planning and execution

8/2/2019 Planning and Execution

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Manufacturing Strategy,Planning and Execution



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Major Issues

• Types of manufacturing environments

• Overview of corporate and business strategies

• Order winners and qualifiers

• Operations strategy overview

• Market and resource perspectives of operations strategy

• Functional strategies

• Manufacturing planning and execution

• The reconciliation of functional perspectives



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Major Issues

• Production planning

• Demand management

• Resource planning

• Capacity issues in production planning

• Master Production Scheduling and MRP

• Execution of plans

• Best Manufacturing Practices (BMP)



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Characteristics ofManufacturing Environment

• Increased product diversity

• Reduced product life cycles

• Increased awareness of the environment – impact of products & manufacturing

systems

• Difficulties of estimating the costs andbenefits

• Changing social expectations

-



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Discrete ManufacturingEnvironments

• Make-to-Stock (MTS)

• Assemble-to-Order (ATO)

• Make-to-Order (MTO)

• Engineer-to-Order (ETO)

Level of

complexity



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Discrete Manufacturing: MTO

• An MTO product is finished after receipt of thecustomer order. Frequently long lead timecomponents are planned prior to the orderarriving in order to reduce the delivery time tothe customer. Where options or othersubassemblies are, the stocked prior tocustomer orders arriving, the term „assembleto order‟ is frequently used”

APICS (1987)



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Discrete Manufacturing: ATO

• Typically, delivery time requirements are shorterthan total manufacturing lead time

• Production is usually started in anticipation of

customer orders• Basic components and subassemblies are

produced using a push system (MRP)

• Final assembly is managed via a pull system(JIT)



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Major Issues


• Overview of corporate and business

strategies





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Corporate Strategy

• How the firm plans to use all its resources andfunctions to gain competitive advantage

• Corporate objectives typically include: – Growth

– Survival – Profit – Return on Investment – Other financial measures

– Employee policies – Environmental policies – ...



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General Business Strategy

• Cost leadership

• Differentiation – Create unique products commanding a premium

price based on:

• Brand image

• Quality

• Features/options

• Rapid delivery• Superb customer service



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Major Issues



strategies





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Competitive Priorities

• Basic strategies:

– Cost

– Quality

– Speed of delivery

– Product/volume flexibility

– Innovation



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The Order Qualifiers

• These are product or service characteristics

that allow your company to be present in the

market. They include:

– Quality – Price

– Reputation

– Number of years in business

– Reliability

– ...



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The Order Winners

• These are product or service characteristicsthat allow your company to win orders inthe market. They include:

– Quality – Price

– Speed of delivery

– Consistency of delivery

– Reliability – ...



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Order Winners andQualifiers

• Over the lifetime of a product operations-related criteria are most important winnersand qualifiers

• The relative importance (weights) ofvarious order winners changes asproducts travel on the product lifecyclecurve (over time) and must becontinuously monitored and updated foreach product and each market segment



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Major Issues



strategies





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Operations Strategy:Definition

• Operations strategy involves the decisionswhich shape the long-term capabilities ofthe company’s operations and theircontribution to overall strategy through theon-going reconciliation of marketrequirements and operations resources



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Corporate Objectives

Marketing Strategy

Order Winning Criteria

Manufacturing Strategy

Process Choice Infrastructure

• Growth

• Survival

• Profit

• Return oninvestment

• Otherfinancialmeasures

• Product marketsand segments

• Range

• Mix

• Volumes

• Standardizationvs. customization

• Level of innovation

• Leader vs. follower

alternatives

• Price

• Conformancequality

• Delivery speed

• Delivery reliability

• Volume flexibility

• Color range

• Product range

• Design

• Brand image• Technical support

• After sales support

• Choice of alternativeprocesses

• Tradeoffs embodied in

process choice• Role of inventory in

process configuration

• Make of buy decisionsand supply chainmanagement

• Capacity size

• Capacity timing

• Capacity location

• Functional supportfor operations

• Manufacturing

planning and controlsystems

• Quality assuranceand control

• Manufacturingsystems engineering

• Clerical procedures

• Compensationagreements

• Work structuring

• Organizationalstructure

Developing an OperationsStrategy



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Components of the OperationsStrategy

OperationsMission andStrategy

ProductDesignProcurement

QualityManagement

Schedule

Location

Layout

ProcessDesign

Reliability &Maintenance Inventory

HumanResources &Job Design



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Operations has to cope with the clash between the nature of external markets and the nature of internal resources

Operations Resources are….

Difficult to change

Technicallyconstrained

Complex

Market Requirements are….

Dynamic

Heterogeneous

Ambiguous

The Dichotomy of BusinessViews



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“Hard” issues

“Soft” issues

ProcessTechnology

Development andOrganization

Supply NetworkCapacity

Operations Decisions areStructural & Infrastructural



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Understanding Markets

• Understanding markets and agreeing on how toapproach them is critical to strategyimplementation success – In-depth debate about the markets, their needs and

manufacturing/operations capabilities must involve allfunctions (cross-functional team approach)

– Each organizational function must develop strategiesto support current and future market needs

– Each function’s strategic contributions are expressed

in terms of priorities, developments and investmentsor resources



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Major Issues

• Market and resource perspectives ofoperations strategy






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OperationsResources

MarketRequirementsOPERATIONSSTRATEGY

StrategicReconciliation

Operations strategy reconciles the requirements of the

market with the capabilities of operations resources

Market Needs vs. OperationsCapabilities



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Understandingmarkets

Understandingresources and

processes

PerformanceObjectives

MarketPositioning

CustomerNeeds

Competitors‟

Actions

Requiredperformance

OperationsStrategyDecision Areas

Tangible andIntangibleResources

Operations Capabilities

OperationsProcesses

Strategicdecisions

Two Operations StrategyPerspectives



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PERFORMANCE OBJECTIVES

•Dependability•Speed of delivery•Conformance quality•Speed to market

MARKET POSITION

•Innovative products•Time to market•Product range•Coordinated launches

Differentiation based on:

CUSTOMERS

Segmentation based on:

COMPETITORS

Traditionally weak in:

•Promotion•Design innovation•Conformance quality

Example: The MarketAnalysis for a Hydraulic

Pumps Manufacturer •Purchase volume•End-item application•OEM or replacement•Geographic location



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ResourcesTangible

•Equipment•Staff

Intangible•Reputation•Relationships

(internal and external)•Experience

• Application of leading-edge high-pressuretechnology and electroniccontrols

• Articulation of client

requirements

Capabilities

• Integration of equipment

supply and clientrequirements

• Design process

•Supplier liaison process

Processes

•Location•Computer simulation capability•Internet specking by customers•Supplier development•Order tracking system•Organizational structure/culture

•Staff meetings

Operations StrategyDecisions

Example: OperationsStrategy Decisions for a

Hydraulic Pumps

Manufacturer



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Operations Resources

UnderstandingResources and

Processes

StrategicReconciliation Market Requirements

UnderstandingMarkets

Capacity Supply networks Process technology Development and organization

Quality Speed Dependability Flexibility Cost

OperationsProcesses

OperationsResources

OperationsCompetences

MarketPositioning

MarketSegmentation

CompetitorActivity

StrategicDecisions

OperationsStrategy

Decisions

RequiredPerformance

PerformanceObjectives

Operations strategy is the strategic reconciliation ofmarket requirements with operations resources



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Major Issues







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Functional Strategies

• Functional strategies are typically developedindependently of one another and may beinconsistent with corporate strategic objectives



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Functional Perspectives

• Inputs from all functions that are engaged in theprovision of product or interface with themarketplace hold insights into customerrequirements

• One function cannot dominate the process sincethis leads to overemphasizing the need torespond to customer’s actual or perceivedneeds and demands

• Checking the impact on a business must be partof a firm’s overall assessment of a market,segment or customer



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Firm/business unit strategy

R&D Marketing Engineering Manufacturing



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• Functional strategies should be developed in anintegrated process and be consistent withcorporate strategic objectives



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Firm/business unit strategy

R&D Marketing Engineering Operations



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Major Issues





M f t i Pl i d



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Manufacturing Planning andExecution

Resource Planning Production Planning Demand Management

Master Production

Scheduling

Detailed Material

Planning

Detailed Capacity

Planning

Material and Capacity

Plans

PurchasingOrder Release

Front End

Engine

Back End

Planning

Execution

M f t i Pl i d



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• Overall manufacturing planning

• Detailed material planning

• Executing the plans

M f t i Pl i d



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• Planning involves converting firm ordersand demand forecasts into materialrequirements using:

– Production plans (months)

– MPS (weeks)

– MRP (weeks)

M f t i Pl i d



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• Execution involves, for each work center:

– Issuing daily assembly schedules

– Using component inventories to convert them

into finished products for order fulfillment

– Issuing daily shipping schedules

M f t i Pl i d



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• It is expected to have a discrepancybetween the resources planned vs. theresources available during execution

• Deficiencies in planning must beovercome by actions in execution

M f t i Pl i d



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• Approaches to addressing discrepanciesbetween planned and available resourcesduring execution:

– Discipline in execution – sticking to the MPS

– Total cycle time reduction

– Simplifying product lines



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Major Issues





The Reconciliation of



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Firm orders

from known

customers

Forecast

of demand

from random

customers

Aggregate

Product Plan

Master

Production

Schedule

(MPS)

Material

Requirements

Planning

(MRP)

Engineering

design changes

Bill of Materials

(BOM) file

Inventory

transactions

Inventoryrecords

file

Reports

The Reconciliation ofFunctional Perspectives

The Linkages of Functional



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The Linkages of FunctionalPlanning

• Various functions including marketing, financeand production, interact in formulating a “game

plan”

• A game plan reconciles market and resourceperspectives in formulating a production plan

The Linkages of Functional



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Master Production

Scheduling

Marketing Planning “The Game Plan” Financial Planning

Markets

The Linkages of FunctionalPlanning



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Major Issues







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Production Planning

• Production planning is the forum forreconciling various functional perspectivesfrom the point of view of operations

• Production planning facilitates a dialoguebetween manufacturing and topmanagement



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Production Planning

• Production planning uses a commonbusiness terminology in communicatingwith manufacturing and non-

manufacturing executives

• It is stated in commonly understoodmeasures, such as aggregate units

Top Management Role in



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Top Management Role inFormulating a Game Plan

• Commitment to the game planningprocess

• Align functional strategies with thecorporate strategy

– Resolve conflicts between functional goals

– Resolve tradeoffs between functions prior to

approving plans

The Role of Functions in



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The Role of Functions inExecuting a Game Plan

• All functional areas must “hit” the agreed

upon plan

– Communication … especially in instances

when there are problems in hitting the plan

• The most critical issue is integration ofplanning and control between marketing

and production

Overall Manufacturing



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Master Production

Scheduling

Markets

Overall ManufacturingPlanning

Overall Manufacturing



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Overall ManufacturingPlanning

• Activities for overall direction setting formanufacturing

– Demand Management

– Resource Planning

– Master Production Scheduling



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Major Issues







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Demand Management

• Forecasting

• Order entry

• Order promising

• Distribution planning

• Other activities



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• Is a link to the market place

• It should enable coordination betweenmanufacturing, markets, other plans andwarehouses

• Demand management provides inputs to:

– MPS (for end items)

– MRP (for spare parts)

Demand Management



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• Account for all sources of demand

– Finished products

– Spare parts

– Intra-company requirements

– Samples

– Pipeline inventory

Demand Management



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Major Issues







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Resource Planning

• Long range capacity planning to produceproducts

– Involves converting aggregate production

plans into resources such as labor hours andmachine hours



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Resource Planning

• Long range capacity planning to produceproducts

– Involves converting aggregate production

plans into resources such as labor hours andmachine hours



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Major Issues





Capacity Issues in



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Resource PlanningResource Planning Production Planning Demand Management

Master Production

Scheduling

Material Requirement

Planning

Capacity Requirement

Planning

Vendor Systems

Rough-cut Capacity

Planning

Shop-Floor SystemsInput/Output

Analysis

Finite Loading

Capacity Issues inProduction Planning

Rough-Cut Capacity Planning



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Rough-Cut Capacity Planning(RCCP)

• Rough estimate of capacities required tosatisfy the master production schedule

– RCCP does not take into account WIP

inventory,scheduled receipts, planned orders,etc.

Example: Rough-Cut Capacity



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Example: Rough-Cut CapacityPlanning

• Suppose that 35,000 hrs of final assembly timeare available per week. The MPS for a product is2,000 units/week. One unit requires 20 hrs of

assembly time. The capacity required is(2000)(20) = 40,000 hrs.

• Therefore, an additional 5,000 hrs of finalassembly capacity will be needed in that period

Capacity Requirements



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Capacity RequirementsPlanning (CRP)

• Detailed capacity plans

• Capacity need for machine centers andlabor

– CRP takes into account WIPinventory,scheduled receipts, planned orders,etc.

Example: Capacity



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Example: CapacityRequirements Planning

• Suppose that 35,000 hrs of final assemblytime are available per week. Also, anequivalent of 7,500 hrs is available in the

form of WIP inventory• Therefore, in reality, we have 2,500 hrs of

excess capacity



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Finite loading

• Allocation of capacity to work orderssubject to available capacity constraint



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Input/Output Analysis

• Monitoring consumption of capacity duringexecution phase

• Compare actual inputs with planned inputs

and

• Actual outputs with planned outputs



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Major Issues




Master Production Scheduling



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Master Production Scheduling(MPS)

• Master Production Schedule (MPS) is ananticipated build schedule for finished(end) products given production capacity

constraints and capacity utilization desires – MPS is NOT a forecast

– MPS is a primary input to generate material

requirement plans (MRP)




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• In an ATO environment, Final AssemblySchedule (FAS) is the actual buildschedule, i.e. it is the build schedule with

the exact end-item options




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• MPS is the basis for key inter-functionaltrade-offs

– For example, order processing activity

coordinates marketing and productionperspectives

• MPS is the basis for developing

manufacturing budgets in line withfinancial budgets




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• In determining MPS trade-offs need to bemade between market and resourceperspectives

– Accommodating too many changes in MPSresults in productivity loss and inefficiency

– Allowing too few changes in MPS may result

in poor customer service and increaseinventory




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• Hence, marketing and production shouldwork together to respond to product mixchanges




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• Hitting the production plan defined:

(FAS) =

(MPS) = Production Plan

– Ideally, the planned and actual resource

usage to meet the market requirementsshould be the same

Master Production



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Master Production

Scheduling

Material RequirementPlanningDetailed CapacityPlanning

Material and Capacity

Plans

PurchasingOrder Release

Master ProductionScheduling (MPS)

Material Requirements



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Material RequirementsPlanning (MRP)

• Detailed material plans for dependentdemand items

• Period-by-period plans for parts and raw

material

• MRP is a priority-setting scheme

Independent vs. Dependent



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A

Independent DemandItems

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Items

Independent vs. DependentDemand

Material Requirements



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Material RequirementsPlanning (MRP)

• Basic Inputs to MRP

– MPS

– Bill of Material (BOM)

• A list and amount of components and/or materialrequired to produce a product

– Inventory Status File

M j I



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Major Issues




E ti f Pl



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Execution of Plans

• Execution of plans uses the purchased orinternally manufactured materials for orderfulfillment

– Shop-floor scheduling and control ---releasing production orders and control

– Vendor scheduling and control --- releasing

purchasing orders and follow-up

E ti f Pl



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Execution of Plans

• Measurement of actual execution resultsrelative to the plans

• Order status information and warning

signals to MRP

• Peaks and valleys in capacityrequirements make execution more

complicated and difficult

M j I



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Major Issues




Best Manufacturing



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gPractices (BMP) Areas

1. Lead Time Reduction

2. Streamlined Flow

3. Quick Changeover

4. Cellular Manufacturing (FocusedFactories)

5. Empowered Teams

6. Cross-Functional Teamwork

Best Manufacturing



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7. Employee Involvement & Commitment

8. Process Reliability

9. Continuous Improvement

10.In-Process Quality

11.Seamless Shift Operations

12.Standard Operating Procedures

Best Manufacturing



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13.Goal Deployment

14.Visual Management Systems

15.Incentives, Rewards & Recognition

16.Plant Safety, Loss Prevention& Housekeeping

Best Manufacturing



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17.High-Performance Leadership

18.Supplier Partnerships

19.Cross-training

20.World-Class Performance Measures

Source: http://www.granite-bay.com/best-manufacturing-practices.html

Best Manufacturing



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gPractices: Local Examples

• Kohler Generatorshttp://www.kohlerco.com/hub/powersystem.html

– Migrating products from MTO to ATOenvironments

• Use of pull system for final assembly

• Use of push system for material planning

• Use of manufacturing cells for subassemblies

• Exploring commonality of parts

Best Manufacturing

http://www.kohlerco.com/hub/powersystem.html




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– Innovations in visual inventory management

– Innovations in managing suppliers• Expanding the scope of vendor-managed inventory

• Enforcing discipline in deliveries

• Globalization of supply chain

Best Manufacturing







– Process improvements

• New painting technology

• Optimization software for laser cutting of sheetmetal



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