Introduction to
materials management
A summary based on the theory questions. From chapter 2 till 6 and
chapter 8 and 9.
,Table of contents
Chapter 2 – Production planning system..................................................................................................................2
Chapter 3 – Master scheduling.................................................................................................................................6
Chapter 4 – Material requirements planning............................................................................................................8
Chapter 5 – Capacity management.........................................................................................................................11
Chapter 6 – Production activity control..................................................................................................................14
Chapter 8 – Forecast and demand management....................................................................................................18
Chapter 9 – Inventory fundamentals......................................................................................................................21
1
,CHAPTER 2 – PRODUCTION PLANNING SYSTEM
What are the four questions a good planning system must answer?
What are we going to make or provide to customers?
What does it take to make?
What do we have?
What do we need?
2. Define capacity and priority. Why are they important in production planning?
Priority, relates to what products are needed (quantity and when) marketplace establishes the
priorities
Capacity, capability of manufacturing to produce goods and services depends on resources of the
company
Demand vs resources
3. Describe each of the following plans in terms of their purpose, planning horizon, level of detail, and planning
cycle:
A. Strategic plan statement for major goals and objectives expects to achieve over the next 2 to 10
years or more
B. b. Business plan Financially based plan, with revenues. Comes from financial, production, marketing
and engineering and is made every 6 to 12 months.
C. c. Production plan quantities of product, desired inventory levels, resources availability, resources
needed made each month or quarter
D. d. Master production schedule Production plan for individual end items made each week or
month
E. e. Material requirements plan plan for production and purchase of components – high detail level
F. f. Production activity control (PAC) is responsible for planning and controlling the flow of work
through the factory, planning horizon is very short made daily.
4. Describe the responsibilities and inputs of the marketing, production, finance, and engineering departments
to the strategic business plan.
Owns plans of each department to achieve to objectives set by the strategic business plan
Financial statement, projected revenues, projected balance sheet, projected income statement.
5. Describe the relationship among the production plan, the master production schedule, and the material
requirements plan.
Production plan is a global planning of products groups, MPS for individual end items, MRP plan for
the production and purchase of components used in making the end items they all have quantities
that must be produced, inventory levels, resources available and resources needed.
6. What is the difference between strategic business planning and sales and operations planning (SOP)? What
are the major benefits of SOP?
Process of continually revising the strategic business plan and coordinating plans for the various
departments, latest forecasts and market and economic developments are taken into account.
Benefits: Provides a means of managing change – ensures the various department plans are realistic
and coordinated and support the business plan – realistic plan that can achieve company objectives –
permits better management of production, inventory, and backlog.
7. What is MRP II?
Manufacturing resource plan – provides coordination between marketing and production
8. What is ERP?
Enterprise resource planning – whole enterprise is taken into account.
2
, 9. What two changing conditions led to the development of ERP systems?
Computer and information technologies (IT)
Integration of knowledge and decision making in all aspects of direct and indirect functions and areas
that impact material flow and material management.
10. In the short run, how can capacity be changed?
People can be hired and laid off, overtime and short time can be worked, and shift can be added or
removed.
11. When making a production plan, why is it necessary to select a common unit or to establish product
families?
Little detail is needed so it’s necessary to establish product families to make to production, because
it’s not possible for an individual level.
12. On what basis should product groups (families) be established?
Similarity of manufacturing process
13. What are five typical characteristics of the production planning problem?
A time horizon of 12 months is used, with periodic updating
Production demand consists of one or a few product families or common units
Demand is fluctuating or seasonal
Planned equipment are fixed within the time horizon
A variety of management objectives are set, such as low inventories, efficient plant operation, good
customer service, and good labour relations.
14. Describe each of the four basic strategies used in developing a production plan. What are the advantages
and disadvantages of each?
Chase strategy
Production levelling
Subcontracting
Hybrid strategy
15. What is a hybrid strategy? Why is it used?
Finding the combination of strategies that minimizes the sum of all costs involved, providing the level
of service required, and meeting the objectives of the financial and marketing plans.
16. Describe four conditions under which a firm would make-to-stock or make-to-order.
Make to stock
o Demand is fairly consistent and predictable
o There are few products options
o Delivery times demanded by the marketplace are much shorter than the time needed to
make the product
o Product has a long shelf life
Make to order
o Goods are produced to customer specification
o The customer is willing to wait while to order is being made
o The product is expensive to make and store
o Several product options are offered
17. What information is needed to develop a make-to-stock production plan?
Forecast by period for the planning horizon
Opening inventory
Desired ending inventory
Any past-due customer orders.
18. What are the steps in developing a make-to-stock production plan?
3
materials management
A summary based on the theory questions. From chapter 2 till 6 and
chapter 8 and 9.
,Table of contents
Chapter 2 – Production planning system..................................................................................................................2
Chapter 3 – Master scheduling.................................................................................................................................6
Chapter 4 – Material requirements planning............................................................................................................8
Chapter 5 – Capacity management.........................................................................................................................11
Chapter 6 – Production activity control..................................................................................................................14
Chapter 8 – Forecast and demand management....................................................................................................18
Chapter 9 – Inventory fundamentals......................................................................................................................21
1
,CHAPTER 2 – PRODUCTION PLANNING SYSTEM
What are the four questions a good planning system must answer?
What are we going to make or provide to customers?
What does it take to make?
What do we have?
What do we need?
2. Define capacity and priority. Why are they important in production planning?
Priority, relates to what products are needed (quantity and when) marketplace establishes the
priorities
Capacity, capability of manufacturing to produce goods and services depends on resources of the
company
Demand vs resources
3. Describe each of the following plans in terms of their purpose, planning horizon, level of detail, and planning
cycle:
A. Strategic plan statement for major goals and objectives expects to achieve over the next 2 to 10
years or more
B. b. Business plan Financially based plan, with revenues. Comes from financial, production, marketing
and engineering and is made every 6 to 12 months.
C. c. Production plan quantities of product, desired inventory levels, resources availability, resources
needed made each month or quarter
D. d. Master production schedule Production plan for individual end items made each week or
month
E. e. Material requirements plan plan for production and purchase of components – high detail level
F. f. Production activity control (PAC) is responsible for planning and controlling the flow of work
through the factory, planning horizon is very short made daily.
4. Describe the responsibilities and inputs of the marketing, production, finance, and engineering departments
to the strategic business plan.
Owns plans of each department to achieve to objectives set by the strategic business plan
Financial statement, projected revenues, projected balance sheet, projected income statement.
5. Describe the relationship among the production plan, the master production schedule, and the material
requirements plan.
Production plan is a global planning of products groups, MPS for individual end items, MRP plan for
the production and purchase of components used in making the end items they all have quantities
that must be produced, inventory levels, resources available and resources needed.
6. What is the difference between strategic business planning and sales and operations planning (SOP)? What
are the major benefits of SOP?
Process of continually revising the strategic business plan and coordinating plans for the various
departments, latest forecasts and market and economic developments are taken into account.
Benefits: Provides a means of managing change – ensures the various department plans are realistic
and coordinated and support the business plan – realistic plan that can achieve company objectives –
permits better management of production, inventory, and backlog.
7. What is MRP II?
Manufacturing resource plan – provides coordination between marketing and production
8. What is ERP?
Enterprise resource planning – whole enterprise is taken into account.
2
, 9. What two changing conditions led to the development of ERP systems?
Computer and information technologies (IT)
Integration of knowledge and decision making in all aspects of direct and indirect functions and areas
that impact material flow and material management.
10. In the short run, how can capacity be changed?
People can be hired and laid off, overtime and short time can be worked, and shift can be added or
removed.
11. When making a production plan, why is it necessary to select a common unit or to establish product
families?
Little detail is needed so it’s necessary to establish product families to make to production, because
it’s not possible for an individual level.
12. On what basis should product groups (families) be established?
Similarity of manufacturing process
13. What are five typical characteristics of the production planning problem?
A time horizon of 12 months is used, with periodic updating
Production demand consists of one or a few product families or common units
Demand is fluctuating or seasonal
Planned equipment are fixed within the time horizon
A variety of management objectives are set, such as low inventories, efficient plant operation, good
customer service, and good labour relations.
14. Describe each of the four basic strategies used in developing a production plan. What are the advantages
and disadvantages of each?
Chase strategy
Production levelling
Subcontracting
Hybrid strategy
15. What is a hybrid strategy? Why is it used?
Finding the combination of strategies that minimizes the sum of all costs involved, providing the level
of service required, and meeting the objectives of the financial and marketing plans.
16. Describe four conditions under which a firm would make-to-stock or make-to-order.
Make to stock
o Demand is fairly consistent and predictable
o There are few products options
o Delivery times demanded by the marketplace are much shorter than the time needed to
make the product
o Product has a long shelf life
Make to order
o Goods are produced to customer specification
o The customer is willing to wait while to order is being made
o The product is expensive to make and store
o Several product options are offered
17. What information is needed to develop a make-to-stock production plan?
Forecast by period for the planning horizon
Opening inventory
Desired ending inventory
Any past-due customer orders.
18. What are the steps in developing a make-to-stock production plan?
3
