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MPC FRAMEWORK

POM 3008
Jonathan Smith
Some of the slides in this presentation come from
SAPs training material

MPC FRAMEWORK

MPC is Manufacturing Planning and Control


OPSC is Operations Scheduling, Planning and
Control
The information presented here is usually for a
manufacturing environment but can be applied to
the services environment. The key objective is to
show the system and the logical flow of thought
and activities

MPC FRAMEWORK

The MPC system provides information to


efficiently manage the flow of materials,
effectively utilize people and equipment,
coordinate internal activities with those of
suppliers, and communicate with customers
about market requirements.
The MPC system does NOT make decisions or
manage operations. However, it does provide
the information and support to managers
involved in making operating decisions.

MPC FRAMEWORK (contd.)

Typical MPC Support Tasks:


Plan materials
Plan capacity
Plan inventories
Schedule production activities
Track resources
Communicate and foster customer and supplier
relationships
Provide information for systems integration

MPC FRAMEWORK (contd.)

An effective MPC system is essential to


perform these tasks efficiently. Otherwise:

poor customer service


excessive inventories
excessive overtime/downtime
large number of expediters
too many rush orders, schedule disruptions

MPC FRAMEWORK (contd.)

An effective MPC system has many benefits:

reduced inventories
reduced Manufacturing Lead Time (MLT)
reduced cycle time
Improved productivity
improved flexibility
increased profits and market share

MPC FRAMEWORK (contd.)

Three phases of an MPC System

Creating the overall manufacturing plan


Performing the detailed planning of material and
capacity needs to support the plan
Executing these plans on the shop floor
(Scheduling or PAC) and purchasing

PAC is Production Activity Control

MPC FRAMEWORK
(contd.)
Resource
Planning

Production
Planning
Master
Production
Scheduling

Detailed
Capacity
Planning

Front End

Detailed
Material
Planning
Material/Capacity
Planning

Shop-Floor
Systems

Demand
Management

Vendor
Systems

Engine
Back End

MPC FRAMEWORK
(contd.)

A final activity tied to execution is


measurement of actual results (performance
evaluation)

rate and timing of actual production compared to


plans
shipments made to customers compared to
promised delivery dates
actual capacity used/needed compared to planned
capacity usage

MPC FRAMEWORK
(contd.)

Key Decisions supported by the MPC Framework:


Production Planning (PP): provides key
communication links from top management to
manufacturing. Purpose is to focus on the detailed
production resources to achieve the firms strategic
objectives.
Master Production Scheduling (MPS): detailed
production plan for each end product. It is useful to
make customer delivery promises, utilize key plant
resources effectively, achieve the key strategic
objectives, and resolve manufacturing/marketing
conflicts.

MPC FRAMEWORK
(contd.)
Key Decisions (contd.):

Materials Requirements Planning (MRP): a tool


for planning detailed materials plans based on the
MPS. Its primary objective is to provide the right
part at the right time in the right quantity to
support the MPS.
Capacity Planning (CP): a tool used to evaluate
capacity requirements for the PP, MPS, and the
MRP system. The focus is to ensure that the PP,
MPS, and MRP plans are all feasible in terms of
available capacity.

MPC FRAMEWORK
(contd.)

Key Decisions (contd.):


Production Activity Control (PAC): A
mechanism to execute the detailed materials
plans generated by the MRP system. It
integrates the shop-floor execution and vendor
scheduling and follow-up modules of the MPC
framework. This includes short term
scheduling of machines and other resources

MPC FRAMEWORK
(contd.)

Enterprise Resource Planning (ERP) systems


From a manufacturing perspective, an ERP
system is a tool which integrates the decisions
made through the use of the MPC system with
other process areas of a company (e.g.,
Accounting, Finance, Marketing, Human
Resource Management, etc.)
One such system that is used by several
companies is the SAP R/3 system.

Customer Order Management Process


Overview

2.
2. Sales
Sales Order
Order Processing
Processing
3.
3. Inventory
Inventory Sourcing
Sourcing
1.
1. Pre-Sales
Pre-Sales Activities
Activities

Invoice

4.
4. Delivery
Delivery

6.
6. Payment
Payment
5.
5. Billing
Billing

Business Process Integration with SAP R/3 (2)


Financial
Financial controlling
controlling
Resource
Resource controlling
controlling
Sales

Customer
Order

Production

Presales
Activity

SOP

Sales
order

MPS

Purchasing

Logistics
Logistics controlling
controlling

Inventory
Sourcing

MRP

Delivery

Planned
order

Requi- Vendor
sition selection

Customer
Billing

Production
order

Purchase Goods
order
receipt

Customer
Payment

Shop
floor
control

Invoice
verification

Vendor
Payment

Sales,
Sales, Production,
Production, Purchasing,
Purchasing, Warehouse
Warehouse

Procurement Process Overview


1. Requirements
Purchase Order

Vendor
invoice

8. Payment

determination

2.Source

determination

TRUCKING

7. Invoice verification
5.

6. Goods receipt and

inventory management

Order follow-up

3. Vendor

selection

4.Order Processing

Procurement Process
Overview
Purchase requisition is created: manually or automatically

from MRP
Source of supply is determined (RFQ)
The request is assigned to a vendor
A purchase order is created with reference to the PR
The system provides automated expediting and follow-up
reminders to ensure timely delivery
Goods are received into the warehouse via goods receipt
document referencing the PO
The invoice is validated by comparing it to the PO price and
quantity.
Payment will be based on terms and conditions specified in
the PO.

Business Process Integration with SAP R/3 (2)


Financial
Financial controlling
controlling
Resource
Resource controlling
controlling
Sales

Customer
Order

Production

Presales
Activity

SOP

Sales
order

MPS

Purchasing

Logistics
Logistics controlling
controlling

Inventory
Sourcing

MRP

Delivery

Planned
order

Requi- Vendor
sition selection

Customer
Billing

Production
order

Purchase Goods
order
receipt

Customer
Payment

Shop
floor
control

Invoice
verification

Vendor
Payment

Sales,
Sales, Production,
Production, Purchasing,
Purchasing, Warehouse
Warehouse

THE SAP R/3 ERP SYSTEM (contd.)

The Production Planning (PP) Module: The PP module is used to


plan and control the manufacturing activities of a company.
Some of the key Elements of the PP module are:
Sales and Operations Planning (SOP)
Master Production Scheduling (MPS)
Bills of Material (BOM)
Materials Requirements Planning (MRP)
Shop Floor Control (SFC)

THE SAP R/3 ERP SYSTEM (contd.)

The Production Planning (PP) Module (contd.)


Other key elements are:
Routings
Work Centers
Production Orders
Product Costing, activity-based costing
Repetitive manufacturing
Kanban
Production Planning for Process Industries

THE SAP R/3 ERP SYSTEM (contd.)


The Materials Management (MM) Module: The MM application
module supports the procurement and inventory functions
occurring in a day-to-day business operation.
Key elements of the MM module include:
Material procurement (purchasing)
Inventory management
Reorder point processing
Material valuation and Invoice verification
Vendor evaluation and External services procurement
Warehouse Management
Purchasing Information System and Inventory Controlling
Information System

THE SAP R/3 ERP SYSTEM (contd.)


Business Processes and SAP R/3 Functionality

Making
Manufacturing Planning
and Execution (MP&E)
Buying
Procurement
Selling
Customer Order
Management
Accounting
Financial/Management
Accounting & Reporting

Manufacturing Planning and Execution Process


Procurement
Procurement

Sales
Sales Info
Info
System
System

Forecasting
Forecasting

Sales
Sales &
& Oper
Oper
Planning
Planning

Demand
Demand
Mgmt
Mgmt

MPS

MRP

Planning process
Execution process

Manufacturing
Execution

Order
Settlement

CO/PA
CO/PA

Inventory
Inventory

Costing
Costing

Capacity
Capacity
Production
Production Master
Master Data
Data
R

Reporting
Reporting and
and Analysis
Analysis
SAP AG

THE SAP R/3 ERP SYSTEM (contd.)


The Manufacturing Planning and Execution (MP&E)
Process (contd.)
Refers to the process of recognizing demand, netting
requirements, planning for the production and procurement
of materials, and identifying the capacity to satisfy demand.
Thus, the MP&E process encompasses the demand forecast
activity, the closed loop planning phase, and the control of
production activities through inventory valuation, order
settlement, and product costing.

THE SAP R/3 ERP SYSTEM (contd.)


The Manufacturing Planning and Execution (MP&E)
Process (contd.)
SAP R/3 application modules that support this process are:
Materials Management (MM)
Financial Accounting (FI)
Sales and Distribution (SD)
Production Planning (PP)
Controlling (CO)
Human Resources (HR)

THE SAP R/3 ERP SYSTEM (contd.)


The Manufacturing Planning and Execution (MP&E)
Process (contd.)
SAP R/3 functionality includes:
Sales and Operations Planning (SOP)
Demand Management
MPS and MRP
Shop Floor Control (SFC)
Capacity Requirements Planning (CRP)
Bill of Material (BOM)

PRODUCTION PLANNING

Production Planning (PP): provides key


communication links from top management to
manufacturing. Purpose is to focus the detailed
production resources to achieve the firms
strategic objectives.
Also referred to as Sales and Operations
Planning (SOP) since the purpose it to
coordinate several critical process activities
within a firm

PRODUCTION PLANNING
(contd.)

Key Linkages of Production Planning

Marketing
Planning

Top Management
The Game Plan

Financial
Planning

Resource
Planning

Production
Planning

Demand
Management

Master Production
Scheduling

Front End

PRODUCTION PLANNING (contd.)

Production Planning (PP) states the mission to be


accomplished by the manufacturing function so as
to meet the marketing and financial objectives set by
the firm
Is it necessary to prepare a production plan? Why
cant manufacturing simply work off the Master
Production Schedule?

PRODUCTION PLANNING
(contd.)
PP process

Obtain/Prepare aggregate demand forecasts for


each product group or each product family.
Estimate/Specify relevant production parameters:

Inventory Holding/Backorder Costs


Regular/Overtime Labor Costs
Workforce Changing Costs (Recruitment/Retrenchment)
Estimated Beginning Inventory/Workforce Levels
Minimum Safety Stock requirements
Maximum Regular/overtime capacity
Subcontracting costs

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