Production Concepts

Let’s assume we are a manufacturer of
bicycles

What do we need to make a bicycle?
For example, to build this bicycle
(an assembly), we need:
Seat
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
Brakes
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
Brakes
Wheels (2)
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Pedal Assembly
For example, to build this bicycle
(an assembly), we need:
Seat
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Chain
Pedal Assembly
For example
Seat
Gear
Assembly
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Chain
Pedal Assembly
Bills of Materials

bill of materials (BOM) - the term
used to describe the "parts list" of
components needed to build another
assembled item or part.
SO, my BOM for this bicycle is:
Seat
Gear
Assembly
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Chain
Pedal Assembly
SO, my BOM for this bicycle is:
PART
Seat
Gear
Assembly
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Chain
Pedal Assembly
How Many
Bicycle
1
•Seat
•Frame
•Handle Bars
•Brakes
•Wheels
•Tires
•Pedal Assembly
•Chain
•Gear Assembly
1
1
1
2
2
2
1
1
1
But, two of the parts in this list are
assemblies too:
Seat
Gear
Assembly
Frame
Handle Bars
Brakes
Wheels (2)
Tires (2)
Chain
Pedal Assembly
So, I have actually created 3 bills of materials (BOMs)

Part
How Many

Bicycle
1
•
Seat
1
•
Frame
1
•
Handle Bars
1
•
Brakes
2
•
Wheels
2
•
Tires
2
•
Pedal Assembly
1
•
Chain
1
•
Gear Assembly
1
With this BOM, building 2 bicycles would require:
Sub-assembly
Sub-assembly
With this BOM, building 1000 bicycles would require:
Now, consider the factory where
we build the bicycles
Frames
Receiving
Dock
Seats
Chains
Inventory Storeroom
H.B.
Pedal
Assembly
Area
Wheels
Rims
Pedals
Spokes
Brakes
Wheel
Assembly
Area
General Assembly Area
Shipping
Dock
Red denotes purchased inventory, Black denotes manufactured inventory
Purchased inventory is received at
the receiving dock:
Frames
Receiving
Dock
Seats
Chains
Inventory Storeroom
H.B.
Pedal
Assembly
Area
Wheels
Rims
Pedals
Spokes
Brakes
Wheel
Assembly
Area
General Assembly Area
Shipping
Dock
Red denotes purchased inventory, Black denotes manufactured inventory
Sub-assemblies need to be manufactured before we
begin manufacturing the bicycle
Frames
Receiving
Dock
Seats
Chains
Inventory Storeroom
H.B.
Pedal
Assembly
Area
Wheels
Rims
Pedals
Spokes
Brakes
Wheel
Assembly
Area
General Assembly Area
Shipping
Dock
Red denotes purchased inventory, Black denotes manufactured inventory
Lead Time
For manufactured items, lead time is
the period of time between the
initiation of any process of production
and the completion of that process.
 For vendor supplied items, lead time is
the period of time between placing the
order and its receipt.

Let’s make a bicycle!

Let’s assume:
◦
◦
◦
◦
◦

bicycle lead time = 7 days
wheel assembly lead time = 4 days
pedal assembly lead time = 6 days
rim order lead time = 14 days
spokes order lead time = 20 days
Need the bicycle by November 30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.
October
31
(timeline)
5
10
15
20
November
25
Bicycle
30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.
October
31
(timeline)
5
10
15
20
Wheels
November
25
Bicycle
30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.
October
31
(timeline)
5
10
15
20
Wheels
November
25
Bicycle
30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.

To insure we have the pedal assembly available on November 23, we need to
create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days.
October
31
(timeline)
5
10
15
20
Wheels
Ped A
November
25
Bicycle
30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.

To insure we have the pedal assembly available on November 23, we need to
create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days.

To insure we have the spokes before we build the wheel, we need to place an
order with the vendor on Oct. 31 since it has a lead time of 20 days.
October
31
(timeline)
5
10
Spokes
15
20
Wheels
Ped A
November
25
Bicycle
30
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.

To insure we have the pedal assembly available on November 23, we need to
create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days.

To insure we have the spokes before we build the wheel, we need to place an
order with the vendor on Oct. 31 since it has a lead time of 20 days.

To insure we have the Rims before we build the wheel, we need to place an order
with the vendor on Nov. 5 since it has a lead time of 14 days.
October
31
(timeline)
5
10
Spokes
Rims
15
20
Wheels
Ped A
November
25
Bicycle
30
Material Requirements Planning

Materials Requirements Planning
(MRP) is a systematic production
planning and inventory management
system used to manage manufacturing
processes by meeting these three
objectives:
◦ Ensure materials and products are available
for production and delivery to customers.
◦ Maintain the lowest possible level of
inventory.
◦ Plan manufacturing activities, delivery
schedules and purchasing activities.
So if you tell your MRP system that
you need a bicycle produced by
November 30…
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.

To insure we have the pedal assembly available on November 23, we need to
create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days.

To insure we have the Rims before we build the wheel, we need to place an order
with the vendor on Nov. 5 since it has a lead time of 14 days.

To insure we have the spokes before we build the wheel, we need to place an
order with the vendor on Oct. 31 since it has a lead time of 20 days.
October
31
(timeline)
5
10
Spokes
Rims
15
20
Wheels
Ped A
November
25
Bicycle
30
So if you tell your MRP system that
you need a bicycle produced by
November 30…
It will handle the remaining
steps to produce that
bicycle.
Here is the process

Shop order is placed for a bicycle to be finished by November 30.

Since lead time for the bicycle is 7 days, we need to begin the manufacturing
process for the bicycle by November 23.

Of course, all parts in the BOM need to be available as we start the process.

To insure we have the wheels available on November 23, we need to create a
shop order for the wheels on Nov. 17 since its lead time is 6 days.

To insure we have the pedal assembly available on November 23, we need to
create a shop order for the assembly on Nov. 19 since it has a lead time of 4 days.

To insure we have the rims before we build the wheel, we need to place an order
with the vendor on Nov. 5 since it has a lead time of 14 days.

To insure we have the spokes before we build the wheel, we need to place an
order with the vendor on Oct. 31 since it has a lead time of 20 days.
October
31
(timeline)
5
10
Spokes
Rims
15
20
Wheels
Ped A
November
25
Bicycle
30
Master Production Schedule
The input to your MRP system is the
Master Production Schedule (MPS).
 The MPS is the list of all shop orders for
the company’s “end items.”
 An “end item” is an item that my
company sells that is NOT used in
another assembly (for example, the
bicycle is an end item.)

It can be quite complicated…

Suppose I make two types of bicycles,
one blue and one green.
PART
How Many
PART
How Many
BicycleB
1
BicycleG
1
•Seat
•FrameB
•Handle Bars
•Brakes
•Wheels
•Tires
•Pedal Assembly
•Chain
•Gear Assembly
1
1
1
2
2
2
1
1
1
•Seat
•FrameG
•Handle Bars
•Brakes
•Wheels
•Tires
•Pedal Assembly
•Chain
•Gear Assembly
1
1
1
2
2
2
1
1
1
Other complications

What my company makes 150 different types of
bicycles?
Other complications


What my company makes 150 different types of
bicycles?
What if I’m a manufacturer of automobiles that have
70-80 levels in their BOMs?
Other complications



What my company makes 150 different types of
bicycles?
What if I’m a manufacturer of automobiles that have
70-80 levels in their BOMs?
What about items that have customer ordered
options?
Other complications




What my company makes 150 different types of
bicycles?
What if I’m a manufacturer of automobiles that have
70-80 levels in their BOMs?
What about items that have customer ordered
options?
What if there are other “end items” that are not really
“end items”? For example, spare parts….
Other complications





What my company makes 150 different types of
bicycles?
What if I’m a manufacturer of automobiles that have
70-80 levels in their BOMs?
What about items that have customer ordered
options?
What if there are other “end items” that are not really
“end items”? For example, spare parts….
I’m ultimately dependent upon my suppliers for
some of the purchased items that are crucial to my
production schedule. Wouldn’t it be nice if I could
work closely with them to manage our relationship
to mutual benefit.?