLES
293
Chapter 8
319
290
Mohawk's Integrated Planning
Process
CONCLUDING PRINCIPLES
D^
270
DEMAND MANAGEMENT TECHNIQUES
Aggregating and Disaggregating
Forecasts
302
312
313
314
314
316
318
318
319
Integrated MPC
Systems
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
Moog, Inc., Space Products Division
Kawasaki, U.S.A.
Applicon
The Driver Is the Marketplace
INTEGRATING MRP AND JIT
The Need to Integrate
320
327
331
332
333
336
336
340
342
342
354
354
355
357
358
361
361
362
363
364
369
369
372
374
377
377
377
Contents
Physical Changes That Support
Integration
AUDITING
378
XXI
424
Cross-Checking the Data Base
424
Reconciling Data Base Errors
425
The Just-in-Time Approach to Data
Accuracy
425
A Detailed Checklist for the
MRP-Based System
427
The Audit Process
428
Continual Improvement
430
CONCLUDING PRINCIPLES
430
400
Chapter 11 Advanced Concepts
in Material
Requirements
Planning
439
Matching the Manufacturing Task to
System Design
401
DETERMINING MANUFACTURING
ORDER QUANTITIES
440
MPC Data Base Integrity
402
Economic Order Quantities (EDO)
441
Discipline to Use the Formal System
405
Periodic Order Quantities (POQ)
442
405
Part Period Balancing (PPB)
4^3
Top-Management Commitment
406
McLaren's Order Moment (MOM)
445
Waste or "Slack" Reduction
406
Wagner-Whitin Algorithm
447
Job Design
407
Simulation Experiments
447
Some Techniques for Integrating
MRP and JIT
Strategy for Combining MRP and JIT
CONCLUDING PRINCIPLES
Chapter 10
Implementation of
MPC Systems
INITIATING THE PROJECT
378
379
380
389
390
The Yardstick of Performance
390
The Company Environment
393
Justification
394
An Evolutionary Point of View
399
ESSENTIAL PREREQUISITES
ORGANIZATIONAL ISSUES
THE IMPLEMENTATION PROJECT
TEAM
408
DETERMINING PURCHASE ORDER
QUANTITIES
449
Project Team Structure
408
The Purchasing Discount Problem
449
The Primary Project Team
409
Look-Ahead Feature
453
Team Building
410
Performance Comparisons
453
EDUCATION
412
BUFFERING CONCEPTS
455
Education Levels and Requirements
413
Categories of Uncertainty
456
An Education Program
415
Safety Stock and Safety Lead Time
457
Problem Solving
416
Coping with Change
418
Safety Stock and Safety Lead Time
Performance Comparisons
459
PROJECT MANAGEMENT
419
Other Buffering Mechanisms
461
Defining the Scope
419
Where to Start
420
Project Planning
NERVOUSNESS
461
420
Sources of MRP System
Nervousness
462
Project Control
421
Reducing MRP System Nervousness
462
When to Quit
423
OTHER ADVANCED MRP CONCEPTS
464
Timing Conventions
Bucketless Systems
Phantom Assemblies
Scrap Allowances
Automatic Updating
CONCLUDING PRINCIPLES
464
465
465
466
467
467
Chapter 12 Advanced Concepts in
Just-in-Time
480
A JIT RESEARCH FRAMEWORK
481
SCHEDULING
Scheduling Mixed Model Assembly
Lines under JIT
Schedule Stability in Implementing
JIT
SUPPLIER MANAGEMENT
481
PRODUCTION FLOOR MANAGEMENT
497
Setup Time Reduction
Determining the Optimal Number of
Kanbans
JIT PERFORMANCE AND OPERATING
CONDITIONS
Variability in Operating Conditions
Lot Size
Comparing MPC System Approaches
CONCLUDING PRINCIPLES
498
Chapter 13 Advanced Concepts in
Scheduling
A SCHEDULING FRAMEWORK
Performance Criteria
Shop Structure
Product Structure
Work Center Capacities
BASIC SCHEDULING RESEARCH
C W Static Scheduling Approaches
Dynamic Scheduling Approaches
The One-Machine Case
The Two-Machine Case
[P®
484
488
489
502
507
507
509
511
515
524
525
525
526
527
528
528
529
529
530
531
Queuing Model Approaches
Sequencing Rules
Sequencing Research Results
ADVANCED RESEARCH FINDINGS
Due Date Setting Procedures
Dynamic Due Dates
Labor-Limited Systems
Lessons for Practice
533
EMERGING ISSUES IN SCHEDULING
Scheduling Cellular Manufacturing
Systems
Scheduling Manned Cellular
Manufacturing Systems
Scheduling FMS Systems
548
CONCLUDING PRINCIPLES
560
Chapter 14 Advanced Concepts in
Master Production
Scheduling
574
TWO-LEVEL MASTER PRODUCTION
SCHEDULING
Two-Level MPS Example
Booking Customer Orders
Managing with a Two-Level MPS
TWO-LEVEL MPS AT MITEL
CORPORATION
MPS Planning
MPS Detail
ADDITIONAL TECHNIQUES
Alternative ATP Explosion
Conventions
Consumption by Actual Orders
Capacity Planning
METHODS FOR CONSTRUCTING
PLANNING BILLS OF MATERIAL
The Matrix Bill of Material Approach
Commonality and Bill of Material
Depth
Component Commonality Analysis
System
533
535
537
537
540
544
546
548
549
553
575
575
577
578
579
579
581
582
582
584
586
587
588
588
591
Contents
Material Handling Equipment
Manufacturer Example
CONCLUDING PRINCIPLES
Chapter 15 Advanced Concepts in
Production Planning
MATHEMATICAL PROGRAMMING
APPROACHES
591
595
612
613
The Basic Exponential Smoothing
Model
ENHANCING THE BASIC EXPONENTIAL
SMOOTHING MODEL
XXIll
657
660
Trend Enhancement
660
Seasonal Enhancement
662
Trend and Seasonal Enhancement
Other Enhancements
665
666
Linear Programming
613
FOCUS FORECASTING
666
Mixed Integer Programming
615
COMPARISONS OF METHODS
667
OTHER APPROACHES
617
The Forecasting Competition
667
The Linear Decision Rule
617
The Focus Forecasting Comparison
668
The Management Coefficients Model
619
Search Decision Rules
620
USING THE FORECASTING SYSTEM
670
670
620
Incorporating External Information
Getting Started
The Disaggregation Problem
620
Demand Filter Monitoring
672
Hierarchical Production Planning
621
Tracking Signal Monitoring
673
Strategic Issues
674
DISAGGREGATION
Disaggregation through Mathematical
Programming
671
623
FORECASTING IN INDUSTRY
676
627
CONCLUDING PRINCIPLES
677
Owens-Corning Fiberglas: Anderson,
South Carolina, Plant
627
Aggregate Production Planning
628
Disaggregating the Production Plan
631
Chapter 17 Independent Demand
Inventory
Management
688
COMPANY EXAMPLE
APPLICATIONS POTENTIAL
633
Application of Modeling Techniques
634
Data Issues
634
The Future
635
CONCLUDING PRINCIPLES
636
Chapter 16 Short-Term
Forecasting Systems
648
THE FORECASTING PROBLEM
649
Forecasting Perspectives
649
Forecast Evaluation
BASIC FORECASTING TECHNIQUES
Example Forecasting Situation
Moving Averages
O Jl D
BASIC CONCEPTS
Independent versus Dependent
Demand Items
Functions of Inventory
689
MANAGEMENT ISSUES
Routine Inventory Decisions
692
Determining Inventory System
Performance
Timing the Implementation
INVENTORY-RELATED COSTS
689
691
692
693
693
694
650
Order Preparation Costs
694
653
Inventory Carrying Costs
Shortage and Customer Service
Costs
694
653
656
695
\\1%
t
i ''il
'^'^
696
DRP and Demand Management
746
Example Cost Trade-Offs
ECONOMIC ORDER QUANTITY MODEL
696
DRP and Master Production
Scheduling
747
Solving the EDO Model
QUANTITY DISCOUNT MODEL
ORDER TIMING DECISIONS
699
Incremental Inventory Costs
698
DRP TECHNIQUES
748
The Basic DRP Record
Time-Phased Order Point (TPOP)
748
Linking Several Warehouse Records
751
704
Managing Day-to-Day Variations
from Plan
754
Continuous Distributions
Probability of Stocking-Out Criterion
707
Safety Stock in DRP
758
708
MANAGEMENT ISSUES WITH DRP
761
Customer Service Criterion
710
Data Integrity and Completeness
761
Time Period Correction Factor
710
762
Forecast Error Distribution
712
Organizational Support
Problem Solving
Sources of Demand and Supply
Uncertainty
The Introduction of Safety Stock
ORDER QUANTITY AND REORDER
POINT INTERACTIONS
701
702
702
713
750
765
COMPANY EXAMPLE
768
CONCLUDING PRINCIPLES
773
Chapter 19
787
Service Levels and Order Quantities
714
Total Cost Criterion
717
Grid Search Procedure
718
The Iterative (Q, R) Procedure
719
The Standard for MPC Systems
788
720
Beyond the Schematic
789
MULTI-ITEM MANAGEMENT
Single-Criterion ABC Analysis
720
Multiple-Criterion ABC Analysis
722
MULTIPLE ITEMS FROM A SINGLE
SOURCE
Methods Based on Individual Item
Reorder Points
Methods Based on Group Reorder
Points
A Group Service Level Method
Simulation Experiments
CONCLUDING PRINCIPLES
Chapter 18 Distribution
Requirements
Planning
DRP IN MANUFACTURING PLANNING
AND CONTROL SYSTEMS
DRP and the Marketplace
725
727
730
731
732
733
743
744
745
MPC Frontiers
THE MPC SYSTEM SCHEMATIC
OPTIMIZED PRODUCTION
TECHNOLOGY (OPT)
Basic Concepts of OPT
OPT and the MPC Framework
Philosophical Underpinnings
Theory of Constraints
Implementation Issues
The Repetitive Lot Concept
MPC FOR THE PROCESS INDUSTRIES
(PRISM)
Production Resources
Production Models
Transaction Processing
Performance Measurement
Implications for MPC Practice
INTEGRATED SUPPLY CHAIN
MANAGEMENT THE NEXT FRONTIER
Supply Chain Complexity
788
789
790
795
796
798
798
799
802
803
804
804
805
807
807
808
Contents
Best Practices
808
Implications for MPC Systems
810
CONCLUDING PRINCIPLES
812
Index
823
xxv