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CPIM Exam – Basics of Supply Chain Management Practice Study Sheet
Chapter Two – Production Planning System
• Priority – what is needed, how many and when; Capacity is the capability to produce goods and services. In the long run, they must be in balance
• Manufacturing Planning and Control System has five levels (sorted by level of detail):
1. Strategic Business Plan
2. Production Plan
3. Master Production Schedule
4. Material Requirements Plan
5. Production Activity Control and Purchasing
• Strategic Business Plan 1) marketing determines product & pricing 2) Finance finds funds 3) Production meets needs through machinery & labor 4) Engineering is responsible for design. Reviewed every 6 months to a year
• Production Plan 1) quantities by product group 2) desired inventory levels 3) equipment, labor and material needed 4) availability of resources needed. Planning horizon 6-18 months and reviewed monthly or quarterly
• Master Production Schedule (MPS) is for production of individual items. The planning horizon is 3-18 months out. Master scheduling is the process of making an MPS. The plans are changed weekly or monthly
• Material Requirements Plan (MRP) is a plan for production and purchase of items in the master production schedule. Purchase and Production Activity control use the MRP for controlling raw materials. The planning horizon is a day to a month
• Production Activity Control and Purchasing represent the implementation of the plan. Purchasing obtains material per the MRP and production carries out the tasks in the MRP
• Sales and Operations Planning is derived from the Strategic Business Plan and is made up of a Marketing Plan that links to the Production Plan (above) and a Detailed Sales Plan that links to the master Production Schedule (above)
• Manufacturing Resource Planning (MRP II) is the fully integrated planning and control system. It coordinates between marketing and production. It includes the sales and operations plan, the sales plan, master schedule, material requirements plan, purchasing, production activity control and performance measures
• Enterprise Resource Planning (ERP) is an accounting oriented information system for identifying and planning the enterprise. ERP encompasses the entire company and MRP II is manufacturing
• In the short term the product plan is limited by capacity. Changes can be made through overtime, build up of inventory, subcontracting and leasing extra equipment
• The production plan usually has a12 month time horizon, a few product groups, demand is fluctuating, plant and equipment are fixed
• Three basic strategies for making the production plan include 1) chase 2) production leveling (divide total production units by # of days for target) 3) subcontracting (make minimum demand and subcontract the rest)
• Level production = (total forecast + back orders + ending inventory – opening inventory) / # of periods
• In a make-to-order environment, there is a backlog of customer orders
• Resource bill shows the critical resources needed to make one average unit in the product group. This is used for resource planning. You need to determine the materials (# of units * # of material required) and labor (# of units * # of hours) needed to make the plan in standard hours