Manufacturing Planning and Control

1. Manufacturing Planning and Control MPC 6th Edition Chapter 2

2. Demand Management The Demand Management (DM) process determines how a firm integrates information from customers (both internal and external) into the MPC system. Activities include demand determination, converting customer orders into delivery promises, and balancing supply with demand.

3. Agenda

4. Demand Management in MPC

5. Demand Management in the MPC System Marketplace (customers and other demand sources Sales and operations planning Resource Planning Demand management MPC Boundary Master production scheduling FRONT END

6. Planning and Control • Demand management coordinates demand quantities and timing with the planning and control activities of the company • Planning occurs mainly in the SOP module • Control determines how capacity will be converted into products

7. Execution • The company executes the plan as actual demand information becomes available • The control function determines how the plans will be modified to accommodate forecast errors and other changes in assumptions • Most control functions are located in the MPS module

9. Independent versus Dependent Demand • The source of demand determines its type • Independent – Customer demand that is not directly influenced by the actions of the firm (e.g. customer orders) • Dependent – Demand that is driven by the plans and activities of the firm (e.g. components, warehouse demand)

10. Demand Management and MPC Environment • DM must conform to the strategy of the firm, capabilities of manufacturing, and needs of customers • These define the MPC environment • MPC environment is defined by customer order decoupling point • The point where demand changes from independent to dependent • Alternatively, order penetration point

11. Make-to-Stock • Customer demand is filled from finished goods inventory (cosmetics, grocery items) • Key focus of demand management is maintenance of finished goods inventories • Physical distribution is a key concern

12. Assemble-to-Order • Customer requirements are met by a combination of standard options (personal computers, fast food) • Primary task of demand management is to define the customer’s order in terms of components and options (configuration management)

13. Make-to-Order • Items built to customer specifications, starting with raw materials (airplanes) • Primary task of demand management is gathering information about customer needs and coordinating with manufacturing

14. Engineer-to-Order • Firm works with the customer to design the product, then produces the product, starting with raw materials (ships, bridges) • Primary task of demand management is gathering information about customer needs and coordinating with engineering and manufacturing

15. Raw materials Work-in-process Finished goods Suppliers Make-to-Stock Independent Dependent Assemble-to-Order Independent Dependent Make-to-Order Independent Dependent Engineer-to-Order Independent Dependent MPC Environments Inventory Location Decoupling Points MPC Environment

16. Key Demand Management Tasks by Environment

17. Demand Management Communication Activities

18. Customer Interactions • Demand management converts customer orders into detailed MPC actions • Make-to-Stock–resupply of inventory • Assemble-to-Order–conversion of customer request to promise date • Make(Engineer)-to-Order–conversion of customer request to product specifications and promise date

19. Information Use in DM • Make-to-Knowledge–replacing forecasts with knowledge of customer requirements • Information channels (EDI, information sharing, etc.) enhance knowledge of customers’ inventory, requirements, and plans

20. Data Capture and Monitoring • Data is needed in two categories • Overall market data–needed for sales and operations planning • Detailed product mix–used for master production scheduling and customer order promising • It is important to capture actual data wherever possible

22. Customer Relationship Management • Make-to-Stock–capturing customer demand can help determine demand and mix trends • Assemble-to-Order/Make-to-Order–customer information can provide information concerning design and mix preferences

23. Outbound Product Flow • Physical distribution of products is planned using information from the demand management function • Short-term transportation schedules are developed using information such as customer delivery promise dates, inventory resupply shipments, interplant shipments, etc.

24. Demand Management Elements • Organization–responsibility for DM activities can be distributed throughout the firm • Flexibility requires rules to avoid conflicts and unintended consequences • Monitoring–data must be accurate, timely, and appropriate • Communication is critical when inputs or outputs change • Balancing supply and demand–intelligence on actual conditions provides the basis for changes to plans

25. Collaborative Planning, Forecasting, and Replenishment (CPFR) • Designed to improve competitiveness by facilitating communication between suppliers and retailers • Goal: reducing variance between supply and demand • Developed by the Voluntary Interindustry Commerce Standards Association

26. CPFR Steps

27. CPFR Steps

28. Principles • Demand management systems and procedures must be in alignment with the market environment • All product resource demands must be identified and accounted for when forecasting • Data capture must include not only sales, but also knowledge, trends, systems performance, and demand management performance

29. Principles • Implementing CPFR can lead to important organizational and business process improvements for both the customer and supplier • The CPFR process can improve customer service, sales, inventory, and margin performance for both the customers and supplier in a supply chain

30. Quiz – Chapter 2 • Demand Management (DM) includes which of the following activities? • Forecasting • Product shipping • Entering customer orders • The customer order decoupling point is best defined as ____________ • In an Assemble-to-Order environment, the most likely point where customer order decoupling would take place is ______________ • Sales and Operations Planning can be completed at which of the following levels • Product Family • Region • Organizational Unit • The main goal of a Collaborative Planning, Forecasting, and Replenishment (CPFR) process is to _________________