Part I Master Planning Of Resources

Question 1

available inventory

Answer 1

The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance.

Question 2

available-to-promise (ATP)

Answer 2

1) In operations, the uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer- order promising. [This] quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, [this] includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete […], cumulative […] with look-ahead, and cumulative […] without look-ahead. (2) In logistics, the quantity of a finished good that is or will be available to commit to a customer order based on the customer’s required ship date. To accommodate deliveries on future dates, [this] is usually time-phased to include anticipated purchases or production receipts.

Question 3

average inventory

Answer 3

One-half the average lot size plus the safety stock, when demand and lot sizes are expected to be relatively uniform over time. The average can be calculated as an average of several inventory observations taken over several historical time periods; for example, 12-month ending inventories may be averaged. When demand and lot sizes are not uniform, the stock level versus time can be graphed to determine the average.

Question 4

backlog

Answer 4

All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board.

Question 5

backorder

Answer 5

An unfilled customer order or commitment. [This is] an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand.

Question 6

batch

Answer 6

1) A quantity scheduled to be produced or in production. 2) For discrete products, [a quantity] planned to be the standard batch quantity, but during production, the standard batch quantity may be broken into smaller lots. 3) In nondiscrete products, […] a quantity that is planned to be produced in a given time period based on a formula or recipe that often is developed to produce a given number of end items. 4) A type of manufacturing process used to produce items with similar designs; it also may cover a wide range of order volumes. Typically, items ordered are of a repeat nature, and production may be for a specific customer order or for stock replenishment.

Question 7

bias

Answer 7

A consistent deviation from the mean in one direction (high or low). A normal property of a good forecast is that it is not [affected by this].

Question 8

bill of material (BOM)

Answer 8

1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly, showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats [exist] for [this], including the single-level […], indented […], modular (planning) […], transient […], matrix […], and costed[…]. 2) A list of all the materials needed by a contract manufacturer to make one production run of a product’s piece parts/components for its customers. [It] may also be called the formula, recipe, or ingredients list in certain process industries.

Question 9

break-even point

Answer 9

The level of production or the volume of sales at which operations are neither profitable nor unprofitable. [The] intersection of the total revenue and the total cost curves.

Question 10

capable-to-promise (CTP)

Answer 10

The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Used to determine when a new or unscheduled customer order can be delivered. Employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. Includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.

Question 11

chase production method

Answer 11

A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine [this] and level production schedule methods.

Question 12

cumulative lead time

Answer 12

The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill of material path below the item; [this term is defined by whichever path adds up to the greatest number]/

Question 13

customer relationship management (CRM)

Answer 13

A marketing philosophy based on putting the customer first. Involves the collection and analysis of information designed for sales and marketing decision support (in contrast to enterprise resources planning information) to understand and support existing and potential customer needs. Includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions.

Question 14

demand management

Answer 14

1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. [This] facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.

Question 15

demand planning

Answer 15

The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers’ raw materials to the consumer’s needs. Items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services. Numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions. Actual sales are compared to forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error.

Question 16

dependent demand

Answer 16

Demand that is directly related to or derived from the bill-of- material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may [also have] independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part.

Question 17

explode

Answer 17

To perform a bill-of-material explosion.

Question 18

extrinsic forecasting method

Answer 18

A forecast method using a correlated leading indicator; for example, estimating furniture sales based on housing starts. [These] forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales.

Question 19

firm planned order (FPO)

Answer 19

A planned order that can be frozen in quantity and time. The computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned. This technique can aid planners working with MRP systems to respond to material and capacity problems by [solidifying] selected planned orders. In addition, [these] are the normal method of stating the master production schedule.

Question 20

forecast

Answer 20

An estimate of future demand [that] can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. [Various techniques] attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend.

Question 21

forecast error

Answer 21

The difference between actual demand and forecast demand. [It] can be represented several different ways: mean absolute deviation (MAD); mean absolute percentage error (MAPE); and mean squared error (MSE).

Question 22

four Ps

Answer 22

A set of marketing tools to direct the business offering to the customer. [This includes] product, price, place, and promotion.

Question 23

gross requirement

Answer 23

The total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts.

Question 24

indented bill of material

Answer 24

A form of multilevel bill of material. It exhibits the highest-level parents closest to the left margin, and all the components going into these parents are shown indented toward the right. All subsequent levels of components are indented farther to the right. If a component is used in more than one parent within a given product structure, it will appear more than once, under every subassembly in which it is used.

Question 25

independent demand

Answer 25

The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand.

Question 26

interplant demand

Answer 26

One plant’s need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.

Question 27

intrinsic forecast method

Answer 27

A forecast based on internal factors, such as an average of past sales.

Question 28

leading indicator

Answer 28

A specific business activity index that indicates future trends. [Housing starts is an example of this] for the industry that supplies builders’ hardware.

Question 29

lead-time offset

Answer 29

A technique used in MRP where a planned order receipt in one time period requires the release of that order in an earlier time period based on the lead time for the item.

Question 30

level production method

Answer 30

A production planning method that maintains a stable production rate while varying inventory levels to meet demand.

Question 31

level schedule

Answer 31

1) In traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible. Finished goods inventories buffer the production system against seasonal demand. 2) In JIT, [this is usually constructed monthly, and] each day’s customer demand is scheduled to be built on the day it will be shipped. [It] is the output of the load-leveling process.

Question 32

load leveling

Answer 32

Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although [this ideally applies to] both material and labor, specific businesses and industries may load to one or the other exclusively (e.g., service industries).

Question 33

lot

Answer 33

A quantity produced together and sharing the same production costs and specifications.

Question 34

market-driven

Answer 34

Responding to customers’ needs.

Question 35

marketing strategy

Answer 35

The basic plan the marketing function expects to use to achieve its business and marketing objectives in a particular market. Includes marketing expenditures, marketing mix, and marketing allocation.

Question 36

master production schedule (MPS)

Answer 36

A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce, expressed in specific configurations, quantities, and dates. [This] is not a sales item forecast that represents a statement of demand. It must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.

Question 37

master schedule

Answer 37

A format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to- promise, and the master production schedule. It takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.

Question 38

material requirements planning (MRP)

Answer 38

A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. [When] time-phased, [this concept] begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. [Also when] time-phased, [this] is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

Question 39

mean absolute deviation (MAD)

Answer 39

The average of the absolute values of the deviations of observed values from some expected value. [This] can be calculated based on observations and the arithmetic mean of those observations. An alternative is to calculate absolute deviations of actual sales data minus forecast data. This data can be averaged in the usual arithmetic way or with exponential smoothing.

Question 40

mixed-model production

Answer 40

Making several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule governs the making and the delivery of component parts, including those provided by outside suppliers. The goal is to build every model every day, according to daily demand.

Question 41

mixed-model scheduling

Answer 41

The process of developing one or more schedules to enable mixed-model production. The goal is to achieve a day’s production each day.

Question 42

multilevel bill of material

Answer 42

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component. If a component is a subassembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts and raw materials.

Question 43

net requirements

Answer 43

[In MRP and for a part or an assembly, these] are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock. After being lot-sized and offset for lead time, net requirements become planned orders.

Question 44

on-hand balance

Answer 44

The quantity shown in the inventory records as being physically in stock.

Question 45

open order

Answer 45

1) A released manufacturing order or purchase order. 2) An unfilled customer order.

Question 46

order entry

Answer 46

The process of accepting and translating what a customer wants into terms used by the manufacturer or distributor. The commitment should be based on the available-to-promise (ATP) line in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-to- stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order products.

Question 47

order promising

Answer 47

The process of making a delivery commitment (i.e., answering the question, “When can you ship?”). For make-to- order products, this usually involves a check of uncommitted material and availability of capacity, often as represented by the master schedule available-to-promise.

Question 48

pacemaker

Answer 48

In lean, the resource that is scheduled based on the customer demand rate for that specific value stream; this resource performs an operation or process that governs the flow of materials along the value stream. Its purpose is to maintain a smooth flow through the manufacturing plant. A larger buffer is provided for [this than for] other resources so that it can maintain continuous operation.

Question 49

parent item

Answer 49

The item produced from one or more components.

Question 50

pegging

Answer 50

In MRP and MPS, the ability to identify for a given item the sources of its gross requirements and/or allocations. [This] can be thought of as active where-used information.

Question 51

planned order

Answer 51

A suggested order quantity, release date, and due date created by the planning system’s logic when it encounters net requirements in processing MRP. In some cases, it can also be created by a master scheduling module. [These] are created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change. [While at one level, these] will be exploded into gross requirements for components at the next level. [Along with released orders, these] serve as input to capacity requirements planning to show the total capacity requirements by work center in future time periods.

Question 52

planned order receipt

Answer 52

The quantity planned to be received at a future data as a result of a planned order release. [These] differ from scheduled receipts in that they have not been released.

Question 53

planned order release

Answer 53

A row on an MRP table that is derived from planned order receipts by taking the planned receipt quantity and offsetting to the left by the appropriate lead time.

Question 54

planning bill of material

Answer 54

An artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning. It may include the historical average of demand expressed as a percentage of total demand for all options within a feature or for a specific end item within a product [family…]

Question 55

planning horizon

Answer 55

The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and time for capacity changes of primary work centers or of key suppliers. For longer-term plans, [this] must be long enough to permit any needed additions to capacity.

Question 56

priority planning

Answer 56

The function of determining what material is needed and when. Master production scheduling and material requirements planning are the elements used for the planning and replanning process to maintain proper due dates on required materials.

Question 57

product family

Answer 57

A group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer. Can be from different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning).

Question 58

production plan

Answer 58

The agreed-upon plan that comes from the […sales and operations planning process]—specifically, the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on). Various units of measurement (e.g., units, tonnage, standard hours, number of workers) can be used to express the plan. Represents management’s authorization for the master scheduler to convert it into a more detailed plan—that is, the master production schedule.

Question 59

production planning

Answer 59

A process to develop tactical plans based on setting the overall level of manufacturing [output…] and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan. The sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed. A primary purpose is to establish production rates that will achieve management’s objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable. Because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, human resources, etc.

Question 60

projected available balance

Answer 60

An inventory balance projected into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders.

Question 61

requirements explosion

Answer 61

The process of calculating the demand for the components of a parent item by multiplying the parent item requirements by the component usage quantity specified in the bill of material.

Question 62

resource planning

Answer 62

Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. [This] is normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. [Decisions based on this] always require top management approval.

Question 63

rough-cut capacity planning (RCCP)

Answer 63

The process of converting the master production schedule into requirements for key resources often including labor, machinery, warehouse space, suppliers’ capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing [this] are the bill of labor (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach.

Question 64

sales and operations planning (S&OP)

Answer 64

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. [This] is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new product plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company’s plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, [this] process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement.

Question 65

sales plan

Answer 65

A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item. Represents sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer orders. Is a necessary input to the production planning process (or sales and operations planning process). Expressed in units identical to those used for the production plan (as well as in sales dollars).

Question 66

scheduled receipt

Answer 66

An open order that has an assigned due date.

Question 67

scheduling

Answer 67

The act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule.

Question 68

seasonality

Answer 68

A predictable repetitive pattern of demand measured within a year where demand grows and declines. These are calendar- related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly.

Question 69

single-level bill of material

Answer 69

A display of components that are directly used in a parent item. It shows only the relationships one level down.

Question 70

summarized bill of material

Answer 70

A form of multilevel bill of material that lists all the parts and their quantities required in a given product structure. Unlike the indented bill of material, it does not list the levels of manufacture and lists a component only once for the total quantity used.

Question 71

time bucket

Answer 71

A number of days of data summarized into a columnar or row-wise display. For example, a weekly [type of this] contains all the relevant data for an entire week [and is] considered to be the largest possible (at least in the near and medium term) to permit effective MRP.

Question 72

time fence

Answer 72

A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. [It] can be used to define these points.

Question 73

total cost curve

Answer 73

1) In cost-volume-profit (breakeven) analysis, [this] is composed of total fixed and variable costs per unit multiplied by the number of units provided. Breakeven quantity occurs where [this] and total sales revenue curve intersect. 2) In inventory theory [and for an inventory item, this] is the sum of the costs of acquiring and carrying the item.

Question 74

tracking signal

Answer 74

The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. Used to signal when the validity of the forecasting model might be in doubt.

Question 75

trend

Answer 75

General upward or downward movement of a variable over time (e.g., demand, process attribute).

Question 76

uniform plant loading

Answer 76

In lean, the distribution of work between work stations so that the time required for each station to complete all tasks is as close to equal as possible.

Question 77

unit of measure

Answer 77

The unit in which the quantity of an item is managed (e.g., pounds, each, box of 12, package of 20, case of 144).

Question 78

where-used list

Answer 78

A listing of every parent item that calls for a given component, and the respective quantity required, from a bill-of-material file.