Business operating management summary

Yuzhi Zhao

chapter13.pptx

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Resource Management

COLLIER/EVANS

Operations + Supply Chain Management

LEARNING OUTCOMES, Part 1

Describe the overall frameworks for resource planning in both goods-producing and service-providing organizations

Explain options for aggregate planning

Describe how to evaluate level production and chase demand strategies for aggregate planning

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LEARNING OUTCOMES, Part 2

Describe ways to disaggregate aggregate plans using master production scheduling and material requirements planning

Explain the concept and application of capacity requirements planning

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Resource Management

LO 13-1

Deals with planning, execution, and control of resources that are used to produce goods or provide services in a value chain

Objectives

Maximize profits and customer satisfaction

Minimize costs

Maximize the benefits to stakeholders of not-for-profit organizations

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Resource Planning Framework

LO 13-1

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Aggregate Planning

LO 13-1

Development of a long-term output and resource plan in aggregate units of measure

Helps:

Define output levels over a planning horizon of one to two years

Focus on product families or total capacity requirements

Define budget allocations and associated resource requirements

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Disaggregation

LO 13-1

Process of translating aggregate plans into short-term operational plans that:

Provide the basis for weekly and daily schedules and detailed resource requirements

Specifies detailed plans for the creation of goods and services or the allocation of capacity to specific time periods

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Execution

LO 13-1

Moving work from one workstation to another

Assigning people to tasks

Setting priorities for jobs

Scheduling equipment

Controlling processes

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Exhibit 13.2

Two Levels of Disaggregation for Many Service Organizations

LO 13-1

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Enterprise Resource Planning (ERP) Systems

LO 11-1

Integrate all aspects of a business into a unified information system

Provide timely analysis and reporting of sales, customer, inventory, manufacturing, human resource, and accounting data

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Exhibit 13.3

Example Aggregate Planning Variables and Revenue/Cost Implications

LO 13-2

EXHIBIT 13.3 Example Aggregate Planning Variables and Revenue/Cost Implications

Aggregate Planning Decision Options	Revenue/Cost Implications
Demand Management Pricing strategies Promotions and advertising	Increased revenue and lower unit costs Economies of scale
Productions rate Overtime Undertime Subcontracting	Higher labor costs and premiums Idle time/lost opportunity costs Overhead costs and some loss of control
Workforce Hiring Layoff Full- and part-time labor mix	Acquisitions and training costs Separations costs Labor costs and productivity changes
Inventory Anticipation (build) inventories Allow stockouts Plan for backorders	Inventory-carrying costs Lost sales (revenue) and customer loyalty costs Backorder costs and customer waiting costs
Facilities, Equipment, and Transportation Open/closed facilities and hours Resource utilization Carbon emissions Mode (truck, rail, ship, air) Capacity and resource utilization	Variable and fixed costs Speed and reliability of service and delivery Low- to high-utilization impact on unit costs Inbound and outbound costs per mode Number of full or partial loads

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Strategies for Aggregate Planning

LO 13-3

Level production strategy: Plans for the same production rate in each time period

Chase demand strategy: Sets the production rate equal to the demand in each time period

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Disaggregation Techniques in Manufacturing

LO 13-4

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Master Production Schedule (MPS), Part 1

LO 13-4

Statement of quantity and the schedule of the finished items to be produced

Master schedule is developed for weekly time periods over a 6- to 12-month horizon

Helps translate aggregate plans into separate plans for individual finished goods

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Master Production Schedule (MPS), Part 2

LO 13-4

Developed for basic subassemblies in industries that produce:

End products using different combinations of basic subassemblies and components

Final assembly schedule (FAS): Quantity and timing for assembling subassemblies and component parts into a final finished good

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Materials Requirements Planning (MRP), Part 1

LO 13-4

Demand-based approach for planning the production of manufactured goods and ordering materials and components

Minimizes unnecessary inventories and reduces costs

Gives a schedule for:

Obtaining raw materials and purchased parts

Manufacturing products and controlling inventories

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Materials Requirements Planning (MRP), Part 2

LO 13-4

Gives accounting and financial functions production information

Based on the concepts of:

Dependent demand

Time phasing

Lot sizing to gain economies of scale

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Dependent Demand, Part 1

LO 13-4

Directly related to the demand of other SKUs and does not require forecasts

Bill of materials (BOM) of finished goods

Hierarchical relationships between all items like subassemblies, purchased parts, and manufactured parts

Bill of labor (BOL)

Hierarchical record analogous to a BOM that defines labor inputs necessary to create a good or service

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Dependent Demand, Part 2

LO 13-4

End items: Finished goods scheduled in the MPS or FAS that must be forecasted

Parent item: Manufactured from one or more components

Components: Any item other than an end item that goes into a higher-level parent item

Subassembly: Composed of at least one immediate parent and at least one immediate component

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Exhibit 13.8

Example of a Bill of Materials and Dependent Demand

LO 13-4

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MRP Explosion

LO 13-4

Process of using the logic of dependent demand to calculate the quantity and timing of orders

Performed for all subassemblies and components that go into and support the production of finished goods

Time buckets

Time-period size used in the MRP explosion process that usually lasts a week

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MRP Record, Part 1

LO 13-4

Consists:

Gross requirements (GR): Total demand for an item derived from all of its parents

Scheduled or planned receipts (S/PR): Orders that are due or planned to be delivered

Planned order receipt (PORec): Specifies the quantity and time an order is to be received

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MRP Record, Part 2

LO 13-4

Planned order release (PORel): Specifies the planned quantity and time an order is to be released to the factory or a supplier

Projected on-hand inventory (POH): Expected amount of inventory on hand at the start of the time period considering on-hand inventory from:

Previous period plus scheduled receipts or planned order receipts minus the gross requirements

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Lot Sizing, Part 1

LO 13-4

Process of determining the appropriate amount and timing of ordering to reduce costs

Methods

Lot-for-lot (LFL): Ordering schedule that covers the gross requirements for each week

When a planned order release reaches the action bucket (or current time period), the order is released to the providers

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Lot Sizing, Part 2

LO 13-4

Fixed-order quantity (FOQ): Uses a fixed order size for every order or production run

Effective when inventory-carrying costs are low and setup/order costs are high

Periodic order quantity (POQ): Orders a quantity equal to:

Gross requirement quantity in predetermined time periods minus the projected on-hand quantity of the previous time period

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Exhibit 13.10

Bill of Materials

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Capacity Requirements Planning (CRP)

LO 13-5

Process of determining the amount of labor and machine resources required to accomplish the tasks of production

Takes into account all component parts and end items in the materials plan

Capacity required (Ci) = Setup time (Si) + [Processing time (Pi) x order size (Qi)]

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KEY TERMS, Part 1

Resource Management

Aggregate planning

Disaggregation

Execution

Enterprise resource planning (ERP) systems

Level production strategy

Chase demand strategy

Master production scheduling (MPS)

Final assembly schedule (FAS)

Materials requirements planning (MRP)

Dependent demand

Bill of labor (BOL)

End items

Parent item

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KEY TERMS, Part 2

Components

Subassembly

MRP explosion

Time buckets

Gross requirements (GR)

Scheduled or planned receipts (S/PR)

Planned order receipt (PORec)

Planned order release (PORel)

Projected on-hand inventory (POH)

Lot sizing

Lot-for-lot (LFL)

Action bucket

Fixed-order quantity (FOQ)

Periodic-order quantity (POQ)

Capacity requirements planning (CRP)

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SUMMARY

Resource management deals with planning, execution, and control of resources used to produce goods or provide services

Resource planning framework includes aggregate planning, disaggregation, and execution

Manufacturing firms disaggregate aggregate plans into executable operations plans

CRP helps accomplish the tasks of production

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4LTR PRESS

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