Appunti delle lezioni del corso di Production Management (Primo + Secondo Parziale)

PLANNING STRATEGIES

Demand segmentation drives:

• Forecast approach and method
• Planning strategy (Make-To-Stock/MTS, Make-To-Order/MTO, Replenish-To-Order/RTO,..)

PLANNING STRATEGY CHARACTERISTICS

Different products have different planning strategies based on their demand characteristics. Each planning strategy has a unique purpose:

Stage in the Supply Chain: ETO=ENGINEER TO ORDER

1. Product are both designed and built after an order is received
2. Includes the design process after the order is received, whereas MTO (Make to Order) already has the design with a defined BOM (Bill of Material) when the order is received.

Stage in the Supply Chain: MTO=MAKE TO ORDER

1. Products are scheduled and built in response to a confirmed order received from the final customer.
2. BOM is defined prior to order receipt.

Stage in the Supply Chain: ATO= ASSEMBLE TO ORDER

1. Raw Material are procured prior to order receipt based on historical demand.
2. Product subassemblies are produced prior to receiving

The order.Stage in the Supply Chain: MTS= MAKE TO STOCK

Supply chain whose products are built before a final customer has been identified/order received, with production volume driven by historical demand information. (Stage in Supply Chain: MTS = MAKE TO STOCK)

PLANNING STRATEGY CRITERIA AND METHODS

The following planning strategy is recommended based on qualitative and quantitative criteria.

PLANNING STRATEGIES: QUANTITATIVE CRITERIA

Independent demand volume:

• ABC classification to identify high volume vs. low volume materials.

Order frequency:

• Contributes to stability measure; low volume, stable demand is classified and handled differently than low volume, unstable demand.

Demand variability:

• AXYZ classification to identify stable vs. unstable demand to apply a different planning strategy.

PLANNING STRATEGIES: QUALITATIVE CRITERIA

Product lifecycle:

• Product lifecycle stages (e.g. new product introduction, growth, maturity/"base product", decline/end-of-life) may have impact.

1. INTRODUCTION
   • New product introductions will be MTS
   • Strategy exceptions will be determined during the Product Review
2. GROWTH
   • Growth products will be categorised as MTS
3. MATURITY
   • Products in the "maturity" stage will default to the strategy indicated by their ABC/XYZ classification

DECLINE- EOL/Decline products will be classified as MTO

Qualitative criteria which impacts planning strategy selection.

Planning strategy may be informed by service level and/or project status:

Service Levels

• 95% - 99%: High service level products will be segmented as MTS to enable flexibility
• 85% - 94%: Standard service level products will default to ABC/XYZ recommended strategy
• < 85%: Low service level products will be segmented as MTO

Sales Events / Special Projects

Denoted "special project," "significant sales events" or "tenders" may have special requirements which classify them as MTO or ATO

KEY MESSAGES

1. Forecasting is a Process involving a large portion of company Functions
2. Process inputs are historical data and Model/ Assumptions
3. Process output are Demand Projections figures (Forecasts) communicated to the appropriate level in the organisation
4. Forecast information has to be managed at different time horizon and level of detail:

short/operational (production plans), medium/tactical (supply and sales plans) and long/strategic (initiatives and investments)

V. Appropriate metrics (Forecast Accuracy, Bias,..) will be defined to track and improve Forecasting process performance

VI. Managing complexity in forecasting refers to the ability to select the few critical Inputs to the process and their connection with the events happening in the external environment (boundaries).

VII. Demand Segmentation (value, volume, frequency, variability) and qualitative criteria (PLM, Service Level,..) drives forecast method selection (Stat., market intelligence,..) and Planning Strategy (Make-To-Order Vs Make-To-Stock)

ACRONYM- MRP = Material Requirements Plan

MPS = Master Production Schedule

DRP = Distribution Requirements Plan (usually computer based processes for materials supply, production execution and finished goods distribution respectively)

MRPII=Manufacturing Resource Planning (Company wide process developed by Oliver Wight)

consultant)

FG I = Finished Goods Inventory

GTIN = Global Trade Item Number (sole identification number for a product assigned by international trade organisations)

SKU = Shelf Keeping Unit (item identification number reported on the package)

MTO = Make-to-Order (production of FG triggered by Customer Orders)

ATO = Assemble-to-Order (final assembly of FG triggered by Customer Orders)

MTS = Make-to-Stock (production of FG triggered by expected future demand)

PLM = Product Lifecycle Management (stages during product 'life' on the market)

EOL = End-of-Life (final stage of product life)

IBP = Integrated Business Planning (evolution of Sales & Operation Planning)

S&OE = Sales & Operation Execution (near term portion of IBP)

II PARZIALE PRODUCTION

INVENTORY SYSTEM FOR DEPENDENT DEMAND (Slide 3-MRP Model)

Dependent Demand: is caused by something calculated according to the independent demand. Is a demand originated within the Supply chain.

Overall View

PUSH SYSTEM = materials (flow of goods) PUSHED along the Supply Chain, according to a plan/forecast. The one traditionally carried out upstream. (Dependent Demand)

PULL SYSTEM = materials (flow of goods) PULLED along the Supply Chain, triggered according to customer orders. The one traditionally carried out downstream. The system is pulled by the market. I don't do anything until I have a demand from the market. (Independent Demand)

The planning of requirements consists of the determination of:

• WHAT
• HOW MUCH
• WHEN

to order at every stage of the production process.

We have already encountered these questions for (A*) and (B*) but here (C*) for the Push planning, the main difference is that we are talking about EACH STAGE of PRODUCTION. Instead for MPS and EOQ we talk about finished products.

A. MPS/ Aggregate planning —> with respect to finished products according to the typical representation of the cycle.

B. EOQ —> Typical model is server/supplier.

Here: What produce,

How much sent to warehouse, When. (one stage production system)

C. Push Planning: Very meaningful difference. ALL THE LEVEL. Every stage of the production process.

In the Push Planning: we are expected to be able to convert a plan here, at the finished product level, into a corresponding plan at the lower level. BOM= Bill of Material

DEPENDENT DEMAND: Planning at all the stages of the Supply Chain (all the levels of the BOM)

MAIN CHARACTERISTICS OF PULL (STOCK BASED) SYSTEM

Objective: Having always the required product stored in the warehouse (according to the service level). We have to consider the warehouse immediately downstream.

Required Information: order issuing criteria (re-order policy) ROP ex. the triggering mechanism

Reordering Point (ROP) usually EOQ

Objective Level (OL)

Implicit hypotheses:

• Smoothed and even stock consumption Saw tooth profile over time
• Independent demands among finished products Safety stocks based on variance
• Reduced demand variance Service level taken from the

Gauss functionDistinctive features:each phase of the production processonly “sees” the warehouse immediately down- This does not protect the inventory systemstream and it is completely blind with reference to bullwhip effectagainst the so‐calledthe remainder of the supply chain.MASSIVE DISRUPTION: BULLWHIP EFFECT. S M D Mar-BULLWHIP EFFECT: colpo di frusta. Source DistributionManufactureStageA NOTE ON THE BULLWHIP EFFECT (1961, Forrester)A very significant AMPLIFICATION effect.Even a very small change at the finished product level (end customer) may represent a remarkable source of va-riance (amplification) when going upstream along the supply chain and/or along the bill of materials.1st effect of bullwhip is AMPLIFICATION.Demand variance (y) and Years (x)D: The distribution stage is almost the same along time,(blue line) is subject to variance but this variance is limited(almost 10%) .a small change in demand causes a huge amplificationin suppliers stage. Example of