Page 142 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 6: Information Technology Framework

Manufacturing Requirements Notes

Manufacturing requirements schedule production resources and attempt to resolve day-to-day
capacity bottlenecks within the materials management system. Primary bottlenecks result from
raw material shortages or daily capacity limitations. Manufacturing requirements determine
the Master Production Schedule (MPS) and Manufacturing Requirements Plan (MRP). The MPS
defines weekly or daily production and machine schedules. Given the MPS, MRP time phases
the purchase and arrival of materials and components to support the desired manufacturing
plan. Although this discussion presents logistics requirements and manufacturing requirements
serially, they actually must operate in parallel. This is particularly true for enterprises utilizing
demand flow or market-paced manufacturing strategies. These strategies coordinate production
schedules directly with market demands or orders and reduce the need to forecast or plan. In a
sense, demand flow or market-paced manufacturing strategies design all production as make to
order and thus totally integrate logistics and manufacturing requirements. Within limits, the
Dell model of MTO computers illustrates a process that matches manufacturing with demand.
However, even the Dell model must operate within capacity constraints within a limited time
horizon.
Procurement Requirements

Procurement requirements schedule material purchase order releases, shipments, and receipts.
Procurement requirements build on capacity constraints, logistics requirements, and
manufacturing requirements to determine long-term material requirements and release
schedules. The requirement and release schedule is then used for purchasing negotiation,
contracting, coordination of transportation equipment, and arrival scheduling.
Planning/Coordination Integration

While each planning/coordination component can and frequently has operated independently,
such independence often leads to inconsistencies that create excess manufacturing and logistics
inventory as well as operating inefficiencies. It was not uncommon for enterprises to have
different forecasts for each functional module since each was controlled by a separate
organizational function.

Example: The strategic objectives may develop high forecasts to motivate the sales force
while logistics may plan on more conservative forecasts.
Similarly, differences between logistics, manufacturing, and procurement forecasts resulted in
inconsistencies between product acquisition, production scheduling, and logistics deployment
which in turn gave rise to unnecessary safety stocks to buffer independent operations.
Historically, the individual planning/coordination processes had limited ability to plan within
capacity constraints. Each planning process was essentially uncapacitated as though there were
infinite capacity.

Operations

Coordinated, integrated operations information systems are also essential for supply chain
competitiveness. Coordination and integration facilitate smooth and consistent customer and
replenishment order information flow throughout the enterprise and offer current order status
visibility. Integrated information sharing reduces delays, errors, and resource requirements.
The operations processes required for customer order fulfilment and to coordinate the receipt of

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