MGMT617 Official Handouts

Table of Content

A. Manufacturing Competitiveness/ MPC Framework

B. Demand Management and Forecasting

C. Sales and Operations Planning (S&OP)

D. Inventory Management

E. Master Production Schedule (MPS)

F. Material Requirements Planning

G. Capacity Planning

H. Distribution Requirements Planning (DRP)

I. Production Activity Control (PAC)

J. Just-in-Time (JIT)

K. Advanced Scheduling

L. Strategy and MPC System Design

A. Manufacturing Competitiveness/ MPC Framework

What does MPC stand for? It is the manufacturing planning and control, which is concerned with planning and controlling all aspects of manufacturing, including demand management, production planning, managing materials, scheduling of machines and people, and supplier and customer coordination. This lecture provides a framework for evaluating responses to changes because these activities change over time and respond differently to different markets and company strategies. The use of an effective manufacturing planning and control system is a key to the success of any manufacturing company. Any organization having a good MPC system can effectively coordinate with its suppliers as well as customers across the company boundaries. It must be realized that the MPC systems design is not a one-time effort; MPC systems need to continuously adapt and respond to changes in the company environment, strategy, customer requirements, particular problems, and new supply chain opportunities. After the completion of this lecture, the students will be able to: Define and identify market, economic, technological, and organizational elements that influence MPC Systems design Describe MPC Systems’ components and match them with the needs of the firm Identify the forces that derive the change in the MPC system

KEY AREAS OF INFLUENCE

Perhaps the most important aspect of the context for development and maintenance of a manufacturing planning and control system is the continual change in its competitive environment. Changes range from technological to political and strategic. Over the years, MPC system has been influenced by different factors: (1) International context for MPC, (2) the role of customer which has evolved over the years, and (3) the role of IT which has developed much more then it was in the 1970s or the 1980s. All these aspects have changed MPC accordingly.

International context for MPC

If we look at international context there is tremendous increase in breadth and depth of internationalization. In 60s and 70s the manufacturing used to take place where the market was. For example, an American company who is selling the product in the United States would produce the product in the United States. But now it has changed. The companies are moving towards the cheaper source of labor. If we look at an example of mobile phones, the popular phone brands are based in the US and Korea but most of their phones are produced in China and they are marketed around the world. These companies are designing the products but they are being produced in China with the components produced in another country. These new arrangements have given rise to what is called ―plug compatibility‖. Basically plug compatibility is something such as a gaming console that you have bought. You bring it at home plug it with your television set, turn it on and start playing the games. Next day probably your friends call you and ask you to come at their place where you all may play the gaming console together. All you have to do is to take the gaming console to your friends place, plug it with their television set and start playing the games. The gaming console is not specific to one region. The plug compatibility is a similar concept in manufacturing. In this concept the company on the basis of demand pattern outsources the production in Malaysia and as the demand pattern changes they may shift the production to China. Now what does that mean? The company doesn’t have to construct a facility in one area. They outsource the production to one region but if need arises they may switch to another location without investing any money in the new facility. For example in 2014`s football world cup, the company which had the contract for providing footballs went to three countries: Pakistan, India, China. They found out that a Pakistani company was ready to produce the footballs more quickly than the other countries. It was a huge order of around six million footballs required in a very short time. The Pakistani company produced the footballs in only thirty three days. Now, according to the concept of plug compatibility they selected Pakistan for the production but they may shift to another country when they receive the contract again depending upon the availability of resources there. Therefore, the MPC has changed a lot because of the breadth and depth of internationalization.

The Role of customer

There has been a lot of influence because of the change in the customers’ role in the MPC system. How has the customer`s role changed? The demand of the customer has increased. When we say that the demand has increased it does not mean that only the quantity has increased but the customer are now asking for more variety of the same product. For example, in 1980s in the USA 2000 different food products were being sold in US. But within 10 years this number increased to 18000 different products. This means that in 10 years the customers’ requirement changed tremendously and they wanted more choice and a large variety for selection. The companies seeing this have created new products at a faster rate. The customer demands more variety and not only they want more variety but they also require new products introduced in the market at a faster rate. For example, we see new models of mobile phones being introduced more quickly in the market. Each company introduces new model and because of competition and competiveness they keep introducing new models regularly. This happens because of the customers’ requirement. The customer also wants that the new models not only comes out without any delay but they also want that when they go to a retail shop the product is available and that they don’t have to wait for it. The customers’ requirements are changing and because of this the MPC system is coming under a lot of pressure and that has influenced MPC for changes in the system. Because of the changes in customer`s requirements, the companies are having problems developing operational capability. Therefore, in order to develop it further they have to bring a lot of the changes to the MPC system. On one hand the customer wants the price to be less but on the other hand he also wants it to be of high quality. Therefore, the inventory has to be less, the manufacturing processes have to be improved so that the quality of the product is high and there are no defects. Because of this the human resource has to be developed. The workers need to be multi skilled so that they know how to operate facilities more efficiently. In order to be an effective competitor in today’s marketplace, firms must have MPC systems with the ability to determine, transmit, revise, and coordinate requirements throughout a global supply chain system. Changing customer requirements and shifting consumer preferences make this an extraordinarily dynamic task.

The role of IT

Similarly the role of IT has also changed. The IT or information technology has developed a lot over the years and because MPC is integrated with it, the MPC come under a lot of pressure further development. For example if the enterprise resource planning (ERP) is installed in a company, MPC will be integrated with it. If we look at the development of ERP over the years, we see that in the late 1970s material requirements planning (MRP) module