04: Production planning and Control

Question 1

 Explain the 3 different types & roles of inventory

Answer 1

• immediately satisfy customers’ demand < finished goods
• uncouple production stages, reducing uncertainty < WIP goods
• decrease prices (bulk) & price fluctuation risks < raw materials & input components

Question 2

 Explain the 4 problems of excess inventory

Answer 2

• tying up capital (interests or opportunity costs)
• storing costs (financial & opportunity costs)
• risks of perishability, obsolescence, pilferage
• reduced visibility of production problems

Question 3

 Apply the EOQ model

Answer 3

EconomicOrderQuantity
~= EconomicBatch/ProductionQuantity =
sqrt( 2 * Demand * CostOfSetup / CostOfHolding )

minimizes
total costs =
costs of orders ~ # of orders
+ costs of storage ~ % of value

Question 4

 Understand reorder level and cyclical review

Answer 4

ReOrderLevel = demandRate * timeToDeliver + safetyStock

=> reorder fixed quantity

more accurate (continuous monitoring)
…
less accurate

CyclicalReview = periodDemand + safetyStock

=> reorder at fixed periods

Question 5

 Understand the ABC technique

Answer 5

classify inventory in categories
A => ‘VIP’ categories: use ROL, RFIDs…

B => in the middle

C => CR

Question 6

Independent vs dependent demand

Answer 6

Demand for final product Vs For parts

-> this, n only this, is managed w MRP I,
w backwards time tracing approach

Question 7

MRP:

• def
• 3 inputs
• 3 main outputs

Answer 7

• Materials Requirements Planning MaRePlan
• master production schedule, bill of materials, inventory levels
• orders & reports

Question 8

Bill of materials

Answer 8

= a product’s list f ingredients

Question 9

MRP I calc: 3 inputs, 3 outputs

Answer 9

INPUTS

• -master prod schedule
• -bill of materials
• -inventory

OUTPUTS

• -order schedules
• -order releases
• -secondary reports

Question 10

Later came MRP II

adds: (1=5)

Answer 10

manufacturing resource planning MaResPlan

adds closed-loop planning of all of firm’s activities, including
ma.ma.ca.f.e.

• manufacturing
• marketing
• capacity
• finance
• engineering

Question 11

ERP systems

Answer 11

• -core is MRP + other functions, including supply chain & CRM
• ​=> integrate transactions-oriented data and business processes*
• -bigger 2 are SAP (takes 16m to adopt) n Oracle
• -trends:
  
  • -SAAS
  • -buy best components rather than whole packages
  • -mobility > smartphones n tablets
  • -consumerization > social media-like interfaces

Question 12

Advanced Planning & Scheduling

Answer 12

• An APS allocates raw materials and production capacity optimally to balance demand and plant capacity.
• It tracks costs.

Question 13

Pharma production: 5 peculiarities

Answer 13

• -very long production lead times, like 18m
• -highly risky products, regulated > need utmost quality
• -capital n skilled-labour intensive
• -global, highly automated production
• -long term planning needed

Question 14

Bullwhip effect in supply chain

Answer 14

Small shock in customer demand can get amplified into huge inventory swings upstream in the supply chain.
Can be mitigated by

• -shorter lead time
• -better forecasts
• -alignment of demand n supply