logistics planning & control

SCHOOL OF ENGINEERING

P01 – GLOBAL EXPANSION

E222 : LOGISTICS PLANNING AND CONTROL

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Engineering, Republic Polytechnic, Singapore.

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Global Expansion

Phone-Innovative Technology Ltd is a local manufacturer of hand-phones. It produces a wide range of hand-phones from high-end smart phones to low-end phones with basic features, to cater to different groups of customers. . Currently Phone-Innovative Technology’s products are distributed and sold in Singapore (~80% of sales) and parts of West Malaysia (~20% of sales). Ever since its first product launch in January 2009, the company has been doing very well and its sales turnover has been increasing progressively. Figure 1A shows the company sales turnover over the last few quarters.

Figure 1A: Phone-Innovative Technology Sales Turnover (S$’000)

During a recent board meeting, the management team feels that the domestic market is too small and its growth limited. In order for the company to progress and to achieve continuous growth, Phone-Innovative Technology has to go global and sell their products in more cities world-wide. The management decides that Phone-Innovative Technology® Ltd will still retain its manufacturing operation in Singapore for the next 3 to 5 years. Jason is the Chief Operating Officer (COO) of the company. He has been assigned to form a task-force and propose some strategies for the new business requirement. Jason is fully aware of the increasing complexities when the company goes global.

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You have been selected to be part of Jason’s task-force. Your role today is to give advice and to provide some recommendation(s) so that the company can reduce the logistics risks.

School of Engineering

P01 – Global Expansion

• International Logistics Functions

• Global Logistics Issues, Goals

and Strategies

• Types of Logistics Intermediaries

• Outsourcing Logistics Operation

E222 – Logistics Planning And Control


Definition of Logistics

Raw

materials

suppliers

1 2 3 4 5

Manufacturer Distributor Wholesaler Retailer

6

End-User

Obtain Produce Distribute

Activities include:• Transportation

• Forecasting

• Warehousing

• Materials handling

• Packaging

• Information processing

• Finance etc…

“Logistics is the art and science of obtaining, producing, and distributing material and

products so that the customer receives the right product in the right quantity at the right

time.” Source: APICS Dictionary

Supply Chain Community


Factors Affecting Global Logistics

Strategies

• Rapid Product Introduction - Bringing products in a short time

across numerous regions

• Focused Market Needs - Customization, packaging, service

offering to meet varying customer requirements

• Quick Response Delivery – Distribute the right product at right

quantity and shortest time

• Expanded Services – Linking innovative, value-added

services (E.g. Installation, 24 hrs hotlines, asset tagging)

• Innovative Channels – Using minimal echelon, direct delivery

to reach customers rapidly at the lowest cost


Global Logistics Issues to Overcome

Longer & less consistent response time • Longer distance involved

• Ocean shipment at slower speed with less consistency than land/air

transportation

• Additional documentation & arrangement. (E.g. Letter of credit and

custom clearance)

Order completeness & shipping accuracy • Higher costs of back orders and expedited shipment

• Shipping errors could result in expensive routing and replacement

Higher shipping damages• Harsh and variable global environment. (E.g. Road condition and type

of transport used)

• Cost & time to replace damaged items can be significant


Key Logistics Goals

• Rapid responses to changesNew development in the market or a particular customers’ needs

• Minimum varianceE.g. Delivery time

• Minimum inventory to keep expenses down

• Movement consolidation By aggregating smaller shipments into larger ones

• High quality in logistics services as well as in

products

• Life cycle supportAbility to handle repairs, reuse, recycling or disposal as well as product

delivery


Global Logistics Strategy Guidelines

From a long term strategic perspective

• Logistics planning should be integrated into the company’s

strategic planning process

• Logistics department need to be guided by a clear vision and

must measure output regularly

• Import/ export management should try to ensure integrated

management of all elements of the logistics supply chain,

from origin to destination

• Opportunities to integrate domestic and international

operations should be pursued to leverage total company

volumes with globally oriented carriers


Tactical Logistics Strategies

Coordinating functions to create maximum value for

the customers • Logistics system is made up of interlocking, interdependent parts

• E.g. Transportation management, warehousing, packaging

Integrating the supply chain

Step 1: Locate in the right countries

Step 2: Develop an effective export-import strategy

Step 3: Select warehouse locations

Step 4: Select transportation modes & carriers

Step 5: Select the right number of partners

Step 6: Develop state-of-art information system


Substituting information for inventory

•Use postponement centers

-Delay product assemble until actual order receipt (E.g. Dell- Build-to-

order)

•Track inventory precisely

- Using barcodes, RFID (radio frequency identification), GPS (global

positioning systems)

•Keep inventory in transit

•Don’t wait in line at customs

•Mix shipments to match customer needs

Pooling Risks• Reducing stock-outs by consolidating stock in centralized warehouse

-Reduces both safety stock & average inventory by centralizing inventory



Reducing supply chain partners to an effective number Reduce number of partners to reduce operating costs, cycle time,

and inventory holding costs

Factory

Two factory warehouses

Nine wholesale warehouses

350 retail stores

Consumers

This is a supply chain with three

echelons between the factory & the

consumers

•Two factory warehouses

•Nine wholesale warehouses

•350 retail stores

Echelons:• Add to operating expenses

• Hold inventory

• Add to cycle time

• Expect to make a profit

Nodes- Each of these nodes

represents an echelon in the

supply chain network



International Logistics Function

• Demand forecasting

• Order Management

• Packaging

• Labeling

• Documentation

• Customer service

• Parts & service support

• Production Scheduling

• Procurement

• Returned Products

• Inventory Management

•Transportation Management

• Materials Handling

• Warehouse & Distribution

Center Management (Hub

Management)

• Salvage & Scrap Disposal

etc… O

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Intermediaries Roles & Responsibilities

Freight

Forwarder

• Most common intermediary in international logistics

• May assume responsibilities for the firm’s international distribution

and supply channel

• Offers services such as daily pickup, distribution, global shipping

capacity with multi-carriers, advice and preparing documents,

consolidation of freight from multiple shippers to a single

destination, bulk booking of freight space etc

Non Vessel

Operating

Common Carrier

(NVOCC)

• (Also called Consolidators or NVOs)

- Provide scheduled ocean shipping service without operating ships

- Leasing containers and selling space for Less-Than-Container-

Load (LCL) shipment

Export

Management

Companies

(EMC)

• Find and service markets overseas on behalf of domestic

manufacturers (i.e. prepare documentations, appointing forwarders,

arranging for special packing, procuring insurance)

Logistics Intermediaries (Export-Import Participants)


Intermediaries Roles & Responsibilities

Export Packers • Assist exporter with special packaging requirements needed to

reach export markets.

Publication

Distributors

• Includes wrapping, destination sorting, addressing, handling

business reply mail, collection of subscription, data management.

Goods

Surveyors

• To inspect quality of goods , measure the weight, or determine the

extent of damage that have occurred while goods were in transit.

Parts Banks • Assist the manufacturer to store important parts for repair

throughout the world

Container

Leasing

Companies

• Lease containers to companies or individual carrier for intermodal

movements;

Export Trading

Companies

(ETC)

• Buy manufacturer's goods , take title, and then sell these goods in

the export market

(Note: Most of these roles can be taken on by major integrated logistics service providers)

Logistics Intermediaries (Export-Import Participants)


3rd & 4th Party Logistics Providers

Third-party logistics (3PL) 3PL takes over some or all logistics functions & performs them itself

• May be a specialized provider that focuses on airmail, or over-the-road transport

or warehouse

• May also be a multipurpose logistics provider capable of taking over the entire

logistics function

Fourth-party logistics (4PL)• Logistics specialist takes over entire logistics operation &

subcontract some or all particular functions

• Sometimes still called 3PL, but presence of subcontractor

makes it a 4PL setup

• Coordinates efforts of sub-contractors on client’s behalf;

typically charge a fee for its service, not a markup

• Also known as Lead Logistics Provider (LLP)

• Key role of IT in managing the process (e.g. SAP, Oracle)


Importance of 4PL

•Integrate & Manage Logistics Network

•Work across regions

•Globally integrated Information

Network

•Business Process Redesign

•Manage customer service level

•Emphasize their unique values to

differentiate themselves from

traditional 3PLs

http://upload.wikimedia.org/wikipedia/en/9/93/FedEx_Corporation_logo.svg

http://en.wikipedia.org/wiki/File:TNT_NV_logo.svg


Contract Manufacturer (CM)

• Firm that manufactures components or products for

another “hiring” firm

Also known as Electronic Manufacturing Services (EMS)

• A form of outsourcing

• Contract manufacturers (CM) drive down the cost of

production through economies of scale (EOS)

• It allows the hiring company to obtain the components

or products without needing to own and operate a

factory

http://en.wikipedia.org/wiki/File:Logo-flextronics.png

http://en.wikipedia.org/wiki/File:Sanmina-SCILogo.png

http://en.wikipedia.org/wiki/File:Jabil_logo.svg

http://en.wikipedia.org/wiki/File:Foxconn_logo.svg


Global Logistics Outsourcing

• Globalization of marketplace has fueled growth in

global logistics

• As firms become more global in their operations,

they tend to turn to one or more global logistics

service firms to provide logistics services globally

• Firm and logistics providers form close relationships

through IT integration, co-location of logistics

service providers at the shipping firms, capital and

infrastructure investment


Logistics Outsourcing (Case Study)

Nokia Factory

BGKI

S&C

Current no. of park members : 16

Total investment: more than 10 billion RMB

Sales volume: 50 billion RMB per year(about 1/3 for export)

Current no of staff: 3,800

Gross area: 500k sqm for each phase (1&2)

Construction area: 400k sqm for each phase (1&2)

Technology Park in Beijing led by Nokia, began operation in 4Q2001. Nokia Xing Wan Industrial Park


Benefits of Logistics Outsourcing

Improved business focus

• Allows both firm and its contractor to focus on what they do best ─

“core competence”

E.g. Dell (PC assembly) & YCH Logistics (other logistics functions), Nokia and Exel in

Xing Wan Industrial Park, Beijing.

More current logistics technology

• Contract logistics providers generally better able to stay current with

technology than firms that hires them

• Contractors generally quicker to incorporate new software and better

able to upgrade hardware necessary to run it well

Greater technological flexibility

• Contract logistics providers are better positioned to adapt to different

technologies used for the firm’s clients


Benefits of Logistics Outsourcing

More efficient warehousing for rapid replenishment

•Rapid replenishment requires warehouse close to clients

•Using contract logistics provider’s warehouse is cheaper than

building or acquiring firm’s own warehouse

Improved service to customers

•Contract logistics providers may be able to offer a variety of

services to firm’s customers

More workforces and resources flexibility

•Quicker and simpler to hire a contract specialist for a new

function; than to hire and fire workers to reflect market changes


Potential Risks & Challenges for

Logistics OutsourcingLoss of control

• Contracting logistics means giving up control over some or all aspects

of that function

• May be difficult to develop a comprehensive logistics strategy for firm

• Becomes problematic if contractor establishes direct connection with

firm’s customers

Potential for inefficiency

• Firm may already be doing a good job for its logistics function; contract

logistics provider may actually perform with reduced efficiency

• Language, time zone and cultural barriers

• Legal & Political differences

High level of trust required


Today’s Problem• Understand about global logistics issues

• Be familiar with international logistics functions

• Identify the key logistics goals

Define logistics strategy guidelines (For long term, strategic purpose)

Develop short-term tactical logistics strategies

• Select suitable intermediaries including third party logistics

(3PL) or fourth party logistics (4PL)

• Outsource non-core logistics functions, such as

distribution, transportation and export management

• Explore the possibility of outsourcing to Contract

Manufacturer (CM) for lower-end products (longer term

plan)


Learning Outcomes

• International Logistics Functions

• Global Logistics Issues, Goals &

Strategies

• Types of Logistics Intermediaries

• Outsourcing Logistics Operation


P02 – Demand Planning






Engineering, Republic Polytechnic, Singapore

SCHOOL OF

ENGINEERING

Page 2 of 2

Demand Planning

Go-There Pte Ltd is an international company that specializes in selling vehicle Global Positioning System (GPS) devices. Jennifer is the account manager in charge of the sales for both Singapore and Malaysia region. Currently, one of the best-selling GPS model for the company is Navi 3000TM.

Table 1-1 below gives the historical sales data of Navi 3000TM GPS.

Table 1-1: Historical Sales Data of Navi 3000TM GPS

Month-Yr Actual Sales Month-Yr Actual Sales

Apr-09 932 Oct-09 970

May-09 950 Nov-09 915

Jun-09 1020 Dec-09 942

Jul-09 980 Jan-10 933

Aug-09 940 Feb-10 961

Sep-09 950 Mar-10 945

Having been in this trade for more than eight years, Jennifer is fully aware of the expectations of the customers. Once they make the decision to buy a GPS device, they would expect the product to be available for purchase over the counter. If the stores they visit do not have the product they want, they may just look elsewhere for other brands and models. This is a highly competitive industry. It is not practical for the distributor to maintain a large inventory because of high inventory holding cost and obsolescent cost. On the other hand, Jennifer wants to meet the customers’ demand for Navi 3000TM GPS as much as possible, to ensure that most numbers of the devices are sold. How would you help Jennifer in her demand planning so that she can meet the customers’ expectations while not keeping a huge inventory for the subsequent months?


P02 – Demand Planning

• Sources of Demand Variability

• Qualitative and Quantitative

Forecasting Techniques

• Calculate Seasonality



Forecasting Forecasting is a necessary part of business planningSome guidelines when deciding how much product likely to sell,

therefore need to produce/import

Affects decisions & activities throughout an organization (E.g. sales,

marketing & logistics)

Examples of forecasting in business organization• Accounting - New product/process cost estimates, profit projections, cash

management

• Finance – Equipment/ equipment replacement needs, timing and amount of

funding/borrowing needs

• Human resources – Hiring activities, including recruitment, interviewing, training,

layoff, counseling

• Marketing – Pricing & promotion, e-business, global competition strategies

• Management of Information System (MIS) - New/ revised information systems

• Operations – Schedules, work assignments & workloads, inventory planning

• Product/ service design – Design of new products or services


Features of Forecasts

Causal systemForecast techniques generally assume that the same underlying causal system

that existed in the past will continue to exist in the future

Forecast error

Forecasts are rarely perfect; actual results usually differ from predicted values

Group forecastsForecasts for groups of items tend to be more accurate than forecasts for

individual items because forecasting errors among items in a group usually have

a cancelling effect

Accuracy and time

Forecast accuracy decreases as the time period covered by the forecast (i.e. the

time horizon) increases. Generally, short-term forecasts must deal with fewer

uncertainties than long-term forecast


Considerations of Forecasts

A company must be knowledgeable about numerous

factors that are related to the demand forecast.

Past demand

Lead time of product

Planned advertising or marketing efforts

State of the economy

Planned price discounts

Actions competitors have taken


Sources of Demand Variability

Competition•The most basic fact of life in a market economyCompetitors’ unpredicted innovations can cut into market share; alternatively,

competitors’ unpredicted problems can suddenly increase demand for your

product

Seasonality•Demand for many products and services varies with the changing

seasons of the yearE.g. demand for clothing undergoes seasonal variations, demand for snow

shovels (winter)

Life cycle trends•Demand fluctuates over life cycle of a productE.g. Demand builds to a peak before product comes into market (popular

books, movies, initial public offerings); or demand build slowly as buyers

become gradually aware of product’s existence or refinement


Sources of Demand Variability

External factors• Factors external to the product & market (e.g. business cycle) tends

to stimulate and depress demand across many markets in long-

wave terms

Promotions• Special pricing, advertising blitzes, “no-interest” financing and other

promotional scheme can cause upward fluctuation in demand

• Demand planning needs to take promotions into account

Disasters• Disasters may seem unforeseeable and devastating but planning

can mitigate their effectE.g. With proper planning, Procter & Gambler (P&G) was able to recover its

business operation fully (within 45 days) at New Orleans after hurricane

Katrina (Aug, 2005)


Types of Forecasting Qualitative

•Based on judgment & intuition (human touch)

•Advice from most experienced, market-savvy, objective

person/ group of experts

•A rough estimate of likely demand (difficult or impossible to

quantify)

Quantitative

•Rely on historical data

•Two main types Intrinsic forecasting: Time series models; focus upon data about

demand for the product/service (e.g. past sales data)

Extrinsic forecasting: Associative models; analyze data on conditions

thought to be associative with changes in demand for a particular item/

group of items


Qualitative Forecasting Methods

Personal insight•Based upon the insight of most experienced, most knowledgeable, or

most senior person available person available

Sales force consensus estimate•Sales & marketing area maintain closest contact with customers, hence

they bring expertise to forecasting

Management estimate•Similar to sales force estimate

•Relies upon a consensus of panel members

•Depends on forecasting techniques like:

Pyramid forecasting – Begins by aggregating item forecasts for a product group to

establish a new group forecast; forecast is then “disaggregated” to generate item forecast

consistent with product group plan

Historical analogy - study patterns of demand for a similar product/ service


Qualitative Forecasting Methods

Market research• “The systematic gathering, recording, and analyzing of data about

problems relating to the marketing of goods and services” (APICS Dictionary; 11th Edition)

• Involves market analysis (e.g. product potential studies), sales analysis

(e.g. sales data study) and consumer research (e.g. questionnaires,

focus groups)

Delphi method •Relies upon a panel of experts (their experience, wisdom, insight and

intuition acting in concert)

•Questionnaires submitted to individual expert for their anonymous

response in successive rounds

•Useful for technological forecasting

•Frequently used when data are thin or non-existence


Quantitative

(Time-Series Forecasting)

Also known as Intrinsic forecasting

techniques

Predicting the future from past historical data

Based on a sequence of data collected during

set intervals of time (hours, days, weeks,

months, quarterly etc.)

Causal variables and qualitative factors are

not considered


Time-series forecasting shows combinations of four types of

variability-Trends: A steady movement up or down

-Seasonality: Changes that correlates or changes related to temporal

phenomenon

-Cycles: Series of data show alternating cyclical movements, each

lasting for years

-Chance: Random variation that can neither be predicted or explained

Time-Series Forecasting


Time-Series Models Naïve approach Assumes that demand in the next period will be the

same as demand in the last time

Rules out all types of fluctuations; a baseline for use to

evaluate more sophisticated approaches

Moving averages

Weighted moving averages

Exponential smoothing

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n


Moving Average

N

FFFF tNtNt

t11 .....

Where Ft is the forecast in period t and N is

the number of most recent periods used in

the forecast.

3

3213

MMMAverageMovingMonth

Example:


Moving Average Moving average corrects for chance variation,

with longer periods removing more of the

randomness (+)

Moving average are not sensitive to trends (NB:

The averages of previous numbers cannot

predict higher or lower value than period

preceding forecast) (-)

Calculations become complex and have to

collect more data, as more periods are included

in the average (-)


Weighted Moving Average

N

i

tNNtNtt

W

FWFWFWF

1

1121 .....

where Wi’s are the individual weights.

• Greater weights may be placed on more recent data to

improve the responsiveness of forecast to changes

6

)332211(3

MMMAverageMovingWeightedMonth

Example:


Exponential Smoothing

Ft = Ft-1 + α (At-1 – Ft-1)

OR

Ft = α At-1 + (1 – α) Ft-1

where:

Ft = new forecast

Ft-1 = previous forecast

α = smoothing constant (0≤α≤1)

At-1 = previous period’s actual demand


Extrinsic Forecasting Techniques

Also known as causal techniques

Analyze conditions that may cause demand

May include leading, concurrent or lagging

indicators

Examples: Gross National Product (GNP),

steel production, contract awards, automobile

production (worldwide)


Seasonality Calculation

Variation of sales volume with season is typical of many products

and services. More products are sold during summer or winter

season. Such demand pattern is call seasonality

Seasonality can be represented using the seasonal index

associated with a particular demand stream

The Seasonal index is period average demand divided by the

average demand for all periods

It is best to get more that one year’s worth of data for seasonality

calculations

periods allfor demand average

demand average period IndexSeasonal


Seasonal Demand of Servers

Annual sales growth = 4% (Based on Annual Sales for 2010 assumption)

The Seasonal Index = Period average demand/average demand

for all periods


P02 :Suggested Solution


Time Series Chart

• Use Regression Analysis in Excel to check for linear trend

• Tools> Data Analysis> Regression

• P-value associated with slope is 0.3733 > 0.05 significant level

• No strong evidence to conclude there is significant linear trend in data

• Also not enough data over time horizon to show seasonality and cycles

•Chart shows mainly chance or random variations


Naive Forecasting


3-Mth Moving Average Forecasting


3-Mth Weighted Moving Average

Forecasting


When α= 0.5

Exponential Smoothing Forecasting•Assumption: The initial forecast used (982) is the forecast value of 3-month

weighted average for July 09. (Note: It may also be from naïve, 3MA methods)


RecommendationsJennifer should

Take into account the various sources of demand variability when

planning for sales, marketing & logistics activities

Be aware of the merits & limitations of different forecasting

techniques

Use a combination of Qualitative & Quantitative techniques during

forecasting Example:• Use qualitative techniques (e.g. personal insights, management estimate) for

longer range forecast (e.g. 6 months)Qualitative techniques are especially critical in new products without prior historical

sales data

Insights from Market Intelligences and inputs from Business Plan becomes the main

sources in gauging the overall market potential

• Complement longer range forecast with suitable quantitative techniques,

when more actual demand data becomes available


Learning Outcomes

•Sources of Demand Variability

•Qualitative and Quantitative

Forecasting Techniques

•Calculate Seasonality


P03 – Managing Forecast Accuracy






Engineering, Republic Polytechnic, Singapore

SCHOOL OF

ENGINEERING

Page 2 of 3

MANAGING FORECAST ACCURACY Maxtronics (Singapore) Ltd is a contract manufacturing firm that specializes in producing LCD monitors. Maxtronics’ customers include major electronics and computer companies in Asia. Nancy is a senior planner from the Sales and Operation Department. Each month, Nancy and her team would need to determine the number of LCD monitors to produce. Their forecasts are based on a combination of qualitative and quantitative methods. (Note: See Table 1 below for forecast and actual demand of LCD monitors.)

Table 1: Forecast and Actual Demand of LCD monitors (From January 2009 to February

2010)

Inaccurate forecasting

has caused many

problems.

Robert, General Manager

I better do something

to improve the

situation.

Nancy

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Page 3 of 3

For some of the months, Nancy realizes that the forecasts deviate a lot from the actual demand. This has caused problems to the Procurement Department when they could not order the raw materials and components on time. Moreover, the Production Department also complains that inaccurate forecasts have caused them to produce shortfall or excessive LCD monitors. Robert, the General Manger (GM) of Maxtronics is quite unhappy with the current situation and expects Nancy to do something. The meeting with Robert is next week. However, Nancy is still unsure of how to better measure, monitor and control the forecast accuracy. She is getting worried. Put yourself in Nancy’s shoes. What will be your recommendation for the department?


P03 – Managing Forecast Accuracy

• Reasons for Forecast Inaccuracy

• How Forecast Accuracy is

Measured

• Why & How Forecast should be

Monitored



Measure & Monitor Forecast

Why Measure & Monitor?

• Monitoring forecast feedback & measuring

forecast performance are parts of forecasting

process

If we don’t measure, how do we know it is okay?

• Alert the forecaster if processes are out of

control.

Appropriate action then can be taken to regain control

• To hold people accountable for forecast accuracy


Reasons for Forecast Inaccuracy

• Inappropriate forecasting methodE.g. Selecting a 3-mth moving average method when

there is a clear evidence of seasonal pattern.

• Lack of participationE.g. Forecast done by Production Department without

consulting Sales & Marketing.

• Too difficult to understand If users do not understand, you will have a “garbage in

garbage out” situation.


• Lack of compatibility Is it compatible with the capabilities of the organization?

Can the users understand the technique?

• Inaccurate/Inappropriate data Dependent demands or parts should not be forecasted

• Lack of monitoring No comparing of actual to forecast results, no way to

assess the current forecast performance and no way for

improvement

Reasons for Forecast Inaccuracy


Forecast Accuracy Measurement

• Forecast AccuracyForecast Accuracy(%) = 100% - Forecast Error(%)

• Period Forecast ErrorForecast Error = Actual Demand – Forecast Demand

• Absolute Percentage of Error (APE)

• Relative error measure is more

appropriate for comparison purpose

A = Actual demand, F = Forecast demand

%100

A

FAAPE



Example: APE


• Mean Absolute Percentage of Error (MAPE)A measure of how much the average percentage

forecast values deviated from the actual values.

Relative


%1001

1

n

A

FA

nMAPE



Example: MAPE


• Mean Absolute Deviation (MAD)

The average of the absolute values of the

deviations of the observed values from the

forecasted values

The average amount in which the forecast is in error

Measures the variations of the actual value from

the forecasted value, but does not consider if

the variation is plus (+) or minus (-)



n = Number of periods


Example: MAD

n

FAn

MAD1

||1


• Mean Square Error (MSE)

MAD places equal weight on small and large

deviation

Process of squaring the error will give a much

wider range of numbers

• Greater range gives a more sensitive measure of error

rate


2

1

)(1

n

FAn

MSE



Example: MSE


• Standard Deviation (σ)

Similar as Mean Absolute Deviation (MAD)

Measures the distance of error and does not

consider the direction of error


Note: Denominator uses n-1 for a sample population of fewer than 30

data points; and n if 30 data points or more

2

1

1

2

1

)(

.

n

FA

DS

n



Example: Std Deviation


• BIAS

Bias is the tendency of the forecast to be

either above or below the actual

observation.

Should strive for zero bias

• Indicates that forecaster’s model is good


n

FA

Bias

n

1

)(

n

FA1

)(

is also known as Running

Sum of Forecast Errors

(RSFE)


Effects of Bias

• Continually low forecast (+ Bias) Late shipment

Unhappy customers

Scrambling

Unplanned overtime

• Continually high forecast (- Bias) Surplus inventories

Excess capacity

layoffs


Demand Filters

• “A standard that is set to monitor sales data for individual

items in forecasting models. It is usually set to be tripped

when the demand for a period differs from the forecast by

more than some numbers of mean absolute deviations

(MAD)”

(APICS Dictionary)

• It is a quantity limit setting

• When order exceeds filter setting, filter is tripped and

the order is flagged and has to be dealt with separately

Demand filter catches data entry errors



Today’s Problem Errors are significant for some of the months E.g. May

2009, Feb 2010


Today’s Problem

“Tripping” triggers

investigations/

attention


Today’s Problem Nancy needs to be • Aware of

The importance of measure, monitor and control in forecasting accuracy

Reasons for forecast inaccuracy and to avoid making these “mistakes”

• Uses various types of forecast accuracy measurement

techniques to keep track variability E.g. APE, MAD, MSE, MAPE

• Track Bias (Biasness) If negative, it indicates a routinely “over-forecast”

• Uses appropriate demand filter (“control limit”) and takes

action when “tripped”

• Motivates people (Including making them accountable) for

forecasting.


Tracking Signals

• Used to measure forecast bias

A trip value or predetermined threshold may be

generated (e.g. 4 in both direction). If this is

exceeded, it triggers an investigation

Tracking signal =RSFE

MAD


Going Further….


Learning Outcome

• Reasons for Forecast Inaccuracy

• How Forecast Accuracy is Measured

• Why & How Forecast should be

Monitored


P04 – Design with Efficiency







SCHOOL OF

ENGINEERING

Design with Efficiency

You are the General Manager (GM) of My-Shirt Pte Ltd. Your company manufactures and distributes T-shirts to major retail outlets around Singapore.

Figure 1a and 1b below show the steps to produce a T-shirt.

Figure 1a: Key Steps to produce a T-shirt

Cutting

Stitching

Complete

Product

SCHOOL OF

ENGINEERING

Figure 1b: T-Shirt Manufacturing Process (Overview)

The T-shirts that My-Shirt Pte Ltd manufactures are gaining popularity among many youngsters in Singapore. My-Shirt Pte Ltd current business strategy is to increase its market share. To do so, the company manufactures a wide variety of design and colours to cater to different customers’ preferences. However, having a wide variety (and colours) would mean higher manufacturing, packaging, shipping and inventory holding cost incurred. It will also be harder for the company to forecast the right number of each type of T-shirts to produce. From a product design and manufacturing process perspective, how can you help your company reduce the manufacturing, packaging, shipping and inventory holding cost, while meeting customer requirement at the same time? Discuss your approach.


P04 – Designing With Efficiency

• Economic Packaging and

Transportation

• Concurrent & Parallel

Processing

• Standardization



The Manufacturing Environment

• Rapid Changes

• New products rapidly introduced

• Short, unknown product life cycles

• High Variety of Products

• Long Production Lead Times

• Increasing storage and transportation costs

• Difficult to forecast demand


Problem Faced…

• Forces for keeping low inventory

• inventory expensive

• low salvage values

• Forces for keeping high inventory

• long lead times

• customer service is important

• demand is hard to predict

• reduction in transportation quantity


Design for Logistics (DFL).. (Why?)

1. Product trends

• High product

variety

• Short life cycles

2. Challenges to meet product

trends

• Shorter production lead times

• Difficult to forecast demand

• High storage & transportation

cost

3. Design for Logistics to meet the challenges posed by

product trends

• Economic Packaging and Transportation

• Concurrent & Parallel processing

• Standardization

3 Components

for DFL


Economic Packaging and

Transportation (E.g. IKEA)


• Products are designed to be packed

compactly for customer to take from store

and then assemble at home

• Economies of scale from transporting high

volume of compact furniture

• Warehouse to store and display all its 10,000

products rather than relying on distributors


Transportation (E.g. IKEA)


Ocean Shipping Cost = Function (Packing density) +

Materials to Ship

Container cost is fixed

Packing more units per container lowers per unit shipping costs.

HOW ?

1.Optimize use of Container Rectangular volume space • Shipping cartons are box-shaped

• Products are collapsible or foldable

2.Robust product design to allow less external packaging

& cushioning/foam materials.


Transportation


• Some companies would redesign product rather

than packaging

• Many retailers favor products that takes up less

storage space, stack easily and fit onto their

shelves (revenue per m2 increase)

• Therefore, Tupperware and Rubbermaid

containers/pails are made to stack


Transportation


• Tetrahedron shape reduces material

use

• Box/Square-shaped products

• Foldable products


Transportation

“Square” water-melon

“Foldable” Colander &

Chopping Board

http://en.wikipedia.org/wiki/Image:Square_watermelon.jpg


Considerations: • Design products so that they can be efficiently packed and stored

e.g. Compact, stackable, flat

• Design products to efficiently utilize retail space by packing more

compactly e.g. bulk, sub-packaging, fit to shelves

• Design packaging so that products can be consolidated at cross

docking points e.g. easily identifiable, less than 25kg

• Less packaging material Prism/tetrahedral shaped packaging

Robust product design

Box-shaped product


Transportation


Concurrent & Parallel Processing

• Steps that are performed in sequence can

be completed at the same time

Reduce manufacturing lead time

Lower inventory cost due to improved

forecasting

Reduce safety stock requirements

If raw material supply is uncertain for a

particular component, a higher inventory can be

held for the component, rather than product


Customers (Europe)

Serial Processing

Parallel Processing

Plant 1 (Europe) Plant 2 (US) Plant 3 (Asia)

3 Days 3 Days 3 Days 9 Days

Customers (Europe)Assembly Plant

(Asia)

3 Days 6 Days

Plant 1 (Europe)

Plant 2 (US)

3 Days

Concurrent & Parallel Processing


Standardization

•Modular product – a product assembled from a variety of modules such that for each modules, there are a number of options.

E.g. Personal computer, Mac-Donald’s burgers, watches, cars etc…

•Modular Process – is a manufacturing process consisting of discrete operations so that inventory can be stored in partially manufactured form between operations

E.g. garment making process


Standardization

• Standardization to help reduce inventory

level and increase forecast accuracy

through risk pooling from aggregate

planning

• Product modularity and process

modularity are key to choosing the right

standardization strategy


Selecting the Standardization

Strategy

Part

Standardization

Process

Standardization

Product

Standardization

Procurement

Standardization

ModularNon-Modular

Process

Modular

Non-

Modular

Pro

du

ct


4 Approaches to Standardization

•Part Standardization

•Process Standardization

•Product Standardization

•Procurement Standardization


Part Standardization

• Common parts are used across many products

• Reduce inventory through risk pooling

• Reduce part cost due to risk pooling and

economies of scale• E.g. Common circuit board & print-head for different printers

• E.g. Same sesame seed buns, lettuce, tomato slices for different types of

burgers (Mac-Donald’s)

• E.g. Nokia Phone


Process Standardization

• Standardizing as much of the process

as possible for different products, and

customizing the products as late as

possible (postponement)

http://www.benetton.com/portal/web/guest/home


Process Standardization E.g. Benetton Manufacturing Process

Purchase Yarn

Old Sequence

Dye Yarn

Finish Yarn

Knit Garment Parts

Join Parts

Purchase Yarn

Dye Yarn

Finish Yarn

Knit Garment Parts

Join Parts

New Sequence

More

accurate,

Consolidate

d demand

Postpone

dyeing process


Product Standardization

•When product not kept in stock is ordered,

the order may be filled by a product that

offers a superset of features required by

customers - “Downward substitution”

E.g. Car rental, higher functionality/speed chip,

multiple power supply options for printer

When Not

Available

Economy Class (if not

available) Upgrade to Business

Class

http://images.google.com.sg/imgres?imgurl=http://www.mrfeedback.net/blog/images/singapore_airlines.jpg&imgrefurl=http://mrfeedback.net/blog/2008/03/14/singapore-airlines-forefront-of-aviation/&usg=__X--6JyCqJIaXO4tSmw--IpbbWco=&h=1056&w=1102&sz=55&hl=en&start=1&tbnid=dBp2fovrJZCtHM:&tbnh=144&tbnw=150&prev=/images%3Fq%3Dsingapore%2Bairline%26hl%3Den


Procurement Standardization

• Particularly useful when processing

equipment is very expensive

• Same equipment is used to produce each of

the possible end-products

E.g. Hand-phone

chipset

Computer

Motherboard

http://images.google.com.sg/imgres?imgurl=http://www.sxc.hu/pic/m/s/su/sundstrom/677481_mobile_phone_circuit_board.jpg&imgrefurl=http://www.sxc.hu/photo/677481&usg=__b0x1U_3VGN3x2U39YCCl2uo4WTo=&h=225&w=300&sz=14&hl=en&start=1&um=1&tbnid=d5UcpOhUUFXSIM:&tbnh=87&tbnw=116&prev=/images%3Fq%3Dphone%2Bcircuit%2Bboard%26hl%3Den%26sa%3DN%26um%3D1

http://images.google.com.sg/imgres?imgurl=http://cache.eb.com/eb/image%3Fid%3D79391%26rendTypeId%3D4&imgrefurl=http://student.britannica.com/comptons/art-73301/The-primary-circuit-board-connects-all-the-basic-components-of&usg=__Ublg4JkH0Qlf2saSKDKquw0I9I4=&h=450&w=432&sz=64&hl=en&start=1&um=1&tbnid=eBbgNggnQ4HShM:&tbnh=127&tbnw=122&prev=/images%3Fq%3Dcomputer%2Bcircuit%2Bboard%26hl%3Den%26um%3D1

http://images.google.com.sg/imgres?imgurl=http://www.compatible-inkjet-cartridge.com/inkpages/Howstuffworks%2520How%2520Inkjet%2520Printers%2520Work3_files/inkjet-printer11.jpg&imgrefurl=http://www.compatible-inkjet-cartridge.com/inkpages/How_Inkjet_Printers_Work_Inside.html&usg=__MWyIDU3vrIFqVKmbGv1z-X4ZeZI=&h=284&w=400&sz=29&hl=en&start=13&um=1&tbnid=7XSrnM_ZjBoEKM:&tbnh=88&tbnw=124&prev=/images%3Fq%3Dprinter%2Bcircuit%2Bboard%26hl%3Den%26um%3D1


Today’s Problem

Safety Stock Reduction of 2132 – 1840 = 292

Cost Saving!


“Old

Sequence”

“New

Sequence”

Today’s ProblemStyling

Cutting

Assembling

Stitching

Features (e.g. color

& design)

Packaging

Shipping

Styling

Cutting

Assembling

Stitching

Features (e.g. color

& design)

Packaging

Shipping


• Economic Packaging and Transportation

• Packing T-shirts in compact box for ease of stacking

and handling

• Process Standardization

• Re-sequencing of process features (determine

colors + design) takes place after stitching

After customer order is being placed

• Modular Product and Modular Process

• Process Standardization in the form of

Postponement

• Reduction in safety stock

Today’s Problem


Learning Outcomes

•Economic Packaging and

Transportation

•Concurrent & Parallel Processing

•Standardization


P05 – Select Suitable Process







SCHOOL OF

ENGINEERING

Select Suitable Process

T-Com Inc. is a manufacturer of computer components including motherboards, graphic cards and sound cards. As part of the company business expansion and vertical integration initiatives, the management decides to set up a plant in Bintan, Indonesia to produce computers.

The following attachment shows a typical manufacturing process of computers in a factory.

Key Processes in Computer Maufacturing.pdf

Matthew has been appointed as the General Manager (GM) for the new business subsidiary, T-Com Computer Limited. During his preparation work before actual production, Matthew engages an external marketing research company to conduct surveys on potential customers so as to understand their needs and requirements. Matthew needs this information to plan for suitable manufacturing processes in his new factory and build computers that suit different types of customers.

Figure 1a gives a summary of the marketing research findings.

Category A B C

Brief description of

the customer

Home users or

individuals who want

their computers to be

reasonably priced

with standard

configuration

(Customization is not

required.) Prompt

delivery is important

Corporate customers

who order anything

from 10-500

computers. Typically,

they require

computers with some

forms of

customization (both

hardware and

“Techies” who need

high quality, highly

reliable computers

with good after-sales

and repair services.

Typically, they want

computers that are

fully customized to

their individual needs.

SCHOOL OF

ENGINEERING

Category A B C

to this group of

customer

software) to suit their

company’s needs

Price sensitivity of

customer

Most price sensitive

customers among all.

Price is not a primary

concern for this group

Least price sensitivity

among all

Figure 1: Summary of Market Research Findings

What types of manufacturing process (or processes) would you recommend to Matthew for the new plant? Justify your choice.


P05 – Select Suitable Process

• Key Milestones in Manufacturing

History

• Process Selection

• Manufacturing Process Types Job Shop

Batch

Assembly Line

Flow



Key Milestones in Manufacturing History

• Andrew Carnegie & Scale (1875) Focused on unit cost through integration, efficiency, velocity of

throughput; Used accounting techniques from railroads to

accurately track costs; Set prices high in good times (made killing),

low in bad times (killed competition)

• Henry Ford & Speed (1913) Mass Production: defined new limits for complex assembly

operation; famous moving assembly line in 1913 Highland Park

plant, mass production became virtually synonymous with

assembly lines after this; single model (Model T)


Key Milestones in Manufacturing History

• Alfred Sloan &Structure (1920) Restructuring of GM: collection of autonomous operating divisions;

coordination through strong central office; divisions targeted at markets;

used ROI to evaluate units; evolved procedures for forecasting, inventory

tracking, market share estimation

• Frederick Taylor &Scientific Management (1911) Time studies; Planning vs. Doing; Task reduction; etc

• Japan’s Experience & Toyota Production System

(1978) The success of American and Japan was based more on the

system than specific technologies or products (American system

with interchangeable parts and vertical integration; Japanese JIT

system)


Production Process

• Production Process: the conversion of inputs (raw materials) into outputs (finished goods); core of operation management

• Process Structure

• The way the process is organized to make or deliver a product or service

• Determines the way the product flows through different stages of the production process

• Is dictated by business strategy E.g. low cost mass production OR product differentiation/ customization

• Implications? It affects:

• Layout of production facilities

• Capacity planning

E.g. Skills and quantity of labor, flexibility of equipment


Process Selection

Forecasting

Product &

service

design

Technological

change

Facilities &

Equipment

Layout

Work Design

Capacity

Planning

Process

Selection

Inputs Outputs


Process Selection Variables

• Also known as Manufacturing Variables

• Product Variety: How much the product changes from customer to customer.

• Equipment Flexibility: Whether equipment provides very specialized function or has the flexibility to provide certain level of product differentiation

• Production Volume: Some products are produced on small volume depending on customer needs, while others are produced in huge quantities in anticipation of customer demand


Manufacturing Process Types

Product Variety

Equipment

Flexibility

Production

Volume

Flow

Processing

Assembly Line

Batch

Processing

Job Shop


Job Shop

• For highly specialized product in low volume on

customer-order basis

• Equipment must be flexible enough to change

with each new job

• Jumbled flow – each product is made in a different

sequence of activities

• E.g. Computer Aided Manufacturing (CAM) workshop

which produces wide variety of parts based on

specific customer order (usually low volume)


Batch Processing

• For higher volume product with standard

product design and a few product ‘types’

• Disconnected production line flow –

produced in small lots or batches

• Uses flexible equipment (adjustable for

multiple tasks) to produce a variety of

products in moderate volume• E.g. Shoes, pharmaceutical products


Assembly Line• Small variety of highly standardized product to be produced

in large volume

• Originated by Henry Ford for automobile production in 1913

• Uses a connected line for production & moves the product

along the line

E.g. On a conveyor system along a series of work stations

• Structured with each line producing only one type of

product

• Cannot easily switch product, but there are options to offer

some variety on the product being produced

E.g. Car assembly lines, electrical appliances


Flow Processing

• For very standardized product in very large

volume in the most cost-effective manner

• Like assembly line, flow processing has a fixed

pace and fixed sequence of activities.

• Each piece of equipment performs a specific

function & seldom modified for special needs

• Quantity of product is measured in weight or

volume• Eg. Steel plant, oil refineries



(Summary)

Job Shop BatchAssembly

LineFlow

Description Customized

goods or services

Semi-

standardized

goods or

services

Standardized

goods or

services

Highly

standardized

goods or

services

Merits

Able to handle a

wide variety of

work

Flexibility

Low unit cost,

high volume and

efficient

Very efficient,

very high volume

Limitations

Slow, high cost

per unit, complex

planning and

scheduling

Moderate cost

per unit,

moderate

scheduling

complexity

Low flexibility,

high cost of

downtime

Very rigid, lack of

variety, costly to

change, very

high cost of

downtime


Job Shop BatchAssembly

LineFlow

Variety Highest High Low Lowest

Equipment

Flexibility Highest High Low Lowest

Volume Lowest Low High Highest


(Summary)


Manufacturing Objectives

• One key manufacturing objective is to achieve the

cost advantage of the Flow Process and the

product variety and/or customization associated

with the Job Shop.

• Most companies operate in between the 4 types of

configuration, to achieve optimal production mode

and better respond to market changes.

E.g. Companies that operate primarily in flow mode will often

have repair shops (job shop) to fix equipment that fails.


Today’s Problem Standardized computer (Category A product) has high volume of

demand (account 73% of total sales), the set up of an assembly-line

type of process can be justified.

Computers for corporate customers (Category B product) where

orders are anything from 10 to 500 units (account 20% of sales) →

Batch processing may be a more suitable process. The volume is lower than assembly line and the equipment can be shared among the

different varieties

Category C product has very low demands (account 7% of sales)

where product variety and equipment flexibility are highest → Job-

shop is suitable.

To justify the process selection, the fixed and variable costs have to

be determined for different processes. Comparison of the total cost for

each process can then be made against the volume of demand

expected


Batch-Processing for computers for

corporate customers (Category B )

+Load customized software

(E.g. Packed in batches, customer specific)

Assembly–Line for Standardized Computer (Category A)

Load common software+

Job-Shop (Category C )

Kitting +Custom

Build Area +

Testing Area +

Repair &

Servicing

(E.g. Pack to

customer)

Suggested Solution

Build Area

(customized)


Learning Outcome

• Key Milestones in Manufacturing

History

• Process Selection

• Manufacturing Process Types Job Shop

Batch

Assembly Line

Flow


P06 – Planning For Manufacturing







SCHOOL OF

ENGINEERING

Planning For Manufacturing

Aaron is the Chief Operating Officer (COO) of Kelter Electronics Ltd- a contract manufacturing company that specializes in manufacturing printed circuit boards (PCBs) for computers, mobile phones and electronic devices. One of the recent initiatives by the upper management is to expand its existing production facilities to manufacture mobile phones with Ketler’s own brand. (Figure 1A shows the key components of a typical mobile phone.)

Figure 1A: Key Component of a Mobile Phone Although Ketler Electronics has been a leader in producing PCBs, manufacturing a complete mobile handset is still a new and unfamiliar area to the company. Mobile phone manufacturing is a lucrative yet highly competitive industry. Aaron understands that careful planning is necessary prior to entering the market. This is not going to be an easy task. How would you advise Aaron in planning for the new business (short, intermediate, long term) from a manufacturing planning and control perspective?


P06 – Planning For Manufacturing

• Understand about Manufacturing

• Key Goals of Manufacturing

• Manufacturing Planning and

Control (MPC) System Roles of MPC

Principles of MPC

Activities in MPC



What is Manufacturing?

• Manufacturing : A series of interrelated activities and

operations involving the design, material selection,

planning, production, quality assurance, management,

and marketing of discrete consumer and durable goods.– From APICS Dictionary

• It is a value-adding process. The raw material is

converted by adding cost (or value) progressively until the

final product is created.

Production

System

Inputs

material

labor

capital

product

components

Outputs


Manufacturing

Other Activities …

Build/ Rent warehouse

Train employees, schedule

shiftsBuild new assembly

line/ plant

Source Suppliers/

Buy components & parts

Find transportation team or

3PL

Get specialized

manpower E.g.

manager, operators

Buy Machinery &

Equipment

Manufacture

Mobile Phones

Preparation Work Involved in Manufacturing

http://www.legitreviews.com/images/reviews/525/ecs_drill_machine.jpg


Key Processes in Mobile Phones Manufacturing


Manufacturing Goals

The 3 typical goals for a manufacturing plant:

1) Quality: The manufactured product must be equal or better than its competitors

2) Cost : The cost of making the product must be equal or lower than its competitors

3) Time : The product must be delivered to the customer on time, every time


Cost, Quality and Time

Cost

Time Quality

Note: Trade-off relationship exists among the 3 goals


Cost, Quality and Time

Cost• Unit product cost

• Unit labor cost

• Unit material cost

• Total manufacturing overhead cost

• Inventory turnover-raw material, WIP, finished

gds

• Capital productivity

• Capacity/machine utilization

• Materials yield

• Direct/Indirect labor productivity

Time• Quoted delivery time

• % of on-time delivery

• Average lateness

• Inventory accuracy

• Master Production schedule performance/stability

Quality• Internal failure cost

• External failure cost

• Quality of incoming materials from

suppliers

• Warranty cost as % of sales

• Rework cost as % of sales


Manufacturing Planning and Control (MPC)

System

A Manufacturing Planning and Control (MPC)

system is a methodology designed to manage

efficiently the flow of material, the utilization of

people and equipment, and to respond to customer

requirements by utilizing the capacity of our

suppliers, that of our internal facilities, and in some

cases that of our customers to meet customer

demand.(Source: Vollman, Berry, Whybark & Jacobs, “Manufacturing Planning and

Control for Supply Chain Management”, Mc-Graw-Hill Inc, 5th Edition”)


MPC consists of…

• Sales & Operation Planning (S&OP)

• Master Production Scheduling (MPS)

• Material Requirement Planning (MRP)

• Capacity Planning

• Production Activity Control

• Just-in-Time Manufacturing (JIT)


Role of MPC in Manufacturing - Center of Activity!


Role of MPC in Manufacturing - Center of Activity!

Customers

Distribution

MPC SuppliersProcurement

Engineering

Design

Sales

Marketing

Plant Floor

Quality

To all functions


Factors Affecting MPC

Supplier

Production process

Customer’s needs

Manpower

Resource

Cost

Quality

Timing

School of Engineering 13

Principles of MPC• Manufacturing planning and control systems should support

the strategy and tactics pursued by the firm.

• The MPC system's design will vary, depending on the

distinctive needs of the firm.

• Different manufacturing processes often dictate the need

for different designs of the MPC system.

• The framework for MPC is general, and all three phases

must be performed, but specific applications necessarily

reflect particular company conditions and objectives.

• The system should evolve to meet changing requirements

in the market, technology, products, and manufacturing

processes.


MPC Activities

• Short Term

• Intermediate Term

• Long Term


Short Term

There is a need for detailed scheduling of

resources to meet production

requirements.

• Involves time, people, material, equipment

and facilities.

• Involves people working on the right things.

• Involves tracking the use of resources and

execution results.

• Provide problem-solving support.


Intermediate TermThe fundamental issue is matching supply

and demand in terms of both volume and

product mix.

• Planning for the right logistics.

• Providing customers with information on correct

quantities and location to meet market needs.

• Planning of capacity to determine employment

levels, budgets, overtime and subcontracting

needs, etc.


Long Term

The system is responsible for providing

information to make decisions on:

• The appropriate amount of capacity

(including supplier capacity) to meet the

market demands of the future.

• Provide the appropriate mix of human

resource capabilities, technology, and

geographic locations (e.g. new plant).


Today’s ProblemAaron’s objectives would include:

Provide good-quality, low-price mobile phones

and deliver promptly to customers.

Have good MPC system with following activities

• Short term

• Schedule production activities so people and equipment are

working on the correct things.

• Track material, people, customers' orders. equipment and

other resources in the factory.

• Respond when things go wrong and unexpected problems

arise.


Today’s Problem (continued)

• Intermediate term

• Maintain appropriate inventories of raw materials (e.g.

PCBs), work in process and finished goods (e.g. complete

handset) in the correct locations.

• Plan for materials/components to arrive on time in the right

quantities needed for product production.

• Long term

• Plan capacity requirements and availability to meet market-

place needs.

• Communicate with customers and suppliers on specific

issues and long- term relationships.


Learning Outcomes

•Understand about Manufacturing

•Key Goals of Manufacturing

•Manufacturing Planning and

Control (MPC) SystemRoles of MPC

Principles of MPC

Activities in MPC


P07 – How Many To Make







SCHOOL OF

ENGINEERING

How Many To Make

You are the Production Planning Manager of Eco-Eyewear Manufacturing Limited. Your company manufactures environmentally friendly sunglasses from recycled materials. The sunglasses manufactured by Eco-Eyewear come in various sizes, models and specifications but the resources used in production (E.g. raw materials, labour and machinery) are identical. As the Production Planning Manager, one of your tasks is to determine how many sunglasses to produce based on the sales forecast from the Sales and Marketing Department. Table 1A shows the sales forecasts of sunglasses from January 2011 to December 2011.

Table 1A: Sales Forecasts of Sunglasses

Month Sales Forecasts

(Units)

Month Sales Forecasts

(Units)

Jan 2011 5,000 Jul 2011 4,600

Feb 2011 4,000 Aug 2011 9,200

Mar 2011 6,500 Sept 2011 9,000

Apr 2011 9,000 Oct 2011 8,000

May 2011 5,500 Nov 2011 8,800

June 2011 8,600 Dec 2011 6,200

In addition, you have the following information about the cost and production. Cost Information

Regular Worker Rate= $12/hr Inventory Holding Cost= $2 per unit/month Cost of Hiring a Worker = $200 Cost of Firing a Worker = $400 Backorders Charge = $3 per unit/month

Other Information

Number of Working Days per month = 22 Current Workers Strength = 15 8 hour shift /day Average Assembly Rate = 20 units/worker/shift

SCHOOL OF

ENGINEERING

Discuss how would you plan for the production of sunglasses in the coming months, with a view to keep the total production cost as low as possible?


P07 – How Many To Make


• Production Planning

• Key Aspects of Aggregate

Planning

• Types of Aggregate Production

Plans Zero-Inventory Plan

Level Work-Force Plan

Mixed Aggregate Plan


Production Planning • Production Plan- Determines how much and when to make a

product

Goal: To match production rate and demand rate so that

products are made when needed

• Factors constituting the complexity of Production Planning

Function:

i. Number of products

ii. Demand pattern & uncertainty

iii. Number of periods in planning horizon

iv. Alternative production processes

v. Subcontracting

vi. Overtime

vii. Inventory


Production Planning

Long Range Plan

Intermediate Range Plan

Short Term Plan

~2-10 year

period

~6 months-2

year period

1 week-6

months

e.g. Long term capacity, location, layout,

product design, work system design

e.g. General level of work-force, output

subcontracting , overtime

Aggregate

Planning

e.g. Job sequencing, detailed machine loading,

work schedules

Time Period


Aggregate Production Planning

Business

planning by top

management

Manufacturing

management

and planning


Aggregate Production Planning

• Intermediate range planning is also referred

to as Aggregate Production Planning

• Focus: Determining volume of product

family („aggregate unit”) to produce, not mix

of individual products

• Aim: To balance demand and supply

(production) at the lowest cost


Aggregate Production Planning • Three key aspects of Aggregate Production Planning

1. Capacity• How much a production system can make

• To satisfy demand, system capacity should exceed demand , at least over the

long run

2. Aggregate Units• A variety of products is produced over intermediate and long range period. They

are lumped together to form aggregate units

• Different products in aggregate units share the same production capacity

3. Costs• Production costs: E.g. Material, direct labor, overtime and subcontracting costs

• Inventory costs: E.g. Holding and shortage costs

• Capacity change costs: E.g. Hiring and training costs, separation costs


Types of Aggregate Production Plan

1. Zero-Inventory Plan

• Also known as Lot-for-lot , Chase or Just-in-time plan

• Each month, produces exactly the amount demanded

• No inventory is carried over

• Workers are added when demand increases and layoff when

demand decreases

(+) Advantages

• Low investment in inventory

• Labor utilization is kept high

(-) Disadvantages

• Cost of adjusting output rates and/or workforce levels

• Variability in workforce is an undesirable phenomenon seen by many

Zero-inventory plan

Time

Units

DemandProduction


2. Level Work-Force Plan

• Also called Level production or Constant work-force plan

• Same number of workers used in each period

• Uses inventory produced in off-peak periods to satisfy demand in

peak periods

(+) Advantages

• Stable output rates and workforce

(-) Disadvantages

• Greater inventory costs

• Increased overtime & idle time

• Resource utilization that vary over time

Level work-force plan

Demand

Production

Units

Time



3. Mixed Aggregate Plan

• Combination of Zero-inventory plan & Level Work-

Force plan

Examples: Inventory level cannot exceed x dollars; no more

than y% of workers can be laid off in a month

• Allows inventory, backorders and changing work-force

levels

• Usually yields better outcome than Zero-Inventory plan

and Level Work-Force plan

• How? →Trial & error ,make changes using spreadsheet



Zero-Inventory Plan

• Each month, produces exactly the amount demanded

• No inventory is carried over

• Workers are added when demand increases and layoff when demand decreases


Zero-Inventory Plan

Work-Force

Fluctuations



• Same number of workers used in each period

• Uses inventory produced in off-peak periods to satisfy demand in peak periods

Note: Assuming backorder



Inventory

Fluctuations


Proposed Aggregate Plan: Mixed

• Combination of Zero-inventory plan & Level Work-Force plan

• Allows inventory, backorders and changing work-force levels


Comparing the Aggregate Production

Plans

“Pure Strategies” (zero-inventory & level workforce plan)are useful

as basis for drafting a realistic aggregate plan

o Instances of high inventory & backorder costs > zero-inventory plan is

favored

o Industries employing highly skilled labor > level workforce plan is prevalent

Mixed Aggregate Plan satisfies demand and yields better

outcome in terms of total cost compared to “pure strategies”


Learning Outcome

• Production Planning

• Key Aspects of Aggregate Planning

• Types of Aggregate Production Plans

Zero-Inventory Plan


Mixed Aggregate Plan


P08 – SCHEDULING FOR PRODUCTION







SCHOOL OF

ENGINEERING

Scheduling For Production

After graduation from Republic Polytechnic, you have been employed to work as a Production Planner at Astro-Optics Corporation, a manufacturer of optical instruments (E.g. Telescopes, binoculars, spectacle lens). You are put in charge on the production planning for the company’s V-Max model of binoculars.

You need to work out the Master Production Schedule (MPS) for V-Max binoculars over the next three months from October to December.

The weekly forecasts of V-Max binoculars by the Sales and Operations Department are shown in Table 1A. In addition, the company has secured two months of committed customers’ orders for October and November (See Table 1B). Committed customers’ orders for December are still pending inputs from the Sales Department.

Table 1A: Weekly Sales Forecast of V-Max Binoculars

Table 1B: Committed Customers’ Order for V-Max Binoculars

SCHOOL OF

ENGINEERING

You check with the warehouse manager and know that there are still 200 units of V-Max binoculars in the warehouse on 30th September. The factory manager updates you that in every production run, the factory floor would produce 500 units of V-Max binoculars.

Based on the information provided, how would you decide on the weekly production quantity for the period? Determine also the level of inventory that is uncommitted and available for new customer orders.


P08 –Scheduling For Production


• Master Production Schedule

(MPS) Functions

Applications (Inputs & Outputs)

• Available-to-Promise (ATP)


Types of Operational Problems Faced

by a Manufacturing Company

• Missed customer deliveries

• Mismatched inventory

• Large queues and excessive work-in-

progress

• Unplanned overtime

• Under-used resources

• End-of-month rush to meet financial

closing date


What is Master Production

Schedule (MPS) ?

A detailed plan that states how many end

items will be produced within specified periods

of time.

a. End items are either finished products or the

highest level assemblies from which shippable

products are built.

b. Time periods are usually measured in weeks,

although they may be measured in hours, days,

or even months.


Master Production Schedule

(MPS) Process

Figure G.1

No

Yes

Are resources

available?

Authorized

production

plan

Prospective master

production

schedule

Material

requirements

planning

Authorized master

production schedule


Functions of MPS

• Provide tangibility to production activities

• Manage inventory

• Manage capacity constraints Hedge demand variations

Balance to a constraint

• Control engineering changes

• Plan material requirements

• Optimize production activity sequence


MPS indicates quantity and timing of planned

production, taking into account desired delivery quantity

and timing, as well as on-hand inventory.

Inputs: 1. Inventory at start

2.Forecast for each scheduling period

3.Committed customer orders

Outputs: 1.Projected inventory

2.Production requirements

3.Uncommitted inventory (available-to-promise)



Problem Statement Analysis

• The MPS presented indicates a lot size of 500

• Objectives are to avoid missed deliveries, excessive

WIP and mismatched inventories

• Assumptions:

• Customer orders to be filled by end of the week

• Production to start at beginning of week and MPS

quantities will be achieved at end of the week

• No capacity constraint

• Availability of material is not an issue


• Forecasted demand is given on a weekly basis for the next three months.

• First step is to calculate Net Inventory before MPS quantity. In this example, the specified limit is assumed to be zero. Hence, we will continue until the Net Inventory before MPS is negative.

• Net Inventory before MPS = Previous week inventory -current week requirements

where the current week's requirements is the larger of forecast and customer orders (committed)



• For the first week, projected on-hand inventory

equals inventory at start minus the larger of

forecast and customer orders. Because forecast

(220) is smaller than the customer orders (230),

the customer order quantity is used. Thus, for the

first week, we obtain:

Production requirement = max(220,230) = 230

Net Inventory before MPS = 200 - 230 = -30



• When the Net Inventory before MPS

becomes negative, this is a signal that

production will be needed to replenish

inventory Planned production is hence required

• Production will take place according to

the lot size of 500



• Hence, the negative Net Inventory before MPS

in Wk 1 will require production of one lot size,

which is 500 units of binoculars

This will meet the projected shortfall of 30 units

and leave 470 units for future demand.

• These calculations continue for the entire

schedule. Every time Net Inventory before

MPS becomes negative, another production lot

of 500 units will be triggered in the schedule.



Available-to-Promise (ATP)

• Available-To-Promise (ATP) inventory is that portion of the on-hand inventory plus scheduled production that is still not committed to the customer orders.

• Using a "look-ahead" procedure: Add the booked customer orders week by week until (but not including) the week in which there is an MPS entry.

• For the first period (Wk 1), the ATP includes the beginning inventory plus any MPS amount in that period, minus the total of booked orders up to the time when the next MPS amount is available.

Thus, ATP (Week 1) = 200 +500 - 230 - 200 - 240 = 30



• In subsequent periods (other than period 1), the ATP inventory consists of the MPS amount in that period, minus the actual customer orders already received for that period and all other periods until the next MPS amount is available.

• E.g. For Week 4, promised amounts are 230 + 180 = 410,

and the ATP is 500 - 410 = 90

•The same method continues for the rest of the weeks.



• As additional orders are booked, these would be entered into the schedule and the ATP (Available-To-Promise) quantity would be updated to reflect these orders

• Astro-Optics Corporation can then use the ATP quantity to provide realistic delivery dates to new customers


Today’s Problem


Conclusion

• In October, Astro-Optics Corporation

needs to produce 500 units of V-Max

binoculars in Week 1 & Week 4

• In November & December, the company

needs to produce 500 units of V-Max

binoculars in Week 2 & Week 4 for both

months

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Learning Outcome

• Master Production Schedule (MPS) Functions

Applications (Inputs & Outputs)

• Available-to-Promise (ATP)

http://sg.wrs.yahoo.com/_ylt=A0S0zu729dRL.C4AN0Qu4gt./SIG=12hkkcghk/EXP=1272334198/**http%3a/www.fishreports.net/fishing-gear/images/binoculars.jpg


P09 – Manage the Material







SCHOOL OF

ENGINEERING

Manage the Material

You are the Materials Planning Executive of Lifestyle Furniture Ltd. Your company manufactures a wide range of furniture (E.g. Sofas, cabinets and coffee-tables) for sale in the local market.

The bill-of-material (BOM) for the company best-selling Coffee-Table is given below. (See Figure 1A)

Figure 1A: Bill-of-Material (BOM) of Coffee-Table

Recently your company has secured an order to supply coffee-tables to a hotel chain. The Master Production Schedule (MPS) for the Coffee-Table is shown below for the next 8 weeks or 2 months.

Table 1B: Master Production Schedule (MPS) of Coffee-Tables

SCHOOL OF

ENGINEERING

Work out the Material Requirements Planning (MRP) record for the Coffee-Table “Legs” (Part No: 203). Assume that it (Coffee-Table “Legs”) has a lead-time of one week and the production lot size is 30 units. There is an on-hand inventory of 200 “Legs” in Week 0 and a scheduled receipt of 30 “Legs” in Week 2. After you have created the MRP records, the Sales and Planning Department announced that there will be addition of customer orders for the Coffee-Tables in Week 6. The new requirement will be 65 units. With the changes, the MRP records for the Coffee-Table “Legs” will need to be updated. How would you update the records? Should you regenerate a new set of MRP or do you simply just update those records that need changing? Give your recommendations?


P09 – Manage the Material


•Understand Material Requirement

Planning (MRP)

•Bill of Material Structure

•MRP Generation

•MRP Updating ApproachesRegenerative Method

Net Change Method


Material Requirements Planning (MRP)

• An MRP system generates time-phased

requirements for components or raw materials to be

used for production.

The inputs to a MRP system are

1. Inventory record

2. Master production schedule (MPS)

3. Bill of material (BOM)• BOM is a listing of all sub-assemblies, intermediates, parts and raw

materials that go into making the parent assembly showing the quantities of

each required to make an assembly (APICS Definition)

• MRP output is net requirement, used in generating

purchase and work orders.


MRP System Overview


MRP Process Sequence

• Explosion : Use information from MPS and BOM to derive quantity required for every product component and raw material

• Netting : Gross requirements are adjusted (at every level of the BOM & for each time bucket) to account for inventory and receipts

• Offsetting : Timing of order release is determined, to take into account production and supplier lead times

• Lot sizing : Batch size to be purchased or produced is determined

Net requirement = Gross requirement – Scheduled receipts -

Projected inventory balance (preceding week)


MRP Explosion – illustration

BOM information


Bill of Material (Multilevel Bill)

• Multilevel bills are formed as logical groupings of parts into

subassemblies based on the way the product is assembled

Coffee- Table

100

Base (1)

200

Legs (4)

203

Leg Bolts (4)

220

Frame (1)

300

Leg Supports (4)

Glue

066

Ends (2)

411

Sides (2)

622

Top (1)

023

Glue

066

Boards (3)

030


Bill of Material (Multiple Bill)

• A multiple bill is used when companies usually make more than

one product, and the same components are often used in several

products. This is particularly true with families of products

Example of multiple bills


Bill of Material (Single-Level Bills)

• A single-level bill of materials contain only the parent and its

intermediate components

Example of single-level bills


Original Material Requirements Planning

1) Referring to BOM, gross requirement for Legs is 4 for each Coffee Table(explosion of

required quantities)

2) Scheduled receipts refer to castors that are to be received due to open work or

purchase order (open work order is assumed here)

3) Lot size is assumed to be 30 (lot sizing) Assume receipt at the beginning of the week

Net requirement (netting) = Gross requirements – Scheduled receipts – On-hand

quantity (previous week)

4) Offsetting process is done in Planned Order Release to cater for the 1-week lead

time

(Note: Net requirement for the week cannot be a negative value)


Changes that Affect MRP

• Forecasts/ Demand (MPS) changes

• Product structure changes

• Promised deliveries arriving late

• Lead time changes

Note: Whenever there are any changes, it

should be updated accurately and quickly


MRP Updating Methods

•The two basic methods used to update the MRP records are:

Net Change

Regenerative

•A Regenerative System is updated periodically while a Net-Change system is updated continuously.


Regenerative Method

The entire material plan is recalculated,

based on the current MPS and exploding

the entire BOM.

Each item record is completely recalculated.

(i.e. all part numbers are reconstructed and

current planning orders are removed.)

All requirements are recalculated, as are the

inventory data and planned orders.


Net Change Method

Recalculates requirements only for those items

affected by change; i.e. A partial explosion is

performed, only the changes are exploded

through the system, level by level. The entire

plan is not regenerated.

Only additions and deletions from the master

schedule are entered.

Production plan modified to reflect changes as

they occur, e.g. some defective purchased

parts had to be returned to a vendor.


New MPS

Change in the MPS quantity in week 6

is the input to net change updating

method.


Updated MRP Record

(Regenerative Method)

• Entire MRP record is regenerated, but changes are only

in the highlighted boxes

• Other files such as BOM, inventory data and rest of the

MRP records are also completely regenerated.


Updated MRP Record Using Net

Change Method

• Only records that need changing will be updated. The net change in requirements

(+120) is updated in Week 6.

• The blank records in the table above mean no recalculation needed unlike

Regenerative method where all records are recalculated

• In Net Change method, the system will immediately update the net change, i.e. +120

in gross requirements (Week 6) and +120 in planned order release (Week 5)

• MRP records of other components are processed in the same manner

• All inventory data are kept current with the update of ‘On-hand’ quantities


Regenerative Method

Suitable for fairly stable systems

Disadvantages:

Deterioration of MRP – status and requirements are

not updated constantly.

Long computer time

Advantages:

Less processing costs (frequency of updating is lesser

for this method therefore requiring less computing

power)


Net Change Method

Suitable for systems that have frequent changes

Disadvantages:

High processing costs due to many small and frequent

updates (require more computing power)

Net change may generate too many action notices

Advantages:

Quick on-the-spot implementation

Requires little computer time

Up-to-date information for planning and control

purposes


Conclusion

Both Regenerative and Net Change methods are

available and applied in conjunction in most

Enterprise Resource Planning (ERP) software

Regeneration is usually performed once a week or

once a month to clean up all records

Between regenerations, the records can be updated

using the Net Change method

Decision to operate Regeneration or Net Change

method depends on the nature of manufacturing

environment.


Learning Outcome

•Understand Material

Requirement Planning (MRP)

•Bill of Material Structure

•MRP Generation

•MRP Updating Approaches•Regenerative Method

•Net Change Method


P10 – Plan and Order







SCHOOL OF

ENGINEERING

Plan and Order

Motor Hub Pte Ltd (MH Pte Ltd) specializes in manufacturing standard motorcycle as well as customizing motorcycle for motorcycling enthusiasts. Over the past year, there has been a huge growth in business (over 75%) for the company. In order to perform better resource planning and scheduling, MH Pte Ltd decides to invest in a new manufacturing planning and control (MPC) system. After a few months of research and testing, a MRPII system (SAP) is finally being implemented within the company. Recently, MH Pte Ltd receives an order to customize a new batch of motorcycles. These motorcycles are to be delivered at various dates. In addition, the customer has requested that some parts/components to be customized and the orders are to be delivered at the shortest time possible.

The components used for manufacturing the customized motorcycle are shown below. (See Figure 1A)

Level Item

Description Material Number

Item Type Components of Original Design (Component ID)

Lead Time

(Days) Quantity

Safety Stock

0 Motorcycle A1-

XXXXXX Finished Product

1300-1400 5 1 0

1 Light B1-

XXXXXX Semi-Finished

Product 2300-101 5 4 0

1 Body C1-

XXXXXX Semi-Finished

Product 1300-251 10 1 0

2 Wheels D1-

XXXXXX Raw Material 3300-113 5 2 0

2 Engine E1-

XXXXXX Raw Material 3300-113 5 1 0

Figure 1A: Bill-of-Material of Customized Motorcycle

SCHOOL OF

ENGINEERING

As the company’s operation planner, you have been tasked to generate a schedule to meet this demand using the new SAP system. You are also expected to describe how SAP helps in fulfilling the functions of MRPII, to some new planners who just join your department.


P10 – Plan and Order


• Describe Manufacturing

Resource Planning II (MRP II)

• Using an ERP tool to perform

some of the MRP II functions• Production Master Data

• BOM

• MPS

• MRP


What is Manufacturing Resource Planning

(MRP II)

• Second generation of MRP (extension of functionality)

• MRP is the heart of MRP II

• More than scheduling and ordering of materials – it integrates Sales, Engineering, Finance, Quality, etc

• Effective planning of all resources in an organization through integrated system

• Addresses operation planning in units, financial planning in dollars, has simulation capability to answer „what-if‟ questions

• Outputs integrated with financial reports like business plans, purchase commitment report, shipping budget, inventory production in dollars, etc.

• Is essentially a „closed-loop‟ MRP with connections to business and financial planning, reporting facilities and „what-if‟ simulation capabilities


Manufacturing Push System

• Central planning approach

(work center activities based on MRP schedule)

• Schedule in advance (plan ahead by MRP)

• Forecast (Master Production Schedule – MPS)

• Lot size based on economic consideration

• Local optimization (maximize production throughput)

• Work center “pushes” completed jobs to next center

• Functions best in a high demand, continuous

production environment


MRP II System (ERP)

MRP IIO

per a

t ion

Pla

nn

ing

MRP

Ex

ecut io

n

Upp

er

Man

ag

em

en

tP

lannin

g

Production

Planning

Master

Production Schedule

MRP

Shop Floor Control

Capacity Planning &

Simulation

Feedback

- Routings

- Inventory Status- BOM- Item Master

Files

Part ID, lead time,

lot size and etc..Material

Plan

Shop

Orders

Purchasing Planning

Purchasing


• Provides robust and fully integrated financial and sales

management capabilities, the solution gives managers

on-demand access to critical real-time information

• Has customisable packages for large organizations,

small and midsize companies, and industries

• Effective planning of all resources in an organisation

through integrated system

• Addresses operation planning in units, financial planning

in dollars, has simulation capability to answer „what-if‟

questions

• Outputs integrated with financial reports like business

plans, purchase commitment report, shipping budget,

inventory production in dollars, etc.

MRP II Functions Using SAP


• Systems, Applications, and Products in Data Processing

• Central relational database

• Three-tier Client/Server system

• Collections of logically related transactions within business

functionsPP (“Make”)

MM (“Buy”)

SD (“Sell” and “deliver”)

FI and CO (“Track”)

HR, etc.

• Add-ons: Customer Relationship Management (CRM)

Supply Chain Management (SCM)

Product Lifecycle Management (PLM)

Etc.

Architecture


Structure Terminology

SAP


Suggested Solution


After Logon


Material Master – Basic Data

Create Item ID

Input Item

Name

Define Unit of

Measure

Material

Group


Material Master – MRP 1

Purchasing

Group

MRP Type

Lot Sizing


Material Master – MRP 2

Planned

Delivery Time


BOM

Parent Item ID

Material used

in producing

the parent part

Item # in

Material BOM

Quantity per

Parent


View Overall BOM Generated

A1-XXX

B1-XXXC1-XXX

D1-XXX E1-XXX


Planned Result (A1-XXX)


Planned Result (B1-XXX)


Planned Result (C1-XXX)


Planned Result (D1-XXX)


Planned Result (E1-XXX)


Material Master DataContains all data required to define and manage all types of

materials

• Raw materials:

Materials purchased from external suppliers

• Semi-finished goods (Sub-assemblies):

Components that have been assembled from raw materials

• Finished goods:

The final product that is sold to the customer


Conclusion

With the help of SAP, MH Pte Ltd is able to:

Plan its materials flow from raw materials until

finished product, more efficiently

The company is able to keep track of all the

necessary information regarding the product

including,

Components for each parts

Lead time

Cost


Learning Outcome

• Describe Manufacturing Resource Planning II

(MRP II)

• Using an ERP tool to perform some of the

MRP II functions• Production Master Data

• BOM

• MPS

• MRP

of 3


P11 – WHEN TO WHERE AND HOW MANY

E222 – LOGISTICS PLANNING AND CONTROL






SCHOOL OF

ENGINEERING

Page 2 of 3

When to Where And How Many

Tamaya Motor Corporation is a manufacturer of motorbikes. Its manufacturing plant is located in Hokkaido, Japan.

To serve the Southeast Asia market, the company has a Regional Warehouse (RW) located in Singapore. In addition, there are two distribution centers (DC), one located in Bangkok (Thailand) and the other in Jakarta (Indonesia) to serve the customers (retailers) in the region. Motorbikes from the Hokkaido plant would ship to the Regional Warehouse first and then distribute to Jakarta and Bangkok DCs. The two DCs would then distribute the motorbikes to their respective retailers. (See figure below)

In August - September 2010 (for a period of 8 weeks), Tamaya Motor decides to hold a promotion for one of its most popular model of motorbikes – Trailer SX. To ensure that there are sufficient stocks for the retailers, the following requirements are obtained from the Bangkok and Jakarta Distribution Centers (DCs) respectively.

Table 1a: Requirement of Bangkok DC

Week 1 2 3 4 5 6 7 8

Gross requirements 75 85 90 65 85 95 80 85

Table 1b: Requirement of Jakarta DC

Week 1 2 3 4 5 6 7 8

Gross requirements 70 60 70 70 80 80 65 85

SCHOOL OF

ENGINEERING

Page 3 of 3

As the Company’s Logistics Planner, you have been tasked to work out the distribution requirements plan (DRP) for the Regional Warehouse (Singapore). The forecast for the Singapore Regional Warehouse (RW) is also given.

Table 1c: Forecast for Singapore RW

Week 1 2 3 4 5 6 7 8

Forecast 40 40 40 30 30 30 50 50

The following table gives some additional information about the 3 warehouses.

Lot Size (Units)

Lead time (Weeks)

Safety-Stock Required

(Units)

Scheduled Receipts (Units)

Bangkok DC 100 1 10 0

Jakarta DC 100 2 15 0

Singapore Regional

Warehouse 200 2 60 200 (Week 1)

There are on-hand inventory of 100, 90 and 200 motorcycles for Bangkok DC, Jakarta DC and Singapore Regional Warehouse (RW) respectively. Discuss how would you go about planning for the distribution?


P11 – When To Where And How Many


• Distribution Requirements

Planning (DRP) Linkages with MPC System

• DRP Techniques Basic DRP Record

Linking several warehouse records

Safety stock in DRP


Distribution Requirement Planning

(DRP)

• The basis for integrating supply chain inventory

information and physical distribution activities with the

Manufacturing Planning and Control (MPC) system.

• Managing the flow of materials between firms,

warehouses, distribution centers. DRP helps to manage these material flows.

Similar to MRP in Manufacturing.

• Relate firms in the supply chain by providing planning

records that carry demand information from receiving

points to supply points and vice versa.


A Multi-Echelon Inventory System

Example


What if I Use Traditional Techniques?

• In multi-echelon inventory systems with

decentralized control, lot size / reorder

point logic will:

Create and amplify "lumpy" demand

Lead to the mal-distribution of available stock,

hoarding of stock, and unnecessary stock-outs

Result in large safety stocks, expediting, and

re-distribution.


Impact of Multi-Echelons

RDC Inventory

Patterns

LDC Inventory

Patterns

Demand for

Retailer

Layers of Inventory Create “Lumpy Demand “

Plant Inventory Patterns


Purposes of DRP

• DRP enables the firm to capture data, including local

demand conditions, for modifying the forecast and to

report current inventory positions.

• This is specially true when they have vendor managed

inventories (VMI).

• DRP provides data for managing the distribution facility

and the database for consistent communications with

the customers and the rest of the company.

• “DRP is simply the application of the MRP principles

and techniques to distribution inventories”


DRP, MRP & MPC Relationship


Basic DRP Record

• Forecast requirements (Gross Requirement)

• In transit (Scheduled Receipts)

• Requirements (Net Requirement)

• Projected available balance (Available)

• Planned shipments (Planned Order Releases)

• Forecast in central supply (if applicable)


Time Phased Order Point (TPOP)

• MRP-like time planning logic for independent demand

items, where gross requirements come from a

forecast, not via explosion.

• Technique can be used to plan distribution center

inventories as well as to plan for service (repair) parts. Because MRP logic can readily handle items with dependent demand,

independent demand, or a combination of both.

• Time-phased order point is an approach that uses

time periods, thus allowing for lumpy withdrawals

instead of average demand. When used in distribution environments, the planned order releases are

input to the master schedule dependent demands.


Safety Stock and DRP

• When there is more uncertainty in terms of timing, then it may be better to use safety lead time.

• When the uncertainty is in quantity then safety stock may be better.

• Carry safety stock where there is uncertainty (near the customer) or where there is some element of independent demand


Potential Management Issues with

DRP

• Data Integrity and Completeness

• Organizational Support

• Stock-Aging


Data Integrity and Completeness

• A key issue is the use of aggregate forecasts which are later on broken down into detailed forecasts.

Adding up of errors

• Forecast errors should be avoided especially biased errors.

• Management programs should be established to monitor the process.

• Inventory accuracy depends on transaction process routines and discipline.


Organizational Support

• To better coordinate a chain like this,

information in DRP form as well as organization

form (e.g. material management) is required

DRP


Monitoring Stock Aging

• Use strict first-in first-out (FIFO) physical

movement.

• Identify those products that may be heading

for a problem before it is too late.

Messages to flag potential shelf life problems.

• If demand is dropping – forecast should be

reduced. Available inventory or in transit

should cover a larger period of time. Maybe

shipped to another warehouse.


Today’s Problem

Plant (Hokkaido, Japan)

Regional Warehouse

(Singapore)

Bangkok DC Jakarta DC

Retailer A

Retailer B

Retailer C

Retailer X

Retailer Y

Retailer Z


DRP (Bangkok DC)

• Assumptions:

Lot size of 100 units

Lead time of 1 week

10 units of safety stock are needed


• Assumptions:

Lot size of 100 units

Lead time of 2 week


DRP (Jakarta DC)


Regional Warehouse (Singapore)Note: Gross Requirements of Regional Warehouse = Forecast + Planned release

order of DCs (Bangkok & Jakarta)

• Assumptions:Lot size of 200 units

Lead time of 2 week



• DRP relates current field inventory availability,

forecast & knowledge of demand to develop resupply

plans and bring those to the MPS of the MPC system

• Gross requirement for Regional Warehouse (RW) is

the sum of all planned order release from various

DCs plus forecast

• Stocks at RW needs to be planned 2 weeks in

advance

Lead time for RW is 2 weeks

• Stocks need to be fulfilled once it falls below the

Safety Stock (SS) requirement

Conclusion


Learning Outcome

• Distribution Requirements Planning

(DRP)

Linkages with MPC System

• DRP Techniques

Basic DRP Record

Linking several warehouse records

Safety stock in DRP


P12 – REVERSING THE FLOW



All rights reserved. No part of this document may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the School of Engineering, Republic Polytechnic, Singapore.

SCHOOL OF

ENGINEERING

Reversing The Flow

You are the Sales Manager of Inno-Com Ltd− a laptop manufacturing company. Selling laptop is a highly competitive business. To keep up with the intense competition, your company has maintained a “seven day return policy” for the customers. Under this policy, unsatisfied customers may return their merchandise to the company’s customers service center ,promising a full refund of the item’s cost within seven days of purchase* (Note: *Terms and conditions apply). For the past few months, sales performance for the company’s laptops has been excellent. As sales volume grows, so are the number of returned products due to defects, warranties and other issues. The returned laptops are piling up in the company’s warehouse wasting valuable storage space. In addition, your customer service staffs are receiving many phone calls from customers enquiring about the status of their returned laptops that they have sent in for repair. You feel that the current return process is too inefficient and generates too much unnecessary costs to the company. What kind of recommendation(s) would you suggest so that your company can manage its returned products more effectively?


P12 –Reversing The Flow


•Reasons for Reverse Logistics

System

•Reverse Logistics Process

•Overcoming Reverse Logistics

Challenges


Reverse Logistics

Reverse Logistics

Raw

materials

suppliers

1 2 3 4 5

Manufacturer Distributor Wholesaler Retailer

6

End-User

Obtain Produce Distribute

Typical Materials/Goods Flow


Reasons For Reverse Logistics

• Return of goods for credit

IT products

• Rental or lease returns

Material handling equipment

• Warranty returns

Printers, MP3 players,

consumer electronic products

• Reusable containers

Milk crates, Pallets

• Consignment agreement returns

Fashion, leather products

• Online purchase returns

Arts and crafts

• Disposal

• Trade-ins

Old PCs

• Take-backs

Old clothes

• Universal product recalls

Contact lens solutions

• Units for inspection or recalibration

Microscope

• Products not meeting guarantees

Lowest price by Carrefour

• Product/Component reuse, recycle

and retrieve residual value

Electronic chips, plastics, batteries,

paper, tin cans


• Savings In The After-Market

Sometimes there is literally gold in the reverse supply

chain, not to mention platinum, silver, copper and a whole

range of commercial metals

• Competitive Edge

Consumers can be wooed and won with products that

promise good service.

Ease of return, repair & recycling may add to a product’s

value in the consumer’s mind

Motivations For Reverse Logistics

System in Company


• Consumer & Shareholder Pressure

Shareholder groups may propose various “green”

policies

• Growing Market For Environmentally Safe

Products

Some customers will pay a premium for products

that protect themselves and the earth

• Environmental Awareness & Regulations

Motivations For Reverse Logistics

System in Company


Key Issues in Reverse Logistics

• Prevention

• Data Tracking

• Customer Service

• Using 3rd Party Logistics Specialist

• Consolidation

• Cost Savings

• Generating Revenue


Prevention

• “The best way to handle a return is never have

to handle it in the first place”

But if it happens;

• Establish clear procedures to handle returns effectively

• To ensure returns are inherent in product and not due

to usage

• Clear guidance on website/helpline/manuals for

troubleshooting, to segregate faulty product from

product fault caused by usage


• Companies need to learn more about why their

consumers are returning goods. The data they

collect is a way for them to

Reduce returns & improve product and/or production

and/or operating instructions and/or distribution process

Identify trends (if any)

Eliminate certain type of goods

Quickly redistribute the goods

• Data should be entered uniformly and consistently

for tracking

Data Tracking


• Short cycle time between customer calling to report,

collection of faulty product and return of repaired/new/

substituted product

• Helpful hotlines, websites and instructions sheets to

report faults and activate technical support/collection

• Bring new product/repaired/substitute product to

exchange as soon as possible

E.g. provide ready-to-mail-back envelopes

• Quick to collect faulty product from customer through

use of couriers or set up collection centers

Customer Service


Third-Party Logistics Specialist

• A growing number of retailers/e-tailers outsource to a

reverse-logistics specialist.

For fees typically ranging from US $1 to $5 per returned item (plus

shipping), companies such as Newgistics, UPS E-Logistics, and

Genco can take over every aspect of a returns process or just a part

of it

After contracting with Newgistics, one company closed the area of its

warehouse devoted to returns, lowering its handling costs

• Email updates to inform them the status of their return

• Efficient collection, consolidation, sorting, reuse, repair

and return products process

E.g. Intermec products are repaired in UPS warehouse instead of at

designated product service centers


Consolidation

• Consolidation (Aggregation) allows

returned products to be Sorted

Tested

Data Collected

Transported

Product requirements consolidated and ordered

more economically


• Cost-savings for reverse logistics are

achieved through:

Data collection

Redistribution of goods

Effective reporting

Remedial actions

Cost Savings


Generating Revenue

• Minor product faults can be repaired

quickly and sold at reduced prices to

generate revenues rather than disposing it

• Take advantage of actual value that can

be derived versus perceived value from

person discarding the product


Reverse Logistics ProcessesCustomer returns

Product

Closed loop

Exchange inc

warranties

Sortation/

testing

Can the product

Be resold?

Basic

Processing

Eg repack

Primary market

Stock, vendor,

supplier

Can the product

Be repair/

Refurbished?

Repair/

Refurbished

recondition

Secondary markets

E-auction, outlet

Stores, jobbers, etc

Does the

Product have

residual value?

Value

recovery

Preprocessor,

Recycle

markets

Waste

disposal

Compliance

information

No No No

Yes Yes Yes

spares

Data

Collection

Compliance

information

Consolidation


Performance Measurement

• Defining metrics to measure the success

of reverse logistics activities is important

• Not too different from forward

logistics/supply chain measurements

Total cost of Reverse Logistics

Reliability

Flexibility

Asset Management

Responsiveness/Cycle Time


Key Benefits

• Improved control and asset recovery

• Income generation through recycling,

reuse, repackage rather than unsold

inventory

• Efficient route planning – returns

collections matched with outbound

deliveries

• Reduced inventory and obsolescence


Today’s Problem

• Find out why customers return their laptops (Data

Tracking and Prevention)

Identify trends (if any)

To establish clear procedures to handle returns effectively

• Do away with warehouse and outsource to 3PL

(e.g. SingPost) to handle the returns, consolidations

& repackaging so as to achieve Cost Savings

• Sell returned/repaired products (Laptops &

accessories) at reduced prices rather than

accumulating them (Generate Revenue)


• Examples of reverse logistics @ SingPost

NLB Books

HP ink cartridges

Canon Printers And Cameras

Epson Printers

Acer Laptops And Desktops

Robinson Shopping Centre And John Little

Apple iPod

SingTel Hand Phones

SingNet Modems ….

Problem Statement


Problem Statement

Customer Post Office

Branches

Consolidate at

Centralized

Collection Centers

Manufacturing PlantSuppliers

Repackage to resell

For

recycle

and repair

Suggested Reverse Logistics Process for Inno-Com Ltd


With conservation of the environment in mind, Inno-

Com Ltd can design/manufacture their products for

reverse logistics (Reduce, Reuse, Recycle)• Make products recyclable

• Use recycled materials

• Use less-harmful ingredients

• Use lighter components

• Use less energy

• Use less material

E.g. Singapore Packaging Agreement

http://app.nea.gov.sg/cms/htdocs/article.asp?pid=2905

Environmental Issues are becoming more important!

Going Further…



http://sg.wrs.yahoo.com/_ylt=A0S0zu5xTmxKJv4Ai3su4gt./SIG=123kmh27g/EXP=1248698353/**http%3A/www.starbamboo.com/images/GreenLabel.jpg


Learning Outcome

•Reasons for Reverse Logistics

System

•Reverse Logistics Process

•Overcoming Reverse Logistics

Challenges


P13 – How Does It Perform







SCHOOL OF

ENGINEERING

How Does It Perform

PTC Medical Instrument Ltd, established in July 2008, manufactures and distributes medical instruments to various parts of Asia. Its customers include hospitals, clinics and major pharmacies.

Our Mission: At PTC Medical Instrument, we aim to excel as the best manufacturer in the medical instrument industry with faster turnaround time, reliability, quality and optimum cost to meet our customers’ needs. You have been employed as the Logistics Manager of PTC Medical Instrument. One of the tasks that your General Manager (GM) has assigned you is to set new targets for your department as part of continuous improvement initiative. To do so, you have collected information from past records and then tabulate them as shown.

Table 1:

SCHOOL OF

ENGINEERING

Using the data provided, discuss how would you go about measuring your department’s performance and setting the new targets?


P13 – How Does It Perform

• Measurement System Objective

• Characteristic of a Good Performance

Measurement

• Logistics Performance AssessmentCost Management

Customer Services

Quality

Productivity

Asset Management



Objectives of Measurement System

Effective measurement systems are used

for:

• Monitoring the system performance for reporting.

• Controlling performance by the established

standards and decide the possible modification to

the logistics system.

• Directing measures to motivate employee

performance.


Characteristics of a Good

Measurement System

Quantitative The measure can be expressed as an objective

value

Easy to understand The measure conveys at a glance what it is

measuring, and how it is derived

Encourages

appropriate behavior

The measure is balanced to reward productive

behavior and discourage “game playing”

Visible The effects of the measure are readily apparent

to all involved in the process being measured

Is defined and

mutually understood

The measure has been defined by and/or agreed

to by all key process participants

Encompasses both

outputs and inputs

The measure integrates factors from all aspects

of the process measured


Measures only what

is important

The measure focuses on a key performance

indicator that is of real value to managing a

process

Is multidimensional The measure is properly balanced between

utilization, productivity, and performance, and

shows trade-off

Uses economy of

effort

The benefits outweigh the costs of collection and

analysis

Facilitates trust The measure validates the participation among

the various parties

Characteristics of a Good

Measurement System


Challenges in Logistics & Supply Chain

Performance

• The metrics must be consistent with overall corporate

strategy

• The metrics must focus upon customer needs and

expectations

• Prioritize the metrics

• Focus upon processes not functions

• Use a balanced approach in selecting and developing

metrics

• Precise cost measurement is an important aspect for

gauging improvement

• Use technology to enhance efficient performance

measurement


Typical Performance Metric

Classification

• Cost Management

• Customer Services

• Quality

• Productivity

• Asset Management


Typical Performance Metrics

(Cost Management)

• Total Cost

• Cost per unit product/order processed

• Cost as a percentage (%) of sales

• Inbound /Outbound freight

• Direct labor Cost

• Actual vs. budgeted Cost


• Total Cost = Sum of costs of warehousing,

outbound, inbound transportation, order processing

(receiving, storage, picking, etc…)

Customer Service Levels

-Customer service

- Parts & Service Support

- Return goods handlingTransportation Costs

- Traffic & transportation

Warehousing Costs

-Warehousing and

storage

-Plant and warehouse

site selection

Order processing and

information costs

- Order processing

- Logistics communications

- Demand

forecasting/planning

Inventory carrying cost

-Inventory management

-Packaging

-Reverse logistics

Lot quantity costs

- Material handling

-Procurement


(Cost Management)


Total Cost Analysis

• Key to managing the logistics function is total

cost analysis

• Management should minimize total logistics cost,

rather than attempt to minimize cost of individual

activities

• E.g. aggregating all finished goods into one warehouse

may minimize warehousing costs, but it may also lead to

increased transportation expenses

• Thus, cost trade-offs among the various

components of the logistics system are essential


• Fill rate

• Stock-outs

• Shipping errors

• On-time delivery

• Cycle Time

• Customer Complaints


(Customer Service)


• Item Fill Rate = No. of items ordered by

customers/No. of items delivered to customers

• Line Fill Rate = No. of purchase order lines ordered

by customers/No. of purchase order lines delivered

complete to customers

• Value Fill Rate = Total dollar value of customer

orders/Total dollar value delivered to customers

• Order Fill Rate = Number of customer orders/Number

of orders delivered complete


(Customer Service)


• Damage frequency

• Order entry accuracy

• Packing/shipping accuracy

• Document /invoicing accuracy

• Number of customer returns/ shipment


(Quality)


• Units processed/

received/picked/stored/shipped per staff

• Units per labor dollar ($)/ labor hour

• Comparison between peers &historical

records


(Productivity)


• Inventory turns

• Weeks of Supply

• Obsolete inventory

• Inventory Cycle Counting Accuracy

• Storage Space Utilization

• Scrap rates

• Slow moving/non-moving inventory


(Asset Management)



(Asset Management)

Used most of

the time

For products whose price and cost

fluctuates E.g. oil, gold

Used by some

retail

organization



(Asset Management)


Problem Statement


• Data for performance indicators can be from ERP, WMS,

invoices, picking list etc…

• Logistics performance indicator to meet Company’s mission

objective

Cost ManagementProductivity

Problem Statement

Asset Management

Quality

Customer Service


• To set targets based on cost management,

customer service, quality, productivity & asset

management . • Example.

• Reduce cost as percentage of sales to 20% in next Qtr

• Achieve line fill rate of 1 in next Qtr

• Achieve on-time delivery of 99% in next Qtr

• Increase no of outbound/man hr to 12 within next 1

month

• Improve inventory turns to 6 in next Qtr

•Targets to be used as basis for performance

appraisal and rewards

Problem Statement


Learning Outcome

• Measurement System Objective

• Characteristic of a Good Performance

Measurement

• Logistics Performance AssessmentCost Management

Customer Services

Quality

Productivity

Asset Management

of 2


P14 – WORK STUDY




SCHOOL OF

ENGINEERING

Page 2 of 2

Work Study

You are the Materials Handling Manager of GTech Limited- a manufacturer of computer parts. As part of an initiative to improve work efficiency in the factory floor, you decide to do time studies for some tasks that your staffs perform and see if improved work productivity can be achieved. You decide to start with a commonly performed task, which is loading to-be- processed parts on a workstation. (Note: Your facilitator will pass you thumb-drives containing the video clip of how loading parts on a workstation is typically carried out.) Based on the work descriptions (from the video clip), record the total time taken for the task. Predetermined Time Standards (PTS) like MODAPTS can also be used to perform a time study. Explore how can PTS be used here? Suggests ways how the task may be performed more efficiently.


P14 – Work Study


• Carry out time studies to

determine the standard time for a

task.

• Use a Predetermined Time

System (PTS) to derive the

normal time required for a

repetitive task.

• Apply basic MODAPTS codes


Time Study and Work

Measurement• Time measurement

• Measurement of time taken to complete a cycle of operation.

• Cycle time:

Time taken to complete a cycle of operation

• Tact time:

Time taken to produce a piece of product

• Ways to conduct time study• Stop watch (Direct Time Study)

• Video and stop watch

• Video time measurement (Time Study Software)


Time Study and Work

Measurement

• Work measurement:

• Capture and analyze the task and motion

required to perform an operation.

• Purpose is to look into ways to simplify,

combine and reduce operation tasks elements

in order to improve the work efficiency.


• Work Elements

• Define motion elements to each motion

• Purpose is to understand the

repeated/redundant elements for analysis

Time Study and Work Measurement


Motion Elements

Classification

Serial

No

.

Motion type Definition

Type I

1 Reach（Reach－RE） Move with empty hands

2 Move（Move－M） Move object from one place to another place with hands or certain parts.

3 Grasp（Grasp－G） Control object with hand or palm.

4 Position（Position－P） Place object on certain position.

5 Assemble（Assemble－A） Match two objects.

6 Disassemble（Disassemble－DA） Make object sever from other objects.

7 Use（Use－U） Use tool or equipment for the purpose of operation.

8 Release（Release－RL） Release the object held.

Type II

9 Search（Search－SH） Feel the position of object with eyes or hands.

10 Select（Select－ST） Select one from two or above similar objects.

11 Inspect（Inspect－I） Inspect the object if it complies with standard.

12 Plan（Plan－PN） Consideration for the next step during the operation.

13 Preposition（Preposition－PP） Pre-place the object on the positioned place before positioning.

Type III

14 Hold（Hold－H） Hold the object continually with hands or palm, and keep static.

15Unavoidable

Delay（Unavoidable Delay－UD）Work is interrupted due to the factors uncontrollable.

16 Avoidable Delay（Avoidable Delay－AD） Work is interrupted due to the artificial reason (intentionally or negligently).

17 Rest（Rest－RT） Work stops working due to over-fatigue.


Ratings

• The speed of the operator during the study

could be varying from the normal speed

due to physiological effect.

• The time recorded is to be adjusted so that

the record could reflect the actual time.

• The percentage of the adjustment is

known as Ratings.


Predetermined Time Study

• Predetermined time study (without using stopwatch)• To define the time taken to perform a certain standard motion

using international recognized time data.

• Such as:

MODAPTS

MTM/MTM I/MTM II/MTM X

Work factors

MOST

• Steps in performing PTS:• Breaking the motion into element tasks:

• Such as reach, grasp, move, release and others.

• Apply the modification factors

• such as distance, weight, texture of material and others.

• Get time data from the time standard

• Sum them up


Common Predetermined Time Systems:

Use of common predetermined time systems like :

• MTM – Methods Time Measurement. Analyzes any manual

operation or method into basic motions required to perform it, and

assigns to each motion a predetermined time standard, by the nature

of the motion and the conditions.

• MODAPTS - MODular Arrangement of Predetermined Time

Standards. The accuracy of the system has been found comparable to

most other such systems. It differs from most other systems in that it is

based on human physiology.

• MOST - Maynard Operation Sequence Technique. A simplified and

faster standard establishment system. Establish standards at least 5

times faster than with MTM. Utilizes larger blocks of fundamental

motions than MTM – hence quicker.


Direct Time Study Vs Predetermined Time Systems

Direct Time Study

Advantages:

a. Can be applied to any operation

b. Data reflects reality, based on actual activities performed

Disadvantages:

a. Requires observer to be patient, sharp and quick

b. Need to handle apprehension/anxiety of operator under timing

Predetermined Time Standards (PTS)

Advantages:

a. Time value can be computed almost immediately

b. Simulation of time impact of various work methods done easily

Disadvantages:

a. Specific classification of work motion using tables not always possible

b. Needs extensive training and practice to achieve proficiency


MODAPTSOverview

MODular Arrangement of Predetermined Time Standards

Developed by Chris Heyde in 1966

Predetermined time system (like MTM and MOST) where

work is divided into micro elements. These elements are

assigned standard time values

Can be used to validate time studies, calculate production

standards, evaluate plant capacity and identify unnecessary

movements

Relatively simple to use, low cost and widely accepted in

many countries


Steps (similar for all other predetermined time systems)

- Document (or determine the best method if the operation is

new) the method of operation

- Analyze the operation by projecting the body parts used to

carry out the actions

- Determine the codes and the time values (in units of MOD)

assigned to each work element

- Sum up the times (assuming additivity and independence) and

divide the total by 7.75 to obtain the normal time in seconds

1 MOD = 0.129 sec

1 MOD = 0.00215 min

1 sec = 7.75 MODS

1 min = 465 MODS

MODAPTS


Contains 21 basic alphanumeric codes

Alpha code depends on the type of activity. The

number attached to the code is the distance moved

or effort required for the move.

For example, M2 is the movement of the palm

which will take 2 MODS (0.258 seconds) to

complete

Major classes of motions are:• Upper limb (shoulder to finger) movement

• Terminal movements: done at the end of upper limb motion

• Auxiliary activities: walking, bending, inspection, deciding, etc

MODAPTS Codes


Types of Motions

• Movement

• Done by the finger-hand-arm-shoulder trunk system

• Required to position a part of the arm to perform the

Terminal activities

• Terminal Activities (GET and PUT)

• Done at the end of a movement

• In close proximity to the things being worked on

• Auxiliary Activities

• Walking, bending, inspection, deciding, etc.


Movements

• Movements and terminal activities take place in pairs.

• Movement first then terminal activities• Move to get, move to put

• Examples: M3GO (move to touch)

• Movement activities are classified by:• Distance moved

• Body part required to perform the move

• Light/small objects vs. heavy/large objects• Large objects : 16” x 16” x 16”

• Heavy objects : over 18 lbs.

• Award the lowest category that is possible to successfully complete the activity


Finger

1 MODHand

2 MODs

Forearm

3 MODs

Arm

4 MODsExtended Arm

5 MODs

1”

2”

6”

12”

18”

Movements


Moves with Small/Light Objects

Type Movement MODs Distances

Finger (M1) Knuckle 1 1”

Hand (M2) Wrist 2 2”

Forearm (M3) Elbow 3 6”

Whole Arm

(M4)

Shoulder directly forward,

perhaps body assistance

4 12”

Extended Arm

(M5)

Shoulder fully left, right,

or across the body

5 18”

Trunk (M7) Shoulder involving the

body trunk

7 30”

Note: Body assistance means to require the body to bend slightly (simultaneously with Move).

It increases distances not time.


Problem Statement

Screenshot of Double-E ™ software interface


Problem Statement – MODAPTS Calculations

Sequence of Work

Activities

Practical Time

(sec)

Code Frequency Mod

1. Walk 4 steps towards table 2.28 W5 4 20

2. Bend & Arise with simple

grasp (1st cycle)

1.72 B17G1 1 18

3. Place computer box on table

(1st cycle)

1.52 M5M5P2 1 12


grasp (2nd cycle)

2.48 B17G1 1 18


(2nd cycle)

1.68 M5M5P2 1 12


grasp (3rd cycle)

2.56 B17G1 1 18


(3rd cycle)

1.80 M5M5P2 1 12

8. Move arm to computer

keypad

0.80 M5M5G0 1 10

9. Press keypad 0.40 M1P0 1 1


Problem Statement – MODAPTS Calculations

Summary of Motion Types

Motion Type Practical Time ST (MODAPTS) No. of Datas

1st Type 15.24 15.67 9

2nd Type 0.00 0.00 0

3rd Type 0.00 0.00 0

Other Types 0.00 0.00 0

Motion Name Count Average Median Minimum Maximum VariancePreimprovement Improvement

Walking 1 2.28 2.28 2.28 2.28 0 2.28 2.6

Bend & Arise (w grasp) 3 2.25 2.48 1.72 2.56 0.21 6.76 6.96

Place on table 3 1.67 1.68 1.52 1.8 0.02 5 4.68

Move arm to computer 1 0.8 0.8 0.8 0.8 0 0.8 1.3

Press keypad 1 0.4 0.4 0.4 0.4 0 0.4 0.13


Problem Statement – MODAPTS Output

Total Normal Time (sec) = 15.67


Suggested Ways to Improve

Efficiency

• Start walking from closer starting point

• Move trolley closer to work-station

• Raise height of trolley

• Move computer terminal nearer

• Carry two boxes per bend/arise cycle


Other ScenariosScenario A:

Set allowance to be 10% comprising 4% fatigue

2% standing

4% mental stress

The standard time would be 1.1 x 15.67 or 17.24 seconds

Hence time to perform this manual task should be 17.24 sec

Scenario B:

Apply L1 weight adjustment in the PTS. Applicable when the

weight is more than 2kg. Each increment of 4kg, time

increases by 1 MOD


Learning Outcome

• Carry out time studies to determine

the standard time for a task.

• Use a Predetermined Time System

(PTS) to derive the normal time

required for a repetitive task.

• Apply basic MODAPTS codes

of 2


P15 – BETTER SECURITY




SCHOOL OF

ENGINEERING

Page 2 of 2

Better Security

You are the Logistics and Warehousing Manager of FMD (Asia) Electronics Limited, a manufacturer of circuit boards for super-computers. FMD (Asia) Electronics has a factory in Batam and Senai,Johor respectively as well as a regional warehouse at Tuas, Singapore. Currently the company exports most of the circuit boards manufactured (over 75%) to various parts of Asia and Europe. Mr Potter the General Manager (GM) of FMD (Asia) Electronics became very concerned when he read a newspaper article last week. The article reported that some microchips worth RM500, 000 were hijacked along the way during transportation. (See article below)

To prevent similar things from happening, Mr. Potter would want you to step-up the security of the regional warehouse as well as logistics flow In addition, the company is also planning to enter the US market as part of market expansion. You understand that there are some regulations introduced in United States to make goods going into the country safer after September-11 terrorist attack .The US government views product visibility as an integral part of the country security. As the Logistics and Warehousing Manager of FMD (Asia) Electronics, discuss what would be your recommendation(s) to meet all the requirements?


P15 – Better Security


• Key aspects of Supply Chain/

Logistics Security

• Major Supply Chain Security

Initiatives

• Enhanced Supply Chain/Logistics

Security with product visibility


Supply Chain/Logistics Security

Why security along the supply chain?

Helps to prevent:• Nuclear, biological and chemical materials falling

onto wrong hands

• Theft/Pilferage

• Sabotage

• Pirates

• Product contamination

• Environmental hazards

• Counterfeit product introduction

• Contraband goods etc… Sabotage on USS Cole at Yemen on 2002


Implications (Some facts & figures…)

• Global transit loss estimates- $30 to $50 Billion/year

• Typically 2-8% income reduction for Fortune 500

companies due to poor security

• Estimated, 80% of cargo thefts are “made to order thefts”

• Threat rated “severe” in Brazil, Russia, South Africa,

Indonesia, Nigeria & Malaysia

What would be the cost of an effective terrorist attack

using the supply chain- UNKNOWN ??? But will be impactful

An attack would probably cause major international disruptions and

closure of some businesses in the supply chain

Source of information: LRQA Training materials on ISO280000:2007


Supply Chain Security

Suppliers Manufacturer Distributor Customer

Physical Material Flow

Information Flow

transportation security

physical facility security

information (including financial) flow security

material flow security

personnel security

Financial Flow

Potential for

security

threats & risks


Transportation Security

• Regular and emergency communication equipment

• Security training of staff

• Non-intrusive inspection technology

• Focus on petroleum and cargo vessels

• Secure the movement of Inter-modal containers

• Secure air cargo and aircraft

• Reduce vulnerabilities to

Catering/Refueling/Maintenance equipment


Information Flow Security

• Password protection

• Firewalls

• Compartmentalize information/segregate data

• Encryption

Personnel Security• Conduct personnel background checks

• Obtain security clearances

• Identification and verification


Material Flow Security

• Apply tracking and tracing technologies to

monitor freight

• Use sensors to detect and report intrusions or

tampering with the shipments while en-route or

at a transshipment node

• Apply tamper resistant electronic seals

• Advance reporting of freight movements to

expedite processing through the transportation

nodes


Physical Facility Security

• Securing the physical facility

Through the use of fences/physical

barriers/guards/controlled access

Enhanced lighting, video, sensors

• Facility Layout (E.g. warehouse, factory)

• Includes screening passengers, cargo and

physical inspections


Original Warehouse Layout Plan

1 2

3 4

5 6

7

8

Security Issues

with existing

layout


Problems Identified 1.Do not put a dumpster or other garbage containers by a door. This

dumpster is in an ideal spot for employees to hide stolen things and

move them to their cars later on.

2.The closeness of this parking area, plus the fact that it is right by a door,

makes it easier for employees to take things from the warehouse and

put them in their cars. The further people park from the warehouse, the

better. If possible, have a fence separating the warehouse from the

parking lot.

3.The receiving dock and the shipping dock are too close together, and

there is no barrier between them. It would be easy to take things from

one truck and put them into another.

4.Staging area may be too close to the loading docks. If no one is around

to keep an eye out, it would be easy to take something and put it in a

truck.



5.Existing warehouse has far too many doors. There should only be one

that is open, and there should be a guard or other employee in charge of

watching this door. If fire regulations require more than one door, use

bars that set off an alarm if the doors are opened.

6.This is a bad spot for the restroom. To reach it, the truckers have to walk

through the warehouse. This puts your goods at risk of being stolen.

Just because people are dropping off or picking up shipments doesn't

mean they are free to wander around. It's best to keep unauthorized

people out of the warehouse.

7.To get to this lounge area, the truckers have to walk all through the

warehouse. It is important to restrict movement in your warehouse. Do

not let people just go wherever they want.

8.These bushes are a good hiding spot for things stolen out of the

warehouse, especially because they are right by the door. So either get

rid of the bushes, or lock the doors



Warehouse Layout Plan (Suggested)

To have a security post at

the entrance/ exit of the

premise

Resolves

physical facility

security


Major Supply Chain/Logistics Security Initiatives

• ISO 28000:2007- Specification for security

management systems for the supply chain

• Secure Trade Partnership (STP)

• Transported Asset Protection Association (TAPA)

Standards A, B and C

• Customs-Trade Partnership Against Terrorism (C-

TPAT)

• 24 hour Advance Manifest Rule

• Container Security initiative (CSI)


ISO 28000:2007- Specification for security

management systems for the supply chain

• Specifies requirements for a security management system

critical to security assurance of the supply chain

• Applicable to both small and multinational companies, in any

stage of the production or supply chain that wishes to:

establish, implement, maintain and improve a security management

system;

assure conformance with stated security management policy;

demonstrate such conformance to others;

seek certification/registration of its security management system by an

Accredited third party Certification Body; or

make a self-determination and self-declaration of conformance with

ISO 28000:2007.


ISO 28000:2007 Contd…

ISO 28000:2007 is NOT about

managing your security

department.

It is all about managing your

security in the supply chain !


Secure Trade Partnership (STP)

• The Secure Trade Partnership (STP) Guidelines spells out

the requirements which companies in the supply chain

should adopt to enhance the security of their operations

and supply chains

• Under the STP Guidelines, companies are required to:

(a) have security management systems;

(b) conduct risk assessments of their business operations; and

(c) implement the security measures under the STP Guidelines to

secure their supply chains.

• Companies meeting such requirements will be certified as

STP companies by Singapore Customs, and can look

forward to greater ease to bring goods into/out from

Singapore


• “Transported Asset Protection Association” is an association of

security professionals and related business partners from high

technology companies who have organized for the purpose of

addressing the emerging security threats that are common to the

technology industry

• Develop and utilize common tools (Freight Security Requirements,

contract language, assessment protocol) to: Increase security awareness and communicate best known methods (BKM’s) to

industry and supplier base

Communicate value and attractiveness of high-tech cargo to criminal element,

particularly to violent criminals

Develop performance of existing supplier base, or create a market niche for

entrepreneurs

Establish industry forum to evaluate effectiveness, pursue continuous

improvement, and set future goals

Transported Asset Protection Association

(TAPA)

http://www.tapa-asia.org/





Sample of TAPA Scoring MatrixAudit Rating Score

Point ValueProcess & Procedures - Description of Measurement

CriteriaStandard

0 Not present or utilized - No plans to adopt or implement Not

Acceptable:

1 Generally present Acceptable:

2 Firmly in place and adopted as best practice Acceptable:

X

AUDIT RESULTS

Facility Classification

Total Score 131.2

Possible Score 138

Percentage 95.07%

Overall Score/Standard Exceeds Requirements

Area of Concern:

1. Perimeter SecurityPreventative Measures

ScoreWarehouse

Classification

X if not

Scored

Total

Score

1.2 CCTV Systems 1.2.1 - CCTV external coverage of shipping and receiving

yard to cover movement of vehicles and people

2 A 2

1.2.2 - 100% CCTV external coverage of all dock doors 2 A 2

1.2.3 - CCTV system able to view all sides of the facility 2 A 2

IMPROVEMENT STATUS

Requirement does not apply

Not Applicable

PREVIOUS AUDIT


Documentation

• Freight security requirements

Specific required security

elements, with functional

descriptions, measurable

• Contractual language

Performance expectations

and effects of non-

compliance

• Standard assessment protocol

Standardized worksheet

Standardized scoring

Standardized reports

Processes

• Consequences

Corrective actions

$ reimbursement consistent

with value

Termination of contract

• Training

Internal and Supplier

Requirements and assessment

• Investigations

Roles and responsibilities after

loss

Recovery of property and

apprehension of thieves

Freight Security Elements


Customs-Trade Partnership Against

Terrorism (C-TPAT)

• In November 2001, US Customs initiated C-TPAT to improve

container security as they move through the global supply chain

• Customs officials work in partnership with private industry to

review supply chain security plans and recommending

improvements

• In return, C-TPAT members’ cargo are less likely to be

screened for weapons of mass destruction (WMDs)

• Participants include importers, Carriers, Brokers, Warehouse

operators, manufacturers (including foreign manufacturers)


C-TPAT Validation Process

Security Guidelines (defined by C-TPAT)

Security Plan (defined

by each member)

C-TPAT Compliance Evaluation.

Validation Process

C-TPAT guideline coverage:

-Personnel Security, Physical Security, Access Control,

Education & Training Awareness, Manifest procedures,

Conveyance Security


24-Hour Advance Manifest RuleOcean Cargo

• Carriers must submit a cargo declaration to US Customs and Border Protection 24 hours before cargo is laden aboard the vessel at a foreign port

Air Cargo

• At “wheels up” for flights less than four hours

• Four hours prior to arrival for flights over four hours in length.

• No-Load Order or Inspections for Invalid cargo descriptions

No address, incomplete address

Fields left blank

Inconsistent documents


Container Security Initiative (CSI)

• Government to government initiative

• Deploy Customs and Border Protection staff in foreign

ports

• US “borders” now at foreign ports

• Targeting, screening and inspecting suspect cargo prior

to lading

• Non-intrusive inspections

• Screen against WMD at foreign ports

• Reward “low-risk” shippers through less inspections


CSI Framework

Foreign Port What do we need here to ensure only legitimate goods are loaded

TransportHow can we be sure nothing “slipped in” ?

US PortHow can we maximize the likelihood of a high-detection hit-rate.


Supply Chain Security (to US)

Manufacturer

or SupplierIntermediate

Facility

Intermodal

Transfer

US

Distribution

Facility

Port of

ExportPort of Import

Customs

Inspect

manifest in

advance

CSI Inspection

C-TPAT

Validation

Note: TAPA & ISO 28000:2007 applies to entire supply chain

logistics planning & control

Career