A well-executed Manufacturing Planning and Control (MPC) system can deliver competitive advantage and often differentiates leading manufacturers from the rest. The more the system is automated, the more it enables informed decisions that in turn speed response times. Each stage of the system has a purpose and varies by the level of details that are considered in it as well as by the planning horizon in attempting to answer three questions:
- How much needs to be produced and when?
- What is the available capacity?
- How can differences between priorities and capacity be resolved?
Let’s look at each stage in a little more detail:
Stage 1: Strategic Business Plan
The strategic business plan is a statement of strategic and forward-looking company goals and objectives and focuses on profitability, productivity, customer lead times, and other key areas for the business. The plan gives general direction about how the company hopes to achieve its objectives. It also provides direction and coordination among various functions of the company. The level of detail in the strategic plan is not high as it contains general market and productions requirements and not sales of individual items. A well laid out strategic business plan drives everything in the business. It is also an input to the Sales and Operations Planning process.
Stage 2: Sales and Operations Plan (S&OP)
S&OP is a cross-functional, coordinated plan that involves sales, marketing, product development, operations, and senior management. Actual demand is repeatedly compared with the sales plan. Market potential is assessed and future demand is forecasted. The updated marketing plan is communicated with manufacturing, engineering, and finance.
During this process, decisions related to trade-offs between volume and product mix are made so that demand and supply are in balance. S&OP feeds into the Master Production Schedule.
Stage 3: Master Production Schedule (MPS)
MPS is a purchasing production and production plan at an individual end product level, by time period. The planning horizon depends on the production and purchasing lead times, but is generally smaller units of time. MPS delivers a master schedule with an anticipated build schedule by specific product configurations, quantities and dates. MPS needs validity through the rough-cut capacity planning and the output of MPS is the input to the Material Requirements Planning stage.
Stage 4: Material Requirements Planning (MRP)
MRP uses bill of materials data, inventory data, and MPS to calculate requirements for materials. It makes recommendations to release replenishment orders for material. And since it is a time-phased output, MRP makes recommendations to reschedule open orders. It establishes when the components and parts are needed, to make each end product. The planning horizon depends on the leads times for manufacturing and purchasing. Time-phased MRP is achieved by exploding the bill of materials, adjusting for quantity on hand or on order and offsetting the net requirements for lead times. MRP, being at the detailed level, also considers finite capacity through capacity requirements planning. And the output of MRP goes into the Purchasing and Production Activity Control stage.
Stage 5: Purchasing and Production Activity Control (PAC)
Purchasing is responsible for establishing and controlling the flow of raw materials into the factory. The level of detail is high since it involved individual components, work centers, and orders—including reviewing plans and revising them as needed daily. PAC manages routing and dispatching at production facility and performing supplier control. PAC also schedules, controls, measures, and evaluates the effectiveness of production operations. Additional activities performed by PAC include:
- Assigning priority to orders for each shop.
- Maintaining work in process (WIP) information.
- Conveying shop order status.
- Providing actual output data.
- Providing quantity by location, by work center, and by shop order for accounting.
- Measuring the efficiency, utilization, and productivity of workforce and machines.
A Manufacturing Execution System (MES) is a subset of PAC capabilities. The output of a well-managed PAC is a manufactured product with full visibility and high quality across the supply chain.
At each level of an MPC system, it’s important to look at performance measures for more-informed decisions, proactive course correction, and plan modification. This level of manufacturing intelligence can help your company observe, learn, and adapt throughout the process.
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Arnold, Tony. Chapman, Stephen. Clive, Lloyd. Introduction to Materials Management 7th Edition. Prentice Hall. January 20, 2011.
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