ET ZC342 Material Management

2013-2014

15/02/2014

Q.1. Describe the four primary manufacturing strategies. Show the affect of each manufacturing
strategies on lead time with the help of a diagram?
[5]
Manufacturing strategy: To meet customers expectations and order winner company should provide
the fast on - time delivery.
Delivery Lead
Time

Design

Purchase

Manufacturer

Assembly

Ship

Engineer-ToOrder

Ship

Make-ToOrder

Ship

AssemblyTo-Order

Ship

Make-ToOrder

Delivery Lead
Time

Inventory

Manufacturer

Assembly
Delivery Lead
Time

Manufacturer

Inventory

Assembly

Delivery Lead
Time

Manufacturer

Inventory

Assembly

There are four basic strategies: engineer-to-order, make-to-order, assemble-to-order, and make-to-stock
Engineer-to-order means that the customers specifications require unique engineering design or
significant customization. Usually the customer is highly involved in the product design. Inventory will
not normally be purchased until needed by manufacturing. Delivery lead time is long because it includes
not only purchase lead time but design lead time as well.
Make-to-order means that the manufacturer does not start to make the product until a customers order
is received. The final product is usually made from standard items but may include custom-designed
components as well. Delivery lead time is reduced because there is little design time required and
inventory is held as raw material.
Assemble-to-order means that the product is made from standard components that the manufacturer can
inventory and assemble according to a customer order. Delivery lead time is reduced further because
there is no design time needed and inventory is held ready for assembly. Customer involvement in the
design of the product is limited to selecting the component part options needed.
Make-to-stock means that the supplier manufactures the goods and sells from finished goods inventory.
Delivery lead time is shortest. The customer has little direct involvement in the product design.
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Q.2. Describe following planning tools:

(a)
Strategic business plan
(b) Production plan
(c)
Master production schedule
(d) Material requirement plan
(e)
Production activity control
Show the effect of level of detail and planning horizon on each planning tool with the help of a
diagram.
[5]
The Strategic Business Plan

The strategic business plan is a statement of the major goals and objectives the company expects to
achieve over the next 2 to 10 years or more. It is a statement of the broad direction of the firm and shows
the kind of business product lines, markets, and so onthe firm wants to do in the future.
STRATEGIC
BUSINESS
PLAN
Production
Plan
Master
Production
Schedule

Master Plan

Planning

Material
Requirement
Plan
Production Activity
Control and
Purchasing

IMPLEMENTTATION

The plan provides direction and coordination among the marketing, production, financial, and
engineering plans.
Marketing is responsible for analyzing the marketplace and deciding the firms response: the markets to
be served, the products supplied, desired levels of customer service, pricing, promotion strategies, and
so on.
Finance is responsible for deciding the sources and uses of funds available to the firm, cash flows,
profits, return on investment, and budgets.
Production must satisfy the demands of the marketplace. It does so by using plants, machinery,
equipment, labor, and materials as efficiently as possible.
Engineering is responsible for research, development, and design of new products or modifications to
existing ones.

The strategic business plan. Figure 2.3 shows this relationship.

Strategic business plans are usually reviewed every six months to a year.
Production

Financial
Plan

Strategic
Business Plan

Market Plan

Engineeri
ng Plan
The Production Plan

Given the objectives set by the strategic business plan, production management is concerned with the
following:
The quantities of each product group that must be produced in each period.
The desired inventory levels.
The resources of equipment, labor, and material needed in each period.
The availability of the resources needed.
The level of detail is not high.
. The planning horizon is usually 6 to 18 months and is reviewed perhaps each month or quarter.
The Master Production Schedule

The master production schedule (MPS) is a plan for the production of individual end items. It breaks
down the production plan to show, for each period, the quantity of each end item to be made..
The level of detail for the MPS is higher than for the production plan. The planning horizon usually
extends from 3 to 18 months but primarily depends on the purchasing and manufacturing lead times. The
plans are reviewed and changed weekly or monthly.
The Material Requirements Plan

The material requirements plan (MRP) is a plan for the production and purchase of the components used
in making the items in the master production schedule. It shows the quantities needed and when
manufacturing intends to make or use them.
Purchasing and production activity control use the MRP to decide the purchase or manufacture of
specific items. The level of detail is high.
The master production schedule, it usually extends from 3 to 18 months.
Purchasing and Production Activity Control

Purchasing and production activity control (PAC) represent the implementation and control phase of the
production planning and control system. Purchasing is responsible for establishing and controlling the
flow of raw materials into the factory. PAC is responsible for planning and controlling the flow of work
through the factory.
The planning horizon is very short, perhaps from a day to a month. The level of detail is high
Plans are reviewed and revised daily.

Figure 2.4 shows the relationship among the various planning tools, planning horizons, and level of
detail.
PA
MRP

LEVEL OF
DETAIL

MPS
Production
Plan
Strategic Business
Plan
PLANNING HORIZON
(Time)

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Q.3. The shades sunglass company assembles sunglasses from frames, which it makes, and
lenses, which it purchases from an outside supplier. The sales department has prepared the
following six-week forecast for ebony, a popular model. The sunglasses are assembled in lots
of 300, and the opening inventory is 250 pairs. Complete the projected available balance
and the master production schedule.
[5]
Week
Forecast sales
Projected available
balance
MPS
Answer:
Week
Forecast sales
Projected available
balance
MPS

1
200

2
300

3
350

4
200

5
150

6
150

1
200
50

2
300
50

3
350
0

4
200
100

5
150
250

6
150
100

300

300

300

300

250

250

Projected available balance is 100 Pairs

The master production schedule are 300pairs at Weeks 2, 3, 4 and 5.
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Q.4. What is bill of material? Describe following types of bills of materials:
(a)
Multilevel bill
(b) Single-level bill
(c)
Planning bill

[5]

Bill of Material
A listing of all the subassemblies, intermediates, parts, and raw materials that go into making the
parent assembly showing the quantities of each required to make an assembly.

are formed as logical groupings of parts into subassemblies based on the way
the product is assembled. For example, a frame, chassis, doors, windows, and engine are required
to construct an automobile. Each of these forms a logical group of components and parts and, in
turn, has its own bill of material.
Table
PARENT
100
Multilevel bills

Legs (4)
203

Ends (2)
411

Sides(2)
622

Top (1) Hardware COMPONENT

023
Kit(1)
722

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.
Single-level bill of material contains only the parent and its immediate components, which is
why it is called a single-level bill.
The computer stores information describing the product structure as a single level bill. A series of
single-level bills is needed to completely define a product. For example, the table needs four
single-level bills, one each for the table, base, top, and frame. These can be chained together to
form a multilevel, or indented, bill.
Indented bill. A multilevel bill of material can also be shown as an Indented bill of material.
This bill uses indentations as a way of identifying parents from components.
Planning bill. A major use of bills of material is to plan production. Planning bills are an
artificial grouping of components for planning purposes. They are used to simplify forecasting,
master production scheduling, and material requirements planning. They do not represent
buildable products but an average product. Using the table example, suppose the company
manufactured tables with three different leg styles, three different sides and ends, and three
different tops. In total, they are making 3 X 3 X 3 = 27 different tables, each with its own bill of
material. For planning purposes, the 27 bills can be simplified by showing the percentage split for
each type of component on one bill. Figure 4.9 shows how the product structure would look. The
percentage usage of components is obtained from a forecast or past usage.
Note the percentage for each category of component adds up to 100%.
TABLE

Commo
n Parts
100%

Legs

Tops

Sides

Legs
A
40%
Legs
B
35%
Legs
C
25%

Sides
A
55%
Sides
B
30%
Sides
C
15%

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Top A
45%
Top B
30%
Top C
25%

Q.5. What is capacity planning? In one week, work center produces 85 standard hours of work.
The scheduled hours at the work center are 80. The hours actually worked at the work
center are 75. Calculate the utilization and efficiency of the work center.
[5]
Capacity planning is the process of determining the resources required to meet the priority plan
and the methods needed to make that capacity available. It takes place at each level of the priority
planning process.
Solution:
standard hours = 85
scheduled hours (Available Hours)= 80
hours actually worked = 75
Utilization = (hours actually worked / available hours )* 100%
Utilization = (75/ 80 )* 100% = 93.75%
Efficiency = (standard hours of work produced / hours actually worked) * 100%
Efficiency () = (85 / 75) * 100% = 113.33%
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Q.6. What are the major functions of planning, implementation, and control?

[5]

The activities of the Production activity control (PAC) system can be classified into planning,
implementation, and control functions.
Planning
The flow of work through each of the work centers must be planned to meet delivery dates, which
means production activity control must do the following:
Ensure that the required materials, tooling, personnel, and information are available to
manufacture the components when needed.
Schedule start and completion dates for each shop order at each work center so the scheduled
completion date of the order can be met. This will involve the planner in developing a load profile
for the work centers.
Implementation
Once the plans are made, production activity control must put them into action by advising the
shop floor what must be done. Usually instructions are given by issuing a shop order. Production
activity control will:
Gather the information needed by the shop floor to make the product.
Release orders to the shop floor as authorized by the material requirements plan. This is called
dispatching.

PRODUCTION
PLANNING

MASTER
PRODUCTION
SCHEDULE

PLANNING

MASTER
REQUIREMENT
PLAN
IMPLEMENTATI
ON .AND
CONTRL

PURCHASING

PRODUCTION
ACTIVITY
CONTROL

PRODUCTION
ACTIVITY
CONTROL

PRODUCTION
ACTIVITY
CONTROL

Control
Once plans are made and shop orders released, the process must be monitored to learn what is
actually happening. The results are compared to the plan to decide whether corrective action is
necessary. Production activity control will do the following:
Rank the shop orders in desired priority sequence by work center and establish a dispatch list
based on this information.
Track the actual performance of work orders and compare it to planned schedules.
Where necessary, PAC must take corrective action by re-planning, rescheduling, or adjusting
capacity to meet final delivery requirements.
Monitor and control work-in-process, lead times, and work center queues.
Report work center efficiency, operation times, order quantities, and scrap.
The functions of planning, implementing, and controlling are shown schematically
in below Figure
PRODUCTION ACTIVITY
CONTROL
CONTROL
Compare
Decide

IMPLEMENTATION
Work
Authorization

DISPATCH

Feed Back
MANUFACTURING
OPERATIONS

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Q.7. Using exponential smoothing, calculate the forecasts for months 2,3,4,5 and 6. The
smoothing constant is 0.2, and the old forecast for months 1 is 245.
[5]
Months
1
2
3
4
5
6

Actual demand
250
230
225
245
250

Forecast demand

SOLUTION:
Months

Actual demand

Forecast demand

250

245

230

225

245

250

(0.2X250)+(0.8X245)
= 246
(0.2X230)+(0.8X246)
= 243
(0.2X225)+(0.8X243)
= 239
(0.2X245)+(0.8X239)
= 240
(0.2X250)+(0.8X240)
= 242