Module: III

Resource Planning and

Networking
 Materials Management

⚫ Materials management is the process of

planning and controlling the flow of materials
within an organization. It involves planning,
organizing, and controlling the activities
related to the flow of materials.
⚫ It includes controlling and regulating the flow
of material while simultaneously assessing
variables like demand, price, availability,
quality, and delivery schedules.
 Materials Management

⚫ Material managers determine the amount

and type of material required and held in
stock, plan for the replenishment of these
stocks, create inventory levels for each type
of item (raw material, work in progress or
finished goods), and communicate
information and requirements to procurement
operations and the extended supply chain.
 Materials Management

⚫ Material management also involves

assessing material quality to make sure it
meets customer demands in line with a
production schedule and at the lowest cost.

⚫ Material management has five types of

activities: material requirements planning,
purchasing, inventory control, material supply
management and quality control.
 Objectives of Materials
Management

⚫ The main objectives of material management

are to:
– Ensure material availability.
– Minimize inventory costs.
– Maximize customer satisfaction.
⚫ Material management aims to balance the
conflicting goals of ensuring material
availability, minimizing inventory costs, and
maximizing customer satisfaction.
 Objectives of Materials
Management

⚫ Material management plays a crucial role in

the success of an organization by ensuring
that materials are available when needed
and in the right quantities.
⚫ It helps to minimize waste and reduce costs
by ensuring no over-stocking or under-
stocking of materials.
⚫ It helps to improve customer satisfaction by
ensuring that orders are delivered on time
and with the correct items.
 Aggregate Planning

⚫ Aggregate planning is a process of

developing a plan to produce goods or
services over a period, usually 3 to 18
months in advance.

⚫ It aims to balance the demand and capacity

of an organization, while minimizing costs
and maximizing customer satisfaction.
 Aggregate Planning

⚫ It involves forecasting the potential demand,

determining the optimal level of inventory,
workforce, and other resources, and
coordinating the supply chain and the
production process.
⚫ Some of the factors that influence aggregate
planning are pricing strategies, advertising
and promotion, back ordering, new demand
creation, and workforce management.
 Aggregate Planning

⚫ Aggregate planning has several benefits for

an organization, such as:

– Ensuring material availability.

– Reducing waste and inventory costs.
– Improving customer satisfaction.
– Achieving long-term goals.
Aggregate Production Planning
 Material Requirement Planning
(MRP)

Demand
– Independent
– Dependent

❖ The demand for one item is related to the demand

for another item.
❖ Given a quantity for the end item, the demand for
all parts and components can be calculated.
❖ In general, used whenever a schedule can be
established for an item.
 Material Requirement Planning
(MRP)

⚫ A dependent demand technique used in

production environment.
⚫ Used for planning the requirement for
dependent products.
⚫ Write definition??????
 Benefits of MRP

1. Better response to customer orders.

2. Faster response to market changes.
3. Improved utilization of facilities and labor.
4. Reduced inventory levels.
 Inputs and Outputs to MRP

Master Production Schedule (MPS)

Inventory Records Material

- Inventory available Bill of Materials
- Purchase Orders Requirements
- Lead Times
Planning System

Planned Order
& Other Reports
Master Production Schedule (MPS)

▶ Specifies what is to be made and when.

▶ Must be in accordance with the aggregate
production plan.
▶ Inputs from financial plans, customer demand,
engineering, supplier performance.
▶ As the process moves from planning to execution,
each step must be tested for feasibility.
▶ The MPS is the result of the production planning
process.
Master Production Schedule (MPS)

▶ MPS is established in terms of specific products.

▶ Schedule must be followed for a reasonable length
of time.
▶ The MPS is quite often fixed or frozen in the near-
term part of the plan.
▶ The MPS is a rolling schedule.
▶ The MPS is a statement of what is to be produced,
not a forecast of demand.
The Planning Process
 Bills Of Material (BOM)

⚫ List of components & quantities

needed to make a product.
⚫ Provides product structure (tree)
• Parents: Items above given level.
• Children: Items below given level.
BOM Example
 Example (cont.)

⚫ Part B: 2 x number of As = (2)(50) =100

⚫ Part C: 3 x number of As = (3)(50) =150

⚫ Part D: 2 x number of Bs + 2 x number of Fs

= (2)(100) + (2)(300) = 800

⚫ Part E: 2 x number of Bs + 2 x number of Cs

= (2)(100) + (2)(150) = 500

⚫ Part F: 2 x number of Cs = (2)(150) = 300

⚫ Part G: 1 x number of Fs = (1)(300) = 300

 Inventory Records

▶ Accurate inventory records are absolutely

required for MRP (or any dependent demand
system) to operate correctly.
▶ Generally, MRP systems require more than
99% accuracy.
 Enterprise Resource Planning (ERP)

▶ An extension of the MRP system to tie in

customers and suppliers
1. Allows automation and integration of many
business processes
2. Shares common data bases and business
practices
3. Produces information in real time
▶ Coordinates business from supplier
evaluation to customer invoicing
 Enterprise Resource Planning (ERP)

▶ ERP modules include

▶ Basic MRP
▶ Finance
▶ Human resources
▶ Supply chain management (SCM)
▶ Customer relationship management (CRM)
▶ Sustainability
ERP and MRP
 Enterprise Resource Planning (ERP)

▶ ERP systems have the potential to

▶ Reduce transaction costs
▶ Increase the speed and accuracy of information
▶ Facilitates a strategic emphasis on JIT
systems and supply chain integration
▶ Can be expensive and time-consuming to
install
SAP’s ERP Modules
 ERP in the Service Sector

▶ ERP systems have been developed for

health care, government, retail stores, hotels,
and financial services
▶ Also called efficient consumer response
(ECR) systems
▶ Objective is to tie sales to buying, inventory,
logistics, and production
 Supply Chain Management

A supply chain is a network of companies and

people that are involved in the production and
delivery of a product or service.
 Supply Chain Management

⚫ The components of a supply chain include

producers, vendors, warehouses, transportation
companies, distribution centers, and retailers.

⚫ The supply chain enables a company to optimize the

use of resources, reduce costs, improve quality, and
increase customer satisfaction.
 Supply Chain Management

⚫ Supply chain management is the process of

planning, coordinating, and controlling the flow of
materials, information, and services from the source
to the customer.
⚫ It involves the activities such as procurement,
production, distribution, and logistics.
⚫ The main objectives of supply chain management
are to reduce costs, improve quality, increase
customer satisfaction, and enhance competitiveness.
 Benefits of SCM

⚫ It helps to optimize the use of resources and

minimize waste.
⚫ It enables faster and more reliable delivery of
products and services.
⚫ It improves the collaboration and communication
among the supply chain partners.
⚫ It increases the flexibility and responsiveness to the
changing market demands.
⚫ It enhances the innovation and differentiation of
products and services.
 Lean vs Agile SCM

⚫ Lean supply chain management focuses on

eliminating waste and improving efficiency.
⚫ Agile supply chain management emphasizes
flexibility and responsiveness to changing customer
demands.
⚫ Depending on the product, market, and customer
needs, a company may choose to adopt either a
lean or an agile supply chain strategy, or a
combination of both.
 Efficient vs Responsive SCM

⚫ An efficient supply chain is one that focuses on

minimizing costs, waste, and resources by
streamlining processes and eliminating unnecessary
steps.
⚫ An efficient supply chain can offer lower margins,
higher productivity, and faster delivery times.
⚫ However, an efficient supply chain may not be able
to adapt quickly to changes in the market, customer
preferences, or external factors.
⚫ An example of an efficient supply chain is Dell, which
pioneered the build-to-order model for computers.
 Efficient vs Responsive SCM

⚫ A responsive supply chain is one that focuses on

meeting customer requirements and expectations by
being flexible and adaptable to changes.
⚫ A responsive supply chain can offer higher margins,
customer satisfaction, and competitive advantage.
⚫ However, a responsive supply chain may require
more inventory, resources, and coordination.
⚫ An example of a responsive supply chain is Zara,
which can produce and deliver new fashion items in
weeks
 Networking: CPM vs PERT
CPM PERT

⚫ CPM stands for Critical ⚫ PERT stands for Program

Path Method. Evaluation and Review
⚫ CPM is a deterministic Technique.
technique, which means ⚫ PERT is a probabilistic
it assumes that the time technique, which means it
required for each activity accounts for the uncertainty
is known and fixed. and variability of the activity
⚫ CPM focuses on the durations.
activities and tasks that ⚫ PERT focuses on the events
are critical for the project and milestones that mark
completion. the progress of the project.
 Networking: CPM vs PERT
CPM PERT

⚫ PERT uses three time

⚫ CPM uses a single time
estimates: optimistic, most
estimate for each activity.
likely, and pessimistic.
⚫ CPM is suitable for
⚫ PERT is suitable for projects
projects that have
that have unpredictable and
predictable and repetitive
non-repetitive tasks, such as
tasks, such as
research and development
construction projects.
projects.
⚫ CPM is more concerned
⚫ PERT is more concerned with
with time-cost trade-off,
time optimization, which
which means minimizing
means finding the shortest
the cost while meeting the
possible time for the project
deadline.
completion.