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MODULE 3 > 1 - INTRODUCTION TO PRODUCTION MANAGEMENT > Flashcards

1 - INTRODUCTION TO PRODUCTION MANAGEMENT Flashcards

1
Q

Why is important the production management?

A

Because it is needed to plan and control the use of the production resources in order to use them efficiently and be able to meet the customer’s requirements.

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2
Q

What does the production management have to do?

A
  • identify (or estimate) customer requirements
  • aggregate these requirements into a production plan;
  • execute the plan
    *monitor the plan’s effectiveness and revise as
    appropriate.
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3
Q

Which are the activities that Production Management is related to?

A

1) Creation and/or adjustment of production capacity,
2) Setting up of the production system for new productions,
3) Generation and management of production plans.

*NOTE: Production Planning and Control (PP&C) mainly refers to point 3

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4
Q

What about Production Planning and Control (PP&C) ?

A

It is based on the portfolio and/or sales forecast.
It deals with:
1. Generation of production orders
2. Assignment of production orders to production units
3. Planning of requirements for components and raw materials
4. Assignment of jobs to workstations
5. Monitoring and control of production plan progress

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5
Q

The Production Manager question is ?

A 
WHAT (… which product …),
WHEN (… considered some time horizon …),
HOW (… with which materials …),
WHERE (… on which work-center …),
HOW MUCH (… which lot dimension …) …
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6
Q

For which reasons is the Production Planning highly complex?

A

*Many variables
-Items (finished products, WIP, raw materials)
-Production resources (shops, work-centres, operators)
-Different ways for producing an item (alternative routings, alternative bill of materials)
…
*Data volumes
-Volumes and quality of data to be managed

  • Uncertainty
  • External (clients, suppliers, …)
  • Internal (machines, manpower, materials, …)
  • Many constraints
  • Internal (manpower, machines, materials, …)
  • External (clients, suppliers, subcontractors, …)
  • Conflicting company’s objectives
  • Cost minimization
  • Service level maximization
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7
Q

Which are the Conflicting company’s objectives ?

A

*Commercial:
(every single) Product availability (client satisfaction)

*Production:
Regularity of utilization of machinery

*Human recourses:
Regularity of utilization of labor (e.g., no overtime)

*Management control:
Minimization of stocks

*Purchasing:
Long term view (to obtain discounts

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8
Q

What about the Herarchical Approach (pyramide) ?

A

PRODUCTION PLANNING

  • Strategic :
  • Objectives: price, quality, service …
  • Decisions: long term production capabilities (size and scope) …
  • Medium term:
  • Objective: to fulfil forecasted demand at
    the lowest cost, to avoid stock-out
    -Decisions: when production starts in each
    period, make or buy tactic …
  • Operative
  • Objective: to effectively fulfil production orders
  • Decisions: when to produce, which workcentre,
    which sequence, etc.
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9
Q

Description of the Herarchical Approach (pyramide)

A

PRODUCITON PLANNING

*Stratetic -> Production budgeting

                - >Aggregate Planning
                     - Master Production Scheduling (MPS)
  • Medium Term -> Materials Planning
    - Push vs Pull
    - Main Techniques (Inventory,
    Management; Materials Requirements
    Plan – MRP; Just-in-time)
  • Operative -> Production Scheduling
    - > Production Control
    - > Performance Management
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10
Q

AGGREGATE PLANNING (black box) ?

A
  • Inputs:
  • Accounting data (costs)
  • Demand (orders + demand forecasts)
  • Machine, manpower availability
  • Supplier, subcontractor availability
  • FInished product availability
  • Output:
    Master Prodcution Scheduling (MPS)
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11
Q

What does the Master Production Scheduling (MPS) consist ?

A

It defines how many units of finished products are going to be manufactured in the medium-long term

Considerations in the MPS:

  • Only finished products are considered (not materials)
  • Only the most critical production resources (bottlenecks *) are considered
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12
Q

MATERIALS PLANNING (black box) ?

A
  • inputs:
  • Master Production Scheduling (MPS)
  • Item master data
  • Bill of materials
  • Accounting Data
  • Materials availability
  • Released and planned orders (purchasing, production)

*Output
Materials Requirements Plan (MRP)

NOTE: considering in the MRP:
-MPS is a constraint for materials planning

  • In case of very simple systems (in terms of bill of materials or production system), this planning phase may be avoided
  • The output of this phase is the proposal of production orders and of purchasing orders
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13
Q

What does the Materials Requirements Plan (MRP) consist?

A

It defines which quantity for each item is to be manufactured/purchased in the short-medium term

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14
Q

PRODUCTION SCHEDULING (Black box) ?

A
  • Inputs:
  • Materials Requirements Plan (MRP)
  • Resource master data
  • Production routings
  • Tracked of the released orders
  • Released and planned orders
  • Output:
    Production Schedule
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15
Q

What does the Production Schedule consist?

A

It defines which production order a certain machine must start manufacture as soon as the current production order has been finished.

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16
Q

The whole process of the Medium term on the herarchical approach?

A
  1. AGGREGATE PLANNING
    - Ouput: Master Production Schedule (MPS)
  2. MATERIALS PLANNING
    - Input: Master Production Schedule (MPS), coming from Aggregate Planning
    - Output: Materials Requirements Plan (MRP)
  3. PRODUCTION SCHEDULING:
    - Input: Materials Requirements PLan (MRP)
    - Ouput: Production Schedule
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17
Q

How can be defined the PP&C phases, and Push and Pull approaches ?

A

Looking to the architecture of the PP&C process, it can be seen that:

  • The process is divided in various phases which are linked together.
  • Also two different general approaches, which are called PUSH and PULL, are implemented
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18
Q

Which are the PP&C phases of the PUSH approach?

A
  • Long term planning
  • Aggregate planning
  • Production Planning
  • Production Scheduling
  • Production Control
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19
Q

Which are the PP&C phases of the PULL approach?

A
  • Long term planning
  • Aggregate Planning
  • Pull production control
  • Production Control
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20
Q

The “time bucket” concept

A

For each planning phase a different “Time Horizon” is considered (e.g. for long term planning is 1 year; while for short term scheduling is 1 day)

So, Each “time horizon” is seen as divided in time slices (buckets) that are considered not divisible and they are called Time Buckets (e.g. for long term planning the time buckets are quarters or months; while for short term scheduling the time buckets can be 1 hour or less).

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21
Q

PUSH and PULL approaches.. which are the categories of the column for the table?

A
  • Phase
  • Input
  • Output
  • Time Horizon (time bucket)
  • Constraints
  • Objectives
22
Q

PUSH approach… Phase: Long Term Planning

A
  • Inputs:
  • Strategy
  • Sales Target
  • Product families
  • Output:
  • Production Budget
  • Time horizon (time bucket)
  • 1 or 2 years (quarter)
  • Constraints
  • Production capacity
  • Personnel availability
  • Objectives
  • Resources provisioning
  • Make r buy decisions
23
Q

PUSH approach… Phase: Aggregate Planning?

A
  • Input:
  • Order book
  • Sales forecast
  • business cycle
  • available resources
  • production cost
  • output:
  • MPS (Master Production Schedule)
  • Time Horizon (time bucket)
  • 6 - 12 months (weeks- months)
  • Constraints:
  • Production capacity
  • Personnel availability
  • Subcontractor availability
  • Inventory level
  • Objectives:
  • Customer satisfaction
  • Production cost minimization
  • Resource smoothing
  • Inventory minimization
24
Q

PUSH approach… Phase: Production Planning ?

A
  • Input:
  • MPS (Master Production Schedule)
  • WIP
  • Technological cycles
  • supplies
  • outputs:
  • Purchase plan
  • Production plan
  • Time horizon (time bucket)
    7-30 days (days-weeks)
  • constraints:
  • resources
  • objectives:
  • cost minimization
25
Q

PUSH approach… Phase: Production Scheduling?

A
  • input:
  • Production plan
  • output:
  • plan of job orders
  • plan of people
  • plan of activities
  • time horizon (time bucket)
  • 1 - 7 days (hours-days)
  • constraints:
  • resources
  • ojectives:
  • delivery reliability
  • delivery on time
  • quality level
26
Q

PUSH approach… Phase: Production Control (monitoring)?

A
  • input:
  • detailed production data
  • detailed cost data
  • output:
  • reports
  • quantitative performance
  • time horizon (tme bucket)
  • variable
  • constraint:
  • NO constraints
  • objective:
  • short-term control
  • cost control
27
Q

PULL approach… Phase: Long Term Planning?

A
  • Inputs:
  • Strategy
  • Sales Target
  • Product families
  • Output:
  • Production Budget
  • Time horizon (time bucket)
  • 1 or 2 years (quarter)
  • Constraints
  • Production capacity
  • Personnel availability
  • Objectives
  • Resources provisioning
  • Make or buy decisions
28
Q

PULL approach… Phase: Aggregate Planning?

A
  • Input:
  • Order book
  • Sales forecast
  • business cycle
  • available resources
  • production cost
  • output:
  • MPS (Master Production Schedule)
  • Time Horizon (time bucket)
  • 6 - 12 months (weeks- months)
  • Constraints:
  • Production capacity
  • Personnel availability
  • Subcontractor availability
  • Inventory level
  • Objectives:
  • Customer satisfaction
  • Production cost minimization
  • Resource smoothing
  • Inventory minimization
29
Q

PULL approach… Phase: PULL Production control?

A
  • input
  • MPS (Master Prodcution Schedule)
  • WIP
  • technological cycles
  • output:
  • plan of people
  • purchase orders
  • production orders
  • time horizon (time bucket)
  • variable
  • constraints:
  • recources
  • objectives:
  • Inventory control
  • Delivery reliability
  • delivery on time
  • quality level
30
Q

PULL approach… Phase: Production Control (monitoring)?

A
  • input:
  • detailed production data
  • detailed cost data
  • output:
  • reports
  • quantitative performance
  • time horizon (tme bucket)
  • variable
  • constraint:
  • NO constraints
  • objective:
  • short-term control
  • cost control
31
Q

Product coding?

A

Coding allows the product to be grouped into types, families and variants
Usually there is a logical naming structure for parts and products.

32
Q

Product types and bill of materials (BOM)?

A
  • Product types:
  • Raw materials
  • Parts or components
  • Sub-assemblies (semi-finished products)
  • Finished products
  • Bill of Material (BOM):
  • Representation of how a product is made up
  • Contains information on the type and number of raw materials, parts, components or sub-assemblies that are required for a finished product
  • May be given other names, e.g. recipe
  • BOM types:
  • Simple – single level
  • Complex – multi-level
33
Q

Which are the Types of BOMs ?

A
  • Engineering (or Design) BOM (or As-designed BOM)
  • Manufacturing BOM (As-built BOM)
  • Maintenance BOM (As-maintained BOM)
34
Q

What are the Product routing sheets?

A

Product routing sheets provide information on the technical processes (operations) that have to be applied to produce a product.

35
Q

What are the Product structures?

A

The combination b/w BOMs and Product routings, information are available on:
The hierarchical structure of the parts making up a product (BOM)
The process by which each of the components can be made (routing).

36
Q

Which are the relevant costs in Production Management?

A
  • Facitlity / Plant costs: connected to the design of the production system.
  • PRODUCTION costs (year is the reference): Refer to operation costs
    • VARIABLE Costs : depend from the production volume
    • FIXED Costs : do not depend from production volume
    • DIRECT Costs : can be assigned to a specific product
    • INDIRECT Costs : can not be assigned to a product
37
Q

For VARIABLE COST, which are the Direct and Indirects costs?

A
  • Direct costs:
  • Raw material
  • Manual labour (workforce)
  • Direct energy
  • Indirect costs:
  • Indifect energy
  • Maintenance
38
Q

For FIXED COST, which are the Direct and Indirects costs?

A
  • Direct costs:
  • Dedicated equipment
  • Manual labour (workforce)
  • Indirect costs:
  • Production staff
  • general costs
  • Maintenance
  • depreciation of the equipment
39
Q

What is it considered as a “relevant cost” in order to minimize the costs and find the most convenient plan?

A

A cost that:

  • is a future cost (past costs are sunk cost!)
  • is avoidable (if we do not follow plan P1, we do not sustain that cost)
  • is differential between alternative plans (if in plans P1 and P2 the same quantity of raw material is needed, raw material cost is not relevant since it is not differential)
40
Q

Which are the most relevant costs for production planning ?

A

The most relevant costs for production planning are:

  • Overtime cost (work contract; operator’s yield)
  • Subcontracting cost (transport; quality control; know-how; … marginal cost)
  • Stockout cost
  • Setup cost
  • Stock holding cost
41
Q

Which are the two categories for Cost of Personnel?

A
  • Standard time

* Overtime (extra cost)

42
Q

What does the cost of sub-contracting entail?

A

Sub-contracting cost = purchase cost + cost of transportation + cost of quality control + cost of supplier relationships

43
Q

What about the Inneficiency cost?

A

Due to the fact that the Production Process is not carried out in the most efficient way (e.g. reduced pace of production, defective production, no production due to equipment failure…)

44
Q

What is the Stock-out cost?

A

Is the unavailability in the company inventory of an item/product due to shortage (“escasez”) in the production or in the supply chain system.

Consequently, the Stock out cost is the cost a company incurs when, in a given period of time, the customer demand is not fulfilled due to a product stock-out.

45
Q

Which are the two ways at which Stock-out cost must be calculated?

A

It depends on two situations:

*It can be recovered:
     Delay in the delivery is accepted by the customer  -> BACKLOG COST
   -Stock-out cost: 
ºAdministrative costs
ºPenalties 
ºReputation loss
It cannot be recovered:
  Order is lost
-Stock-out cost: 
ºMargin loss = (P – Cv) * quantity of production losses
ºReputation Loss
46
Q

For which kind of production does the Stock-out cost apply?

A

It applies to both make-to-stock and make-to-order production:

  • make-to-stock: the finished product is not available in stock when the customer wants to buy it
  • make-to-order: the finished product is not available in the planned delivery date
47
Q

What is the Setup cost?

A

Set up cost is defined the cost a company incurs due to the presence of changeovers (set-ups) of its production facilities.

Components of Set-Up cost:

  • set-up direct cost (labour, material, consumables..),
  • time waste (production loss or opportunity loss).
48
Q

Which are the ways at which Setup cost must be calculated?

A
  • Plant is under-utilized (setup made by production personnel)
    cost: Zero
  • Plant is under-utilized, but set-up personnel is needed
    cost: Standard cost of set-up personnel
  • Plant capacity is fully utilized, personnel in overtime is available
    cost: Overtime cost of personnel
  • Plant capacity is fully utilized, sub-contracting available
    cost: Cost of sub-contracting

*Stock-out (plant capacity is fully utilized, sub-contracting or overtime are not available)
cost; Cost of stock-out

49
Q

What is the Stockholding cost?

A

Stock holding (ownership) cost incurs when an item has been produced or purchased BEFORE the moment in which it is consumed:

Examples:
-A finished product is manufactured on the basis of demand forecasts (make-to-stock production)

-The supplier is very far from the manufacturer so the transportation costs are very high; then the component is purchased in a huge quantity (FTL, full truckload) even if it will be consumed in few units per period during the year

50
Q

Which are the two components of the stock (inventory) holding (ownership) cost ?

A

*EXPENSES (“out-of-pocket costs”):
- Physical space occupied by the inventory (building,
shelving system, utility costs, rent, insurance, taxes,
security, etc.)
- Cost of handling the items (labor, forklifts, energy, etc.)
- Cost of deterioration, obsolescence, and, generally, product loss (e.g., theft)

OPPORTUNITY COSTS (“imputed (figurative) costs”):
  -Financial opportunity costs: money tied up in inventory, such as the cost of capital. In order to quantify these costs, the planner should answer to the following question “If I make stock now, which utilization of my money am I renouncing?”
51
Q

What about the Stock Holding Rate?

A

“If I make stock now, which utilization of my money am I renouncing?”

*Case 1:
The company has liqudity (no debts)
*Answer: For making stock I use the cash, then I renounce to investment in the most profitable alternative way

*case 2:
The company has debts but further money can be borrowed from a bank
*answer: For making the stock, I ust ask a further loan and I am renouncing to save financial loans.

*case 3:
The company has debts and no further money can be borrowed.
*answer: I withdraw money from already existant investments, and then I renounce from that profitable investment.

52
Q

Stock Holding Rate (table) ?

A

*Financial situation of the Company:
Good , liquidity
*Available Investment Opportunities:
- There is no alternative investment available:
Yield / bond rate given on the available money
-There is a remunerative investment available:
Yield / bond rate given on the available money

–
*Financial situation of the Company:
Normal, a loan is normally used, but we have still credit available

*Available Investment Opportunities:
- There is no alternative investment available:
Burden rate requested by the bank to pay back the loan

-There is a remunerative investment available:
Burden rate requested by the bank to pay back the loan

*Financial situation of the Company:
Loan is fully used, no more credit available

*Available Investment Opportunities:
- There is no alternative investment available:
Burden rate requested by the bank to pay back the loan

-There is a remunerative investment available:
Expected remuneration rate from the available investment

MODULE 3 (6 decks)

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