Operations Planning and Control Systems 35 E 00100

Operations Planning and Control Systems 35 E 00100 Service Operations and Strategy #0 Fall 2015

Contents Planning and control systems Aggregate planning n Production planning issues n Workforce planning considerations Planning and scheduling at Air New Zealand Sales Planning at Vaisala MPC systems n Push – MRP n Pull – JIT n MPC integration Development possibilities in manufacturing Key points Useful material: Hopp, W. & Spearman, M. (2000), Factory Physics, Chapters 3, 4, 5 and 16 Vollmann, T. , W. Berry & C. Whybark (1997) Chr 9 in Manufacturing Planning and Control Systems 35 E 00100 Service Operations and Strategy #0 2 Aalto/BIZ Logistics

Basic Manufacturing Planning and Control (MPC) System Resource planning Aggregate production planning Demand management Master production scheduling Aggregate Planning Material requirements planning Capacity planning Production scheduling Vendor systems 35 E 00100 Service Operations and Strategy #0 Shop floor control 3 Detailed Planning Execution Vollmann et al. 1997 Aalto/BIZ Logistics

Demand Management 35 E 00100 Service Operations and Strategy #0 4 Aalto/BIZ Logistics

Pyramid Forecasting Technique $ x 2 z 1 . . . ” wn z do ”R oll up ” rce x Level 2 - Product groups x 1 ”Fo Level 1 - All business z 9 Level 3 - Individual items Gaming? ? ? 35 E 00100 Service Operations and Strategy #0 5 Newberry and Bhame 1981 Vollmann et al. 1997, 320 -325 Aalto/BIZ Logistics

Resource Planning 35 E 00100 Service Operations and Strategy #0 7 Aalto/BIZ Logistics

Aggregate Production Planning 35 E 00100 Service Operations and Strategy #0 8 Aalto/BIZ Logistics

Master Production Scheduling Order Promising Available to promise (ATP) 35 E 00100 Service Operations and Strategy #0 9 Aalto/BIZ Logistics

Master Production Scheduling Basic Production Strategies (flexible production) Demand -I Production Quantity Chase Strategy (fixed production) Quantity Level Strategy Demand +I Production Time 35 E 00100 Service Operations and Strategy #0 Time 10 Aalto/BIZ Logistics

Detailed Material Planning Production Plan Bill of Material Inventory Status Quantities and Timing 35 E 00100 Service Operations and Strategy #0 11 Aalto/BIZ Logistics

Detailed Material Planning Basic MRP Record Gross requirements n Total expected demand in a time period Schedule receipts n Open orders scheduled to arrive On-hand inventory n Expected amount on hand at beginning of period Net requirements n Actual amount needed in each time period Time-phased net requirements n Net requirements offset by lead times Planned-order releases n Planned amount to order in each time period 35 E 00100 Service Operations and Strategy #0 12 Aalto/BIZ Logistics

Capacity Planning 35 E 00100 Service Operations and Strategy #0 13 Aalto/BIZ Logistics

Production Scheduling 35 E 00100 Service Operations and Strategy #0 14 Aalto/BIZ Logistics

Shop Floor Control æ é mi ç ç ê d i -t - pij W ig + pig vi ç ê g = j +1 exp ç - ê Iij (t) = max pij kp ç ê ê ç ç ê è ë å( 35 E 00100 Service Operations and Strategy #0 15 ù ú ú ú û ) + ö ÷ ÷ ÷ ÷ ø Aalto/BIZ Logistics

Main Order Penetration Points Retailer’s demand chain Manufacturer’s supply chain Manufacturing Packaging Inventory management Purchasing Make-to-stock (MTS) Distribution Retailer’s demand chain Manufacturer’s supply chain Manufacturing Inventory management Purchasing Packaging Distribution Assemble or Pack-to-order (ATO) Retailer’s demand chain Manufacturer’s supply chain Manufacturing 35 E 00100 Service Operations and Strategy #0 Packaging Purchasing Inventory management Make-to-order (MTO) Distribution 16 Hoover et al. 2000 Aalto/BIZ Logistics

Master Production Scheduling Time Fences Demand fence C a p a c i t y Planning fence Forecast orders Make-toorder Assembleto-order Make-tostock Present 35 E 00100 Service Operations and Strategy #0 Customer orders Time 17 Future Vollmann et al. 1997 Aalto/BIZ Logistics

Replacing Forecast with Knowledge C a p a c i t y Forecast Orders Present 35 E 00100 Service Operations and Strategy #0 Indicated Orders / Volume (Knowledge) Time 18 Future Vollmann et al. 1997 Aalto/BIZ Logistics

Level of integration From Material Management to… RP E PII R RP M PS A M Time 35 E 00100 Service Operations and Strategy #0 19 Aalto/BIZ Logistics

Aggregate Planning Role in manufacturing planning and control n Strategic preparation for tactical actions n Long-term planning function that determines - The number of workers that should be employed each period - The number of aggregate units that should be produced each period Objective is normally to minimize total costs - Production, payroll, and holding costs as well as costs due to changes in the size of the workforce Main issues n Planning horizon n Treatment of demand n Bottleneck problem - ability to respond to sudden changes n Smoothing is not only about costs - Reputation, impact on usable labor force, and laws must be considered 35 E 00100 Service Operations and Strategy #0 20 Aalto/BIZ Logistics

Costs Considered Cost of changing the size of workforce Regular time costs C o s t n If no overtime or worker idle time do not have to be included in the evaluation of different strategies Slope = CH Overtime and subcontracting costs Slope = CF n Often costs assumed linear Idle time costs Smoothing costs Ft = number of fires Ht = Number of hires Holding and backorder costs n Cost of changing the size of workforce n Some costs difficult to measure e. g. C o s t decline in worker morale Shortage costs n Backlogging normally assumed Slope = CP n Linear function common Holding costs n Almost always assumed to be linear 35 E 00100 Service Operations and Strategy #0 21 Back-orders Slope = Ci Inventory Positive inventory Aalto/BIZ Logistics

A Classification of Selected Aggregate Production Planning Methods and Models Silver et al. 1998, 556 35 E 00100 Service Operations and Strategy #0 22 Aalto/BIZ Logistics

An Illustration of the Graphical Method Nahmias 2001, 122 35 E 00100 Service Operations and Strategy #0 23 Aalto/BIZ Logistics

Example 1 Workforce Planning Strategies A firm can obtain accurate forecasts for 12 months based on firm orders. During 46 -day period, when there were 120 workers, the firm produced 1 700 000 units. Assume that there are 100 workers employed at the beginning of month 1 and zero starting inventory. n. Find the minimum constant workforce needed to meet monthly demand. Assume that holding cost is $0. 10 per product per month, cost of hiring is $100 and cost of firing is $200. What is the total cost of the constant workforce plan? n. Construct a plan that changes the level of the workforce to meet monthly demand as closely as possible. What is the total cost of this plan? 35 E 00100 Service Operations and Strategy #0 24 Aalto/BIZ Logistics

Example 1 Level Strategy - Constant Workforce Plan 35 E 00100 Service Operations and Strategy #0 25 Aalto/BIZ Logistics

Example 1 Chase Strategy – Zero Inventory Plan 35 E 00100 Service Operations and Strategy #0 26 Aalto/BIZ Logistics

Example 1 Comparison of the Production Strategies Monthly Production vs. Monthly Demand 35 E 00100 Service Operations and Strategy #0 27 Aalto/BIZ Logistics

Example 1 Comparison of the Strategies Cumulative Production vs. Net Cumulative Demand 35 E 00100 Service Operations and Strategy #0 28 Aalto/BIZ Logistics

Linear Decision Rule (LDR) Approach by Holt, Modigliani, Muth & Simon (1960) Computes workforce levels & production rates n Inputs: forecasts of aggregate sales for each period of the planning horizon, ending size of workforce, ending inventory in last period Cost of changing the size of workforce C o s t Quadratic cost functions n Regular payroll n Hiring and layoff n Overtime n Inventory holding, backordering and set-ups Ft = Number fired Holding and backorder costs An evaluation of the approach n Allows more realistic cost structure (+) C o s t n Optimization (based on assumptions!) and fairly insensitive to large errors in estimated costs (+) n Dynamic and simple to apply (+) n Cost functions simplify (-) n No constraints on resources (-) - Can generate decisions that are infeasible 35 E 00100 Service Operations and Strategy #0 Ht = Number hired 29 Back-orders Positive inventory Aalto/BIZ Logistics

Management Coefficient Approach (MCA) Bowman (1963) Basic idea n When managers decide production rates, inventories and workforce, they consider costs but tend to overreact to (unexpected) changes n Bowman concluded that decision rules based on past behavior should produce better results than other methods Heuristic method n Coefficients of the rule are fit as closely as possible to prior decisions - Obtained through techniques such as regression analyses n Enables to encounter problems of traditional methods where - The accuracy of assumptions is difficult to determine - Values of input variables are difficult to measure n Cost savings compared to other methods reported - Key advantage: prohibits too radical decisions 35 E 00100 Service Operations and Strategy #0 30 Aalto/BIZ Logistics

Comparison of LDR and MCA The principles are similar n Both obtain new production and workforce levels by considering linear combinations of demand forecasts and current inventory and workforce levels Determination of coefficients n LDR: Optimal solution procedure derived from first principles; coefficients measured from a direct observation of the system n MCA: Coefficients determined by a retrospective examination of past management behavior Compared to linear programs n Easier to compute n Reflect the actual past behavior of management n Assume quadratic costs, which could be inaccurate n Do not provide optimal solutions to the problem 35 E 00100 Service Operations and Strategy #0 31 Aalto/BIZ Logistics

The Role of LP Models? Silver et al. 1998, 556 35 E 00100 Service Operations and Strategy #0 32 Aalto/BIZ Logistics

Practical Considerations Dis-aggregation of aggregate plans n Difficult problem that must be solved so that aggregate plans have value to the firm n Aggregate plan and MPS for items should be consistent - Definition of an aggregate unit - Organizational structure of the firm Global production planning n New smoothing factors arise, e. g. exchange rates, labor cost, tax structure, and pricing policy. Difficulties in practice n The definition of an aggregate unit n Obtaining of cost and demand estimates for “artificial” units n Consideration of political and operational realities / constraints n Inventory is not an option for all types of products and processes n Sensitivity and importance of the issues addressed Reluctance of managers to rely on mathematical models 35 E 00100 Service Operations and Strategy #0 33 Aalto/BIZ Logistics

Other Aspects Implementation responsibility n Achieving organizational acceptance can be harder than finding OR solutions to problems. n Be sure to sell the approach to every level of management. Criticality of decision models n Finding good enough model formulation can make some decisions non-critical. - i. e. , approximations that are sufficiently close the exact fit can be acceptable. Role of computers n Build computer programs of the decision analyses whenever possible. The scale of profit payoffs depends on the level n E. g. aggregate production versus product level 35 E 00100 Service Operations and Strategy #0 34 Aalto/BIZ Logistics

Case: Planning and Scheduling at Air New Zealand Resources n 8000 employees n 33 aircraft (Boeing 737, 747, 767) Daily operations n 85 domestic flights n 50 international flights to 26 countries Other n Base in New Zealand n Award winning airline; customer satisfaction important 35 E 00100 Service Operations and Strategy #0 35 Aalto/BIZ Logistics

Air New Zealand Planning Stages Marketing (plan) n Market analysis and market sensitivity - Estimated volume of passengers - Timing of flights - Pricing time 5 -yr plan on markets to be served 3 -yr plan Annual budget n Drafting of timetable - Ops: resource constraints and possibilities - Mkt: timetable based on analyses n Draft run through LP optimizer which takes into account availability and resources Timetable for publication 35 E 00100 Service Operations and Strategy #0 Weekly schedule n Balancing supply and demand of manpower n Evaluation of long-term impact on training Rostering n Assignment of specific people to specific flights n Required data (training, planning, manpower leave) n Safety rules and other restrictions considered Daily adjustment to unexpected changes n Environmental (no control) n ”Internal” 36 Aalto/BIZ Logistics

Air New Zealand Planning Operations in the MPC System Production Schedule Draft planning Resource planning Master production scheduling Timetable Detailed capacity planning Demand management Front end Detailed Weekly Schedule material planning Engine Material and capacity plans Rostering Shop floor systems 35 E 00100 Service Operations and Strategy #0 Vendor systems Daily Adjustments 37 Back end Aalto/BIZ Logistics

Air New Zealand Planning Operations in the MPC System Balancing Demand Resources Operations Resources Marketing Demand Fleet • Aircraft types • # of aircraft Crew Production Schedule Draft planning Resource planning Demand management • Captains & co-pilots • Flight attendants • Regular / Charter • Season / yr around Frequency Master production scheduling Constraints Aircraft capacity Flight range Air space limitations Workforce training Allowed working time Destinations Timetable Detailed capacity planning Front end Constraints Airport capacity (slots) (Max flight time) Detailed Weekly Schedule material planning Engine Material and capacity plans Rostering Shop floor systems 35 E 00100 Service Operations and Strategy #0 Vendor systems Daily Adjustments 38 Back end Aalto/BIZ Logistics

Air New Zealand Planning Operations in the MPC System Flights are assigned to specific aircraft Production Schedule Draft planning Resource planning Master production scheduling ”Constraints” Timetable The pool of trained people Detailed capacity planning Demand management Front end Detailed Weekly Schedule material planning Engine ”Constraints” Crew changes Maintenance Catering Fueling Cargo and baggage handling Cleaning Material and capacity plans Rostering Shop floor systems 35 E 00100 Service Operations and Strategy #0 Vendor systems Daily Adjustments 39 Back end Aalto/BIZ Logistics

Air New Zealand Planning Operations in the MPC System Specific crews are assigned to flights Production Schedule Draft planning Resource planning Master production scheduling Timetable Demand management Front end Constraints Training Max working hrs Workforce availability Detailed capacity planning Detailed Weekly Schedule material planning Engine • Sick leaves • Days off • Holidays Material and capacity plans Rostering Shop floor systems 35 E 00100 Service Operations and Strategy #0 Vendor systems Daily Adjustments 40 Back end Aalto/BIZ Logistics

Air New Zealand Planning Operations in the MPC System Adjustments in response to unexpected changes Production Schedule Draft planning Resource planning Master production scheduling Timetable Detailed capacity planning Demand management Front end Detailed Weekly Schedule material planning Engine Material and capacity plans Rostering Internal Aircraft breakdowns Workforce absence due to illness etc. External Shop floor systems 35 E 00100 Service Operations and Strategy #0 Vendor systems Daily Adjustments 41 Back end Weather Catastrophes Fuel or other resource availability Aalto/BIZ Logistics

Key Points on Planning and control systems n Clear general structure of MPC exists. n IT enables use of more advanced methods. Different types of methods are available for aggregate planning: n Feasible methods (e. g. graphical method) n Mathematically optimal methods (e. g. LDR, linear programs) n Heuristic decision models (e. g. MCA) Aggregate planning matches demand resources n Tailor the model to fit the situation you are dealing with. n Simplicity promotes understanding! n Aggregate plans are rarely followed precisely robustness of the plans is important. 35 E 00100 Service Operations and Strategy #0 42 Aalto/BIZ Logistics

Case: Sales Planning at Vaisala Instruments What is the Right Demand/Supply Chain? Optimum on this diagonal? low high Margin Functional product high Innovative product High inventory carrying cost + lost market share Efficient Supply Chain Utilization rate [%] low Flexibility Responsive Demand Chain Too high operational costs high low Uncertainty of Demand high ©Vaisala | 2004 -09 -28 | Page 43 Source: Hannu Vierimaa / Processman

Example of Service Classes Fast Track Standard 1 work day 5 work days 20 work days Min 1 piece Max 2 pieces Min 1 pieces Max 25 pieces Min 10 pieces Max within supply frame Basic + 50 USD According to Price List Price includes transportation Delivery to site, one or more lots Delivery Performance Target 100 % 98 % 100 % Target Volume 10 % 80 % 10 % Order Fulfilment Lead time (order received by 14. 00) Delivery lot size Price Other Information Project Basic ©Vaisala | 2004 -09 -28 | Page 44 Source: Hannu Vierimaa / Processman

Sample record - Factory personnel utilization rate Utilization rate of machines? ©Vaisala | 2004 -09 -28 | Page 45

Demand Chain Management Key elements of Integrated Demand Chain Case company : CASE nd Chain Dema gement Mana ONE SET OF NUMBERS based on BEST POSSIBLE MARKET DEMAND DATA updated on rolling basis Plan for capacity -process PLAN FOR CAPACITY, EXECUTE TO ORDER Channel logistics management End User Execute to order -process EXECUTE TO ORDER with FAST THROUGHPUT TIME achieved by INTEGRATED PROCESS Supplier’s Supplier supplier Manufacturing Distribution Sales Information flow Material flow Customer’s customer SERVICE CLASSES aligned to SEGMENTED CUSTOMER REQUIREMENTS forming the basis for customer promises and fulfilment enabling EFFECTIVE AND EFFICIENT LOGISTICS ©Vaisala | 2004 -09 -28 | Page 46 Source: Hannu Vierimaa / Processman

What is the question? No good tools at the moment - capital tied up - investment increment Precise world - every product has its own factory personnel Stock Factory = Machine Extra capacity Factory = System How much money we needed for a product PRODUCED How much money we needed for a product SOLD Precisely wrong answers Approximately right answers Need changes in thinking Bonus system: Process measurements -> Sales Planning Accuracy Product price: Logistic cost -> Capital tied up ©Vaisala | 2004 -09 -28 | Page 47

Basic Production Control Systems n MRP = Push system - Provides a planning hierarchy Initiates production in anticipation of future demand Lot sizes based on forecasts of future demands and cost considerations Underlying model often inappropriate Stock Point . . . n JIT / Kanban = Pull system - Improves production environment Initiates production as a reaction to present demand Reduce lot sizes to minimum to eliminate waste and unnecessary inventories Reduces congestion Suitable only for repetitive manufacturing Stock Point . . . … 35 E 00100 Service Operations and Strategy #0 48 Aalto/BIZ Logistics

MRP & MPC System Resource planning Capacity planning Demand management Master production scheduling Routing file Aggregate production planning Aggregate Planning Bills of material Material requirements planning Time-phased requirements Production scheduling Vendor systems Shop floor control Inventory status data Detailed Planning Execution Vollmann et al. 1997 35 E 00100 Service Operations and Strategy #0 49 Aalto/BIZ Logistics

Uncertainty in MRP Systems Requirements shift from one period to another Orders not received when scheduled Requirements for more or less than planned Orders received for more or less than planned Demand Timing Supply Type Quantity Source Vollmann et al. 1997 35 E 00100 Service Operations and Strategy #0 50 Aalto/BIZ Logistics

Shortcomings of MRP Assumes that required information known with certainty n Uncertainty exists on markets n Capacity not unlimited n Lead times can vary - May depend on lot sizes - No incentive to minimize slack - Priorities can exist n Items can be defective Time horizon issues Data integrity Practice versus theory n Only 10 -50 % of MRP systems are implemented successfully n High requirements on management, training, environment, and planning 35 E 00100 Service Operations and Strategy #0 51 Aalto/BIZ Logistics

JIT & MPC System Resource planning Aggregate production planning Demand management Master production scheduling Aggregate Planning Material requirements planning Capacity planning Production scheduling Vendor systems Shop floor control Detailed Planning Execution Vollmann et al. 1997 35 E 00100 Service Operations and Strategy #0 52 Aalto/BIZ Logistics

JIT Manufacturing Systems Top management support Management leadership in mfg Support for inter-functional co-op. Human resource mgmnt Quality management Quality feedback to shop floor Physical working conditions etc. Just-in-Time Core components: Recruiting and selection Supervisory leadership etc. Set-up time reduction Small lot size Supplier quality level Equipment layout etc. Manufacturing strategy Technology management Long-range orientation Plant-wide mfg philosophy etc. Design for manufacturability New process development etc. 35 E 00100 Service Operations and Strategy #0 53 Sakakibara et al. 1993 Aalto/BIZ Logistics

Shortcomings of JIT Sources of inflexibility n Stable volume n Standard product mix n Precise production sequence n Rapid (inventory) replenishment Measures to promote flexibility Process design n Capacity buffers Manufacturing planning and control n Setup reduction n Cross training JIT Human/ organizational elements n Plant layout Product design 35 E 00100 Service Operations and Strategy #0 54 Aalto/BIZ Logistics

Integration of MRP and JIT There is a need for integration n Many firms have already installed a MRP system n JIT programs seem to conflict with MRP system There are physical changes that support integration n Reduction of inventory transactions (unnecessary transfers) n Cellular manufacturing Implementation aspects n JIT is difficult to implement without a formal MPC system n Handoffs (phantom bills) from MRP to JIT at the start of the JIT process and a transfer back to MRP at the end Not every company can or prefer to implement JIT… 35 E 00100 Service Operations and Strategy #0 56 Vollmann et al. 1997 Aalto/BIZ Logistics

(Re)Configuration of the MPC System Resource planning Aggregate production planning Demand management Master production scheduling Aggregate Planning Material requirements planning Capacity planning Production scheduling Vendor systems Shop floor control Detailed Planning Execution Vollmann et al. 1997 35 E 00100 Service Operations and Strategy #0 57 Aalto/BIZ Logistics

MPC System Design Choices Market requirements Business specifications Manufacturing task Manufacturing process design MPC system design Existing MPC system Desired MPC system Vollmann et al. 1997, 362 35 E 00100 Service Operations and Strategy #0 58 Aalto/BIZ Logistics

Features of MPS Approaches 35 E 00100 Service Operations and Strategy #0 59 Vollmann et al. 1997, 356 Aalto/BIZ Logistics

Features of Material Planning Approaches 35 E 00100 Service Operations and Strategy #0 60 Vollmann et al. 1997, 356 Aalto/BIZ Logistics

Features of Shop Floor System Approaches 35 E 00100 Service Operations and Strategy #0 61 Vollmann et al. 1997, 357 Aalto/BIZ Logistics

Business Characteristics and the Design of MPC systems MPS approach MTO Detailed material planning approach Shop-floor system approach ATO Time phased Rate phased MRP based JIT based Kawasaki 35 E 00100 Service Operations and Strategy #0 MTS Moog 62 Applicon Vollmann et al. 1997 Aalto/BIZ Logistics

Linking Market Requirements and Mfg Strategy to the Design of MPS Approach 35 E 00100 Service Operations and Strategy #0 63 Vollmann et al. 1997, 365 Aalto/BIZ Logistics

Linking Market Requirements and Mfg Strategy to the Detailed Material Planning 35 E 00100 Service Operations and Strategy #0 64 Vollmann et al. 1997, 367 Aalto/BIZ Logistics

Linking Market Requirements and Mfg Strategy to the Design of the Shop Floor System Approach 35 E 00100 Service Operations and Strategy #0 65 Vollmann et al. 1997, 368 Aalto/BIZ Logistics

Development Possibilities of Manufacturing Coordinating Order and Value Offering Points Process improvement n Increase production volume n Minimize lead time n Eliminate inventory Outsourcing Lean manufacturing Quick response Customization according to customer needs n Offer wider product variety using standardization, modularity, etc. n Offer (additional) services, for example, based on the principles of mass customization 35 E 00100 Service Operations and Strategy #0 66 Aalto/BIZ Logistics

Main Order Penetration Points (OPP) Retailer’s demand chain Manufacturer’s supply chain Manufacturing Packaging Inventory management Purchasing Ship-to-order Distribution Retailer’s demand chain Manufacturer’s supply chain Manufacturing Inventory management Purchasing Packaging Pack-to-order Distribution Retailer’s demand chain Manufacturer’s supply chain Manufacturing 35 E 00100 Service Operations and Strategy #0 Packaging Purchasing Inventory management Make-to-order Distribution 67 Hoover et al. 2000 Aalto/BIZ Logistics

Understanding of the factors that affect OPP choices is important but… Market and demand characteristics Delivery time Product characteristics OPP Manufacturing lead time Mfg process, infrastructure and control characteristics 35 E 00100 Service Operations and Strategy #0 68 Olhager 1994 Aalto/BIZ Logistics

…one should analyze value offering points (VOP) as well Retailer’s demand chain Purchasing Manufacturer’s supply chain Manufacturing Packaging Inventory mngmnt Assortment planning Distribution Retailer’s demand chain Purchasing Manufacturer’s supply chain Manufacturing Packaging Offer to purchasing Inventory mngmnt Assortment planning Offer to inventory management Ware. Distribution housing Retailer’s demand chain Purchasing Inventory mngmnt Assortment planning Offer to planning Manufacturer’s supply chain Manufacturing Packaging 35 E 00100 Service Operations and Strategy #0 Distribution Warehousing Retailing 69 Hoover et al. 2000 Aalto/BIZ Logistics

Conventional Demand-Supply Chain College Textbooks Bookstore’s demand chain Course reading lists (instructor) Assortment planning Purchasing (campus bookstore) VOP: Offer to purchasing OPP: Ship to order Warehousing and distribution Printing of books Publisher’s supply chain 35 E 00100 Service Operations and Strategy #0 70 Aalto/BIZ Logistics

New Demand-Supply Chain College Textbooks OPP: Settle copyright with publisher Demand chain Review standard textbook (instructor) VOP: Students buy only material they need Tailor book to course (instructor) Plan order for course (instructor) Use textbook for course On-demand printing (campus bookstore) (student) Electronic textbook repository (publisher) Supply chain 35 E 00100 Service Operations and Strategy #0 71 Aalto/BIZ Logistics

Key Points MRP and JIT as planning and control systems n Both have benefits and shortcomings n Applicability depends on the production environment MPC integration n ”Standard” pull and push systems rarely meet customer requirements and/or manufacturing system needs There are numerous ways to develop manufacturing operations n Break the conventional thinking processes - E. g. focus on value offering instead of order penetration n Use modularity, mass customization, e-manufacturing, etc. 35 E 00100 Service Operations and Strategy #0 72 Aalto/BIZ Logistics

Abbreviations Used APS = Advanced planning system (supply chain planning) ATO ERP = Assemble-to-Order = Enterprise resource planning FGI JIT LDR MCA MES MIP MPC MPS = finished goods inventory = just in time = Linear decision rule = Management coefficient approach = Manufacturing execution system = Mixed integer programming = Manufacturing Planning and Control system = Master production schedule MRP = Material Requirements Planning MRPII = Manufacturing Requirements Planning MSG = Master scheduling game MTO = Make-to-Order MTS = Make-to-Stock OPP = order penetration point 35 E 00100 Service Operations and Strategy #0 73 Aalto/BIZ Logistics