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Institute of Supply Management
(Industry segment benchmarking and trend analysis) |
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Qualitative Methods
(Forecasting) |
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Definition
Intuition, Subjective, Judgemental
"Gut Feeling" |
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Quantitative Methods
(Forecasting) |
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| Mathematics in forecasting |
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Definition
Continually enhance forecasting Technology
Use of Commercial Solutions
Single Forecast with multiple source input
Frequency – one month or less
(P&G – Daily Adjustment for four week view)
FOCUS – Cost, Quality, Customer Service, Differentiation from Competition |
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| Collaborative Planning, Forecasting, and Replenishment |
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Voluntary Inter-industry Commerce Standards
Approach to address requirements for good demand management |
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| Mean Absolute Percentage Error |
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| Running Sum of Forecast Errors |
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| Recent year gets most weight |
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Ex. Men's ties over the years
fashion, etc... |
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| Up and down with the business cycle |
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Determining the production capacity required to meet demand
Capacity = maximum work load (output) for a given period
Goal
No underutilization of resources
No unfilled demand |
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| Issues with Resource Planning |
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Definition
Variance in demand levels
Bad forecasts
Resource failures |
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Definition
Resource Planning
Missed Due Dates
Stock-outs
Downstream Bullwhip |
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Definition
Aggregate Production Planning
Guidelines for Inventory, Capacity, Output Rates, Workforce Size, Utilization, Backlog
Long Range |
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Definition
Master Production Schedule
More detailed, focused on end product planning
Mid-Range |
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| Material Requirements Planning |
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| Combines: Aggregate, Master, MRP, and Capacity |
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| Manufacturing Resource Planning (grew from Closed Loop) |
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| Enterprise Resource Planning |
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Distribution Requirements Planning
= Customer Demand – (On-Hand + In-Transit) |
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Operations Planning
Long Range |
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Operations Planning
Mid Range |
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Definition
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Operations Planning
Short Range |
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Definition
Chase Production Strategy - Adjust Capacity to meet demand
Level Production Strategy - Produce Constant Average Demand
Mixed Production Strategy - Mix the two for best results |
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Term
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Definition
Breaks up Aggregate to assign specific items to specific periods
Example: Rotational manufacturing (ATV – Furniture) |
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| MASTER PRODUCTION SCHEDULE TIME FENCE |
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Definition
System Nervousness - Minor changes create major disruption
Demand Time Fence - Firmed Schedule
Planning Time Fence - Tentative |
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Definition
Available to Promise
Calculation of Inventory Availability
On-Hand + Planned Production – Known Demand |
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Term
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Definition
Bill of Materials
List of Components
Parent / Child BOM
BOM Levels
Phantom BOMs
Figure 6.4 (page 174) |
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Definition
Effects how EFFICIENTLY Assets are deployed
in producing Goods and Services. |
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| Assembly to build a Standard Product up to the end – Customization happens in final stages |
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| Inventory Management Atomization |
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Definition
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| Grouping parts which are used together in assembly (remember phantom BOM) |
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| Must recognize a 20% to 30% savings to offset, lead-time, risks, customs, etc |
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| Supply Chain Communication |
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Definition
| “+” Vertical (SC Tiers) Horizontal (cross departments – inter company and with Suppliers) |
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Definition
Internal
Components
Ex. Parts of ATV
Battery for ATV BOM |
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Definition
External
Finished
Ex. ATV
Battery for Service Part |
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| Hidden Costs of Inventory |
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Definition
Capital Investment
Out of Pocket – not earning interest
Loans – fees and interest
Handling – People and Equipment
Storage – Warehousing Costs
Deterioration – Breaking Down and Getting Old
Shrink – Theft
Depreciation – Devaluation through financial aging |
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Definition
RAW MATERIALS
WIP (Work-in-process)
FINISHED GOODS
REWORK and REVERSE LOGISTICS INVENTORY
MAINTENANCE, REPAIR, OPERATING (MRO) |
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Definition
80% of Usage comes from top 20% of Inventory (A)
20% of Usage comes from remaining 80% (B & C) |
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| RADIO FREQUENCY IDENTIFICATION |
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Definition
Classifications
Class 0 - Read Only
Class 1 - Write Once, Read Many (WORM)
Class 2 - Read / Write
Class 3 - Read / Write with Battery
Class 4 - Read / Write active Transmitter |
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Term
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Definition
Costs
Standardization
Performance Restrictions
Applications |
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Definition
Economic Order Quantity
Demand known and constant
Lead Time known and constant
Full order replenishment
Price is Constant
Holding Cost are Known and Constant
Order Costs are Known and Constant
Stockouts are not allowed
Driven by high SET-UP costs |
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Definition
| Economic Manufacturing Quantity |
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| Production Order Quantity |
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Definition
By Location
By Product
By Event
By Usage |
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A capability provided to a customer
of the highest quality,
at the right time,
at an appropriate price,
as defined by the customer.
… is anything that the customer is willing to pay for. |
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Definition
| NOT an inventory control system. Rather, it is a scheduling system that tells you what to produce, when to produce it, and how much to produce. |
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| ELEMENTS of LEAN PRODUCTION |
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Definition
Waste Reduction
Inventory, Movement, Production Steps, Scrap, Rejects, Rework
Lean Supply Chain Relationships
Closer relationships with vendors who share focus on speed and quality
Lean Layouts
Move WIP closer to production and reduce movement
Inventory and Setup Time Reduction
Reduce batch size, setup times, safety stocks – uncover process problems
Small Batch Scheduling
Smaller Batches assist in creating Level Production Schedule
Continuous Improvement
As each improvement shortens cycles, problems are detected more quickly and solutions implemented
Workforce Empowerment
Cross Train, Peripheral Vision, Problem Solving Input |
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Definition
Overproducing
Waiting
Transportation
Over-processing
Excess Inventory
Excess Movement
Scrap and Rework |
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SIX STANDARD DEVIATIONS = 99.99966% Quality
Improve Quality while reducing time and cost |
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Definition
Defects per million opportunities
= (# of defects/ (OFD per unit* # of Units)) x 1,000,000 |
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| Opportunities for a Defect to Occur |
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Definition
Exceed Quality Requirements
Continuous Improvement
LEAN focuses on EFFICIENY
SIX SIGMA focuses on QUALITY
EACH SUPPORTS THE OTHER |
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Term
| Deming 14 Points for Management |
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Definition
Create Constancy of Purpose toward improvement
ADOPT the new philosophy
Cease Dependence on INSPECTION to improve quality
End the practice of awarding business based on PRICE
Constantly improve production and service
Institute On Job Training
Institute Leadership (Coaching, not Supervising)
Drive out Fear (Fear causes Short Term Thinking)
Break down Barriers between Departments (inter-silo communication)
Eliminate SLOGANS, EXHORTATIONS, and TARGETS for the workforce
Eliminate QUOTAS and MBO (management by objectives)
Remove Barriers to PRIDE of Workmanship
Institute vigorous program of education and self-improvement
Put EVERYONE to work to accomplish the transformation |
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Definition
QUALITY is conformance to requirements
The SYSTEM of Quality is prevention
The Performance Standard is ZERO defects
The measure of Quality is the price of non-conformance |
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Term
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Definition
DEFINE - Customer Quality Requirements
CTQ (Critical to Quality) characteristics
MEASURE - What, when, how to measure
ANALYZE - Pareto Charts and
IMPROVE - Fishbone Diagrams Design plan - eliminate root cause of process variation
CONTROL - Monitor with Statistical Process Control |
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Definition
| (Critical to Quality) characteristics |
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| SIX SIGMA TRAINING LEVELS |
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Definition
Yellow Belt Terminology and Methods
Green Belt Team Member – small projects
Black Belt Team Leader – Understanding
Master Black Belt Demonstrated Mastery and effectiveness, leadership, capable of training others |
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