Seminar 6

Seminar 6 Production Planning Process

Today’s opening discussion was interesting. We were given a list of open items and their due dates, and asked which of them were to be netted at the end of month by the company. I totally had no idea due to the lack of information. But some of my classmates suggested some convincing solutions based on past experiences from other companies, so I also ended with guessing. However, this was actually wrong, and what we were guessing was mere assumptions. Of course, we could not make decisions only based on assumptions. I was correct in the beginning, but I failed to insist on my own opinion as usual. Right! I have to be more confident!

Review on P2P

Every time the review activities given by James can surprise me, because it is always about some aspects that I haven’t thought about. Again, this time it is about the procurement of non-inventory items. Do we need to go through the same process as the inventory items, just like what we’ve done when doing the P2P lab? To be frank, I really haven’t considered this situation. This is probably due to my lack of working experience, because in the CCAs that I joined there was always only one treasurer. No matter what kind of expenses incurred, from the essential props to the printing and transportation fees, we just go to the same person to claim money. This is plausible for such small and one-time activities, but is disastrous for companies. According to the Kraljic’s Portfolio Matrix, inventory items are strategic items, while non-inventory items are non-critical items. And the store room for non-inventory items should also be separated from warehouse for inventories. So companies should not spend much time sourcing and dealing with the non-inventory suppliers. A suggestion is that these items should be purchased in bulk and at a scheduled time, so the requesting departments know when and what to buy. Some group suggested that purchasing department could help ask for a good price, and other departments could just place order after that. This solution sounds tedious, but it could be done by an SAP integrated system called SRM (Supplier Relationship Management). SAP is a real helper!   

Production planning

Again the student-led session introduced the new topic for today – product planning. Everything here starts from forecasting, which is based on both past year sales and current year market conditions, counting any variables, such as advertising campaigns and seasonal changes etc. Series of calculations are also involved in the process, from the inventories to materials, and from quantities, lot sizes to delay time and so on… Even the class activities were all about calculations.  This is essential for the company, since all the following operations, such as material purchasing and production executions, will be based on the plans. 

                                http://sugarcrm-online.s3.amazonaws.com

Nonetheless, the plan is from forecasting, which is not likely to be always accurate, so the forecasts need to be revised frequently and regularly. This is why the financial experts are invited every day on TV to analyse and predict the stock market, although the analysis is possibly more or less the same. But unlike the subtle impact of stock predictions, a failure on production planning can kill a firm. Gratefully, we have MRP (Material Requirement Planning) system, by which the lowest material and inventory level is kept while sufficient available amounts are also guaranteed. Since the presenting group made a small mistake, and James mentioned about MRP II (Manufacturing Resource Planning), I went to Google and found that MRPII is an extension of MRP. Besides all the standard process of production planning (MPS, BOM etc.), MRPII includes capacity planning, cost control and other modules as well, so it is more complete.

                                                   http://www.referenceforbusiness.com

How does ERP help in this case? Needless to say the automated mass calculations, ERP helps connect different departments, so the information for the process can be synchronised. This is not a new point, but it’s true and extremely helpful for efficiency enhancement.

In addition, various production strategies were discussed. First, make-to-stock is the normal strategy for common products, just to produce based on sales anticipation. Make-to-order is usually applied by companies that provide very large and high-cost customizable products, such as home design and stages. James added another strategy, which is ensemble-to-order: the products are not fully customizable, but customers could choose from different pre-designed elements. For example, some automobile and computer companies are applying this strategy. As for just-in-time, it is more like a philosophy that can be applied in many places besides make-to-order strategy. For instance, it can be used to ensure that the products are received in time by the customer when using other production strategies.

                                                                http://4.bp.blogspot.com

The last point was about lot size. Although EOQ (Economic Order Quantity) is used in the presentation to minimise inventory holding cost and ordering cost, lot size is usually decided by the supplier. It is like the situation where you want to buy a bottle of Yakult, but Cheers only sells a row of it and you simply can’t tear the package and only buy one of them.

Ahhh~ what a harvest day! I can go to sleep contentedly :) !