Brief Contents
CHAPTER 1 Overview of Planning and Control 1
CHAPTER 2 Forecasting Fundamentals 17
CHAPTER 3 Sales and Operations Planning 45
CHAPTER 4 The Master Schedule 71
CHAPTER 5 Inventory Management 99
CHAPTER 6 Material Requirements Planning 125
CHAPTER 7 Capacity Management 163
CHAPTER 8 Production Activity Control 179
CHAPTER 9 Lean Production and JIT 195
CHAPTER 10 Fundamentals of the Theory of Constraints 219
CHAPTER 11 “Partnering” Functions: Purchasing and Distribution 233
CHAPTER 12 System Integration and Implementation 249
Contents
Preface Xl
CHAPTER 1 Overview of Planning and Control 1
1.1 Manufacturing versus Service Operations 2
1.2 Customer Influence in Design: Production Environmental Choices 3
1.3 Process Categories 4
1.4 Order Winners and Qualifiers 7
1.5 Business Environment Issues 9
1.6 Process Analysis and Information Flows 10
1.7 General Information Flows 12
1.8 Book Structure 12
Key Terms 13
Summary 14
Discussion Questions 14
References 15
CHAPTER 2 Forecasting Fundamentals 17
2.1 Fundamental Principles of Forecasting 17
2.2 Major Categories of Forecasts 18
Qualitative Forecasting 18
Quantitative Forecasting-Causal 22
Quantitative Forecasting- Time Series 23
2.3 Forecast Errors 35
2.4 Computer Assistance 38
Key Terms 40
Summary 40
References 41
Discussion Questions 40
Exercises 40
CHAPTER 3 Sales and Operations Planning 45
3.1 Purpose of Sales and Operations Planning 46
3.2 General Design of Sales and Operations Planning 47
3.3 Approaches to Sales and Operations Planning 48
Make-to-Stock View of an S&OP 48
Make-to-Order View of an S&OP 49
3.4 Strategies for Sales and Operations Planning 50
Some Techniques 50
Trade-off Approaches 51
3.5 Balancing Resources in Sales and Operations Planning 54
3.6 Discussion: A Simple Example 57
Chase 58
Level 58
Combination 59
3.7 Qualitative Issues 60
3.8 Some Business Environment Issues 63
Key Terms 64
Summary 64
References 64
Discussion Questions 65
Exercises 65
CHAPTER 4 The Master Schedule 71
4.1 Background and Links to the S&OP 72
4.2 Master Schedule Horizon 73
Time Fences 74
Sources of Demand 76
Basic Methodology 76
Impact of Product Environment 78
General Approach to Master Schedule Development
Available-to-Promise Logic 80
4.9 Planning Options in an ATO Environment 83
4.10 The Two-Level Master Schedule 85
79
4.11 Some Notes on the Master Scheduling Responsibility 87
4.12 Demand Management Overview 89
4.13 Elements of Demand Management 90
Key Terms 94
Summary 94
References 94
Discussion Questions and Problems 95
CHAPTER 5 Inventory Management 99
5.1 Basic Concepts of Inventory 100
5.2 Categories of Inventory 101
5.3 The Basic Inventory Lot Sizing Model-Economic Order
Quantity (EOQ) 104
5.4 Basic Independent Demand Inventory Reorder Models 107
5.5 Inventory Control 112
Location Approaches for Stockrooms and Warehouses 113
Maintaining Inventory Data Accuracy 114
Obtaining Accurate Inventory Records 117
Key Terms 120
Summary 120
References 121
Discussion Questions and Problems 121
CHAPTER 6 Material Requirements Planning 125
6.1 Background and Fundamental Concepts 126
The Problem with Reorder Points 126
6.2 Bills of Material 130
6.3 The MRP “Explosion” 139
Common Lot Sizing Rules 139
6.4 Other MRP Issues 141
Generation of Data 141
Updating Information 141
Exception Messages 143
Other Sources of Demand 144
6.5 Potential MRP Challenges 149
6.6 Enterprise Resource Planning (ERP) 150
6.7 Business Environment Issues 152
Key Terms 153
Summary 153
References 154
Discussion Questions and Problems 154
CHAPTER 7 CapaCity Management 163
7.1 Capacity Definitions 164
7.2 Rough-Cut Capacity Planning 165
7.3 Capacity Requirements Planning (CRP) 169
7.4 Input/Output Control (I/O) 171
7.5 Capacity Measures 172
7.6 General Approach to Capacity Management 173
Key Terms 174
Summary 174
References 175
Discussion Questions and Problems 175
CHAPTER 8 Production Activity Control 179
8.1 General PAC Information and Data 180
8.2 Prioritizing Work 183
Scheduling in MRP and “Pull” Production Environments 186
8.3 Scheduling 186
8.4 Loading 188
Infinite Loading 188
Finite Loading
Corrective Actions
Key Terms 192
Summary 192
References 192
Discussion Questions and Problems 193
CHAPTER 9 Lean Production and JIT 195
9.1 Fundamental Concepts 196
9.2 Some Impacts on Capacity 204
9.3 The Pull System 205
The Bicycle Example Revisited 207
The “Down Side” of the Change 208
9.4 Kanban 208
How It Works 209
Kanban Rules 211
Number of Kanban Cards 211
Kanban Card Alternatives 213
Setting Priorities with Kanban 214
Using the Kanban System for Process Improvement
Master Scheduling and Lean Production 215
Are MRP and Kanban Compatible? 216
Key Terms 217
Summary 217
References 217
Discussion Questions 218
CONTENTS ix
CHAPTER 10 Fundamentals of the Theory of Constraints 219
10.1 Fundamental Principles of the Theory of Constraints 220
10.2 Understanding and Managing the Constraint 221
10.3 Improving the Process Using TOC Principles 223
lOA Impact on Operations Strategy 225
General Types of Constraints Causes 226
Logistics and the Theory of Constraints
Scheduling and the Theory of Constraints
Multiple Time Buffers 228
Control Points and Batches 230
10.10 Major Steps in Using the Drum-Buffer-Rope Method 231
Key Terms 231
Summary 232
References 232
Discussion Questions 232
CHAPTER 11 “Partnering” Functions: Purchasing and Distribution 233
11.1 Purchasing Information Issues 234
11.2 Purchasing Responsibilities for Material Procurement 236
11.3 Distribution Requirements Planning 238
Basic DRP Structure 240
Key Data Requirements 241
The Bill of Distribution 243
Using the BOD for DRP 244
DRP in a Lean Production “Pull” Environment 246
Key Terms 246
Summary 246
References 247
Discussion Questions and Problems 247
CHAPTER 12 System Integration and Implementation 249
12.1 General System Design and Selection 249
12.2 “Push,” “Pull,” or Somewhere in Between? 252
Hybrid System #1-MRP with Lean Principles 253
Hybrid System #2-Kanban with MRP Planning 253
Hybrid System #3 – Using MRP for Capacity and Long Lead Time Items 254
Hybrid System #4-Pull Systems with “Spike” Control 254
Focus on the Point of Customization 255
12.3 General Implementation Approaches 256
Major Process Steps in implementation 257
Summary 261
Discussion Questions 262
Index 263
Preface
Many years ago I began my first industry job in planning and control armed only with enthusiasm, energy, a strong desire to be successful, and absolutely no real knowledge of the area. My formal education had virtually nothing to do with industry or business. I can only guess that my employer saw the energy and enthusiasm and figured the knowledge would come. Well it did come, but not easily. I learned from some university courses I took in the evenings, I learned a lot from APICS (American Productions and Inventory Control Society) material, and, unfortunately, I also learned a lot by making many mistakes.
As I went through those agonizing years, I frequently recall myself thinking, “There must be an easier way to get a fundamental understanding of these concepts and how they relate to each other and to business without going through all I went through.” Those thoughts lingered as I advanced in my career – first in industry management in planning and control, followed by many years of consulting. I finally got the formal education as well, completing a PhD in Operations at the somewhat advanced age of 40. As I entered academics, I continued to be very actively involved with industry, both in consulting and research. I would continually encounter young people (both in the university and in industry) that reminded me of myself at the start of my career-greatly in need of a fundamental understanding of planning and control.
I was very aware of the extent of the great sources of information that were available. My position as an academic and as a member of the Curriculum and Certification Council of APICS made it critical for me to keep up with publications in the field. My perception of much of this material is that it is very well done and extensive in its coverage. There is also a great deal of it, and much of it is often too detailed for the needs of someone like myself at the beginning of my career.
That recognition brought about my plan for this book. The focus is a fundamental knowledge approach. There are many very good general operations management books that bring the reader a much farther breadth of knowledge than just planning and control. There are also a few extremely good books focused more on just planning and control, but the depth of coverage can often overwhelm someone relatively new to the field. Since I noticed a lack of a focused approach that covered primarily fundamental principles, it made sense to fill this void. In addition to fundamental principles dealing with the focused area of planning and control, it also seemed important to explain how these principles and approaches interact within the context of the business environment for which they are providing support. That is also a primary focus for this book.
This book is, therefore, focused for use by those interested in planning and control, but are early enough in their learning to possibly be overwhelmed by the depth of detail in other sources. The book provides some references to some of those sources, but not extensively. It represents some of the knowledge I have gained over many years from many sources and many personal successes and failures. Rather than being written in a typical academic style, I attempted to present the material in logical form that while not academically exhaustive, hopefully will provide the understanding and integrative focus that took my many years to accumulate.