Session 1 - Intro

Color Key
APICS Definition
Material Management Book

Session Book

Manufacturing

Adding value created wealth

Value to the customer
o What the customer is willing to pay for
Operations Management
Government
Economy
Competition
Customers
Quality
Order Quantifier/Winner
o Order Quantifier
o Those competitive characteristics that a firm must exhibit to be a viable
competitor in the marketplace. For example, a firm may seek to compete on
characteristics other than price, but in order to "qualify" to compete, its costs
and the related price must be within a certain range to be considered by its
customers. Syn: qualifiers. See: order losers, order winners.
o Order Winner
o Those competitive characteristics that cause a firm's customers to choose
that firm's goods and services over those of its competitors. Order winners
can be considered to be competitive advantages for the firm. Order winners
usually focus on one (rarely more than two) of the following strategic
initiatives: price/cost, quality, delivery speed, delivery reliability, product
design, flexibility, after-market service, and image. See: order losers, order
qualifiers.

United Nations Global Compact

Policy of social justice and sustainable development

Membership
Voluntary, any companys CEO signature and board of directors is
required
Alignment with Global Compact principles (4 areas, 10 principles)
Human Rights
Labor Practices
Environment
Anti-corruption

Manufacturing Business Model

Defining products and customers

o Defining products
Product positioning (quality versus price)
Breadth of product line
Price
Quality
Functionality, features, overall quality
Brand name or generic
Design
Packaging
Returns allowed
o Defining Customers
Types of customers
Industrial, consumer, institutional, government
Market segments
Sales and distribution channels
Market share and profitability
o Defining products and customers: influence on production decisions
Choice of manufacturing environment
MTO, MTS, ATO, ETO
Choice of manufacturing process
Project, intermittent, repetitive, flow, continuous flow
Designing products and processes
o Designed to:
Meet customer needs
Voice of the customer customer input
Be cost effective
Provide quality
Be provided efficiently
Accommodate planning parameters
MOQs, LT, SS, buffers/capacity
Managing material flow
o Procure
o produce
o distribute

Remanufacturing
An industrial process in which worn-out products are restored to
like-new condition.
In contrast, a repaired product normally retains its identity, and
only those parts that have failed or are badly worn are replaced or
serviced.
Providing customer service and support
o Meeting customer needs
o Communication with customer
o Resolving design/production problems with customer input

Global Environment

Global competition
Economic, government, and regulatory influences
Customer expectations
o Providing value to the customer
Cost/price
Quality
Speed (order lead time)
Dependability
Flexibility in product and volume
Corporate Social Responsibility
o Human rights
o Labor practices
o Environment
o Anti-corruption

Manufacturing Environments and Process Choices

Manufacturing Environments
Engineer to order (ETO)
o Products whose customer specifications require unique engineering design,
significant customization, or new purchased materials. Each customer order
results in a unique set of part numbers, bills of material, and routings. Syn:
design-to-order.
Low volume, high variety
Product Life Cycle introduction only
Longest delivery lead time required (includes purchase and design
lead time)
Make to order (MTO)
o A production environment where a good or service can be made after receipt of
a customer's order. The final product is usually a combination of standard
items and items custom-designed to meet the special needs of the customer.
Where options or accessories are stocked before customer orders arrive, the
term assemble-to-order is frequently used. Syn: produce-to-order.

Low-medium volume, medium-high variety

Product Life Cycle all stages
Assemble to order (ATO)
o Assembled after receipt of a customer's order. The key components used in the
assembly or finishing process are planned and usually stocked in anticipation of
a customer order.
o Useful where a large number of end products can be assembled from
common/standard components.
o Syn: finish-to-order
Medium/high volume and low/medium variety
Product Life Cycle Growth, maturity and decline
o Postponement
A product design strategy that shifts product differentiation closer to the
consumer by postponing identity changes, such as assembly or
packaging, to the last possible supply chain location.
Make to Stock (MTS)
o A production environment where products can be and usually are finished before
receipt of a customer order. Customer orders are typically filled from existing
stocks, and production orders are used to replenish those stocks. Syn: produceto-stock.
High volume, low variety
Product Life Cycle growth and maturity
Lowest delivery lead time
Mass customization
o The creation of a high-volume product with large variety so that a customer may
specify his or her exact model out of a large volume of possible end items while
manufacturing cost is low because of the large volume. An example is a personal
computer order in which the customer may specify processor speed, memory
size, hard disk size and speed, removable storage device characteristics, and
many other options when PCs are assembled on one line and at low cost.
High volume, high variety
Product Life Cycle growth and maturity

Determinants of Manufacturing Environments

o
o
o
o

Lead time expectations

Product design input from customers
o The degree of product design needed after receipt of an order
Product volume and variety
Product life cycle

Product Life Cycle

1) The stages a new product goes through from beginning to end, i.e., the stages that a
product passes through from introduction through growth, maturity, and decline.
2) The time from initial research and development to the time at which sales and support
of the product to customers are withdrawn.
3) The period of time during which a product can be produced and marketed profitably.
Product Life Cycle and Manufacturing Environments
Introduction
Growth Maturity Decline Phaseout
ETO
X
MTO
X
X
X
X
X
ATO
X
X
X
MTS
X
X

Mass
Customization

Choice of Processes and Layouts

o

Intermittent
o A form of manufacturing in which the jobs pass through the functional
departments in lots, and each lot may have a different routing.
o Syn: job shop, process, functional layout

o
Flow
o

Workstations used
General purpose equipment used for various products
Used when volume isnt high enough to justify dedicated equipment
Repetitive (or Line)
The repeated production of the same discrete products or families
of products.
Repetitive methodology minimizes setups, inventory, and
manufacturing lead times by using production lines, assembly
lines, or cells.
Work orders are no longer necessary; production scheduling and
control are based on production rates.

Products may be standard or assembled from modules. Repetitive

is not a function of speed or volume.
Syn: repetitive process, repetitive production.
Machinery is dedicated to limited range of products
High volume, low variety
Continuous chemical manuf.
A production system in which the productive equipment is
organized and sequenced according to the steps involved to
produce the product.
This term denotes that material flow is continuous during the
production process. The routing of the jobs is fixed and setups are
seldom changed.
Syn: continuous flow (production), continuous process, continuous
manufacturing.
Flow Manuf. Advantages over Intermittent Manuf.
Low WIP inventory
Short throughput and manufacturing lead times
Low unit costs

Project
o Made at one site, usually specially designed products like ships
o ETO

The Manufacturing Supply Chain

Supply Chain

The global network used to deliver products and services from raw materials to end
customers through an engineered flow of information, physical distribution, and cash.

Supply Chain management

The design, planning, execution, control, and monitoring of supply chain activities with
the objective of creating net value, building a competitive infrastructure, leveraging
worldwide logistics, synchronizing supply with demand, and measuring performance
globally.

Views of Supply Chain

External View

Components
o Suppliers
o Manufacturers
o Distributors
o Retailers
o Consumers
o Flow of information, cash, and goods and services

Internal View

Traditional internal supply chain view

o Departments that are functional silos with conflicting/uncoordinated performance
factors
Results in higher inventory
Purchasing
o Drive for lower purchasing costs through volume discounts
Production
o Maximize machine utilization, produce more than needed
Distribution
o Aim for high service levels and no stockouts
Support services HR/Finance
DO NOT ADD VALUE TO SUPPLY CHAIN
Supply Chain Organizational Issues
o Inherent Conflicts
Production efficiency in manufacturing/finance
High levels of customer service in marketing/finance
Low inventory investment within finance
o When Marketing tries to increase revenue
Higher customer service
Lower production efficiency
Higher inventories
o Production to reduce manuf. Costs
High production efficiency
Less flexibility for other products
Lower customer service
Higher inventory

Finance to increase profit

Higher customer service
Higher production efficiency
Low inventory
Performance Standard sets the goal
Performance Measures how close you came to attaining the goal
o Strategic long term
Profitability, market share, growth, and productivity
o Tactical intermediate term
% on time delivery, inventory turns
o Operational daily work routines
Cycle times, utilization, efficiency
o

Materials Management

Materials Management
o The grouping of management functions supporting the complete cycle of material
flow, from the purchase and internal control of production materials to the
planning and control of work in process to the warehousing, shipping, and
distribution of the finished product.
Two Areas
o MPC
MRP II and ERP systems
o Physical Supply and Distribution
Physical supply - The transportation of goods from supplier to buyer.
Distribution
1) The activities associated with the movement of material, usually
finished goods or service parts, from the manufacturer to the
customer.
These activities encompass the functions of transportation,
warehousing, inventory control, material handling, order
administration, site and location analysis, industrial packaging,
data processing, and the communications network necessary for
effective management.
It includes all activities related to physical distribution, as well as
the return of goods to the manufacturer. In many cases, this
movement is made through one or more levels of field
warehouses. Syn: physical distribution.
o Manufacturing Planning and Control (MPC)
Right Products
Right Quantity
Right Time
Right Price
Priority and Capacity Planning
The process of balancing resources and demand
Priority planning

The function of determining what material is needed and

when. Master production scheduling and material
requirements planning are the elements used for the
planning and replanning process to maintain proper due
dates on required materials
Capacity planning
o The process of determining the amount of capacity
required to produce in the future. This process may be
performed at an aggregate or product-line level (resource
requirements planning), at the master-scheduling level
(rough-cut capacity planning), and at the material
requirements planning level (capacity requirements
planning). See: capacity requirements planning, resource
planning, rough-cut capacity planning.
Determining the resources required to meet the priority plan and
the methods needed to make that capacity available
MPC Hierarchy
MPC uses a top-down planning approach
o Planning/Execution related to organizations strategic and
business plans
Similar to lean manufacturing/hoshin planning
MPCs layered approach to planning
o Business planning long term (2-10yr, reviewed every
6mo) in currency
o S&OP planning medium term at the product family level
Reviewed each month or quarter
o Master scheduling/master production schedule (MPS)
Short/medium planning at the end-item product
level
o MRP short term planning at end item or product
component level
o Purchasing and Production Activity Control
MPC closed loop system continually plans to account for events
occurring before or during production
o Internal events production delays, material shortages,
and quality issues
o External events demand changes, late supplier
deliveries, or economic conditions
MPC cross function coordination
o Primarily manufacturing, marketing and finance
o Secondary engineering, R&D, HR, distribution, quality,
supply chain or material management
MRP to MRP II
MRP
Uses the due dates for end items from the master schedule
o

Establishes the priority plan for the due dates and order quantities
for the components of end items
Closed Loop MRP
Links production plan to MPS in early stage of MPC process
Links production planning/master scheduling/MRP to capacity
planning
Closed loop enables changes to priority plans/production
schedule by MRP and production activity control (PAC)
Helps report cost data
MRP II to ERP
MRP II Manufacturing Resource Planning
More emphasis on cross functional coordination
o Production, finance & marketing coordination to develop
sales/production plans during S&OP
o Constant production & marketing coordination to adjust
MPS due dates/order quantities in response to demand
changes
o Priority plan adjustments to align with capacity
o Financial data reporting
ERP its the best, blah blah blah
New Systems/Philosophies
Goals
Reduce lead times
Reduce inventory
Improve worker productivity
Improve product quality
Cost reductions
Increase profitability
Lean manufacturing
Eliminating non-value added activities (syn waste)
Continuous flow of manufacturing based on pull of customer
Empowering employees
Continuous improvement
Total Quality Management (TQM)
Long term management approach to success through customer
satisfaction
o Customer focus, identifying costs of quality, taking action to
solve problems, continuous improvement
Six Sigma
Reducing defects by decreasing process and product variation
o Variation causes defects
o < 3.4 defects per million opportunities (six sigma level
performance)
o Continuous improvement
Theory of Constraints (TOC)

Systems have constraints limiting their ability to meet goals.

Achieving throughput goals by identifying and managing a few
leverage points

Chapter 14 MM
Product Life Cycle Intro, Growth, Maturity, Decline
Product Development Principles

Manage the amount of product lines

o Ensure savings by
Simplification
Standardization
Modularization using standard component parts
Specialization reduce product line offering to allow specialization in
current products

Product Design
o
o
o
o

Functional
Low-cost
Environmental/green
Simultaneous Engineering product design and process design working together
Time to market is reduced
Cost is reduced
Better quality
Lower total system cost

Process Design

Nesting small processes are linked to form a larger process

Mass customization