Excerpt from TPiCS report No. 79.
■ I wrote a similar theme to this in the previous report titled “regarding the instant delivery system and the production for short-term delivery.”
But I received the responses from many people, which says, “too difficult to understand.”
I believe that to achieve the production with as little inventory as possible, making “production to meet your customers’ needs” and “scheduled production,” is a very important issue of “how fast to make what the customers want,” not the issue of the “system” or the “narrowly-defined production control.” So I’m going to explain in a little plainer language this time.
I wrote the following in my previous report. Thinking about the production control, “how to make the schedule and to maintain it” is very important. But I notice that there are many people who are considering the production control systems but who are not so interested in that point. Although I receive a lot of questions up to the chin regarding “cost,” I find many people, who are considering the production control systems, don’t know much about, for example, “how orders come in from their customers.”
It appears to me that what is expected from the “production control systems” in general is different from what TPiCS-X intends to provide. As our company is a joint-stock corporation and at least a profit-oriented company, all that’s required is to make and sell what the customers want. But I don’t quite feel like doing it because such thoughts as “it’s useless to make such a thing” and “not a problem resolution at all to use it” are stronger in myself.
As discriminating users could understand me, however, I continue my small-sized, TPiCS-style business with their emotional support.
There are words of “setup finishes 80% of your work.” I like these words so much that I frequently use them.
Needless to say, it means “success and failure of your work are determined by the setup.” Replacing “setup” with “schedule,” we say “good and bad of the production schedule” determines good and bad of “production.”
However, I wonder why so little importance is put on the schedule generation function. Let’s think about why.
In the case of the general MRP-family systems, human creates the “master plan,” enters it to the system, and perform the MRP calculations. In other words, since there’s no function (or very weak if any) to make the schedule of products using the system, or to make the production schedule with the system in the general production control systems, users no longer expect the production control system to do anything for them. Or, assuming that “the system can’t do it” or “that’s what human should think,” do they expect nothing from the system?
I would like you to find “what a way to do with TPiCS” or “seems like I can do what I’ve been thinking of” in this report.
Since our company is a software package maker, we always think of something, assuming a variety of production situations. When I am aware of the versatility in my explanation, it gets a little difficult to understand. In addition, a story of the production control tends to be long by any means and it ends up with a “bucket shop profitable if the wind blows”-like story.
Establishment of TPiCS itself started with squeezing what was in my brain out of it first, and ends up in a general-purpose package. It never systemized a user’s management method somewhere into a package. Because of that, you can use the whole system from a variety of standpoints and viewpoints. I guess that’s one of the factors that makes people feel TPiCS difficult.
■ To begin with, we are going to think about the relationship between sales plan and production schedule.
There are companies who have what is called “sales plan” and who don’t have one in the first place. Among those who have a sales plan, there are companies whose plan is good in terms of the degree of accuracy (Case 1,) and whose plan is bad (Case 2.) There are also companies who can approximately figure it out from the past experience even without any sales plans (Case 3,) and who don’t know what’s coming at all (Case 4.)
If you create the production schedule with enough time in the Case 1, you would consult it a great deal.
But if you are in the Case 4, if the degree of accuracy of the schedule is bad and not reliable, or if you only have the schedule for a very short period of time if any, you would find it difficult to use the information.
To make the explanation simple, this report only covers the Case 4 with instant delivery for consideration.
Once you understand my explanation and the functions of TPiCS-X, I’m sure that you will understand the most important concept of the MRP calculations in TPiCS-X, and a concrete way to meet the contradictory request of making “scheduled production” while making “production to meet your customers’ needs.”
■ I’m going to explain the operating method of the MRP calculations in TPiCS-X based on this use.
The MRP calculations of TPiCS-X allow you to enter customer orders and to perform the MRP calculations on a daily basis while temporarily fixing the production schedule of products. (To tell you
the truth, the temporary fix is possible not only on “products” but also on parts and semi-finished goods. It’s a very important function in the MRP calculations of TPiCS-X, but my explanation
would be complicated if I wrote it. So I’m going to skip such explanation as much as possible in this report.)If you have too many customer orders for the temporarily fixed production schedule to
meet your customers’ needs, or if customer orders stop coming in all of a sudden and inventory goes beyond a setup value, TPiCS-X will let you know that as a report.
Once you notice the shortage and overabundance in inventory, you make changes to the production schedule, considering the leveling and the setup, and perform the MRP calculations again.
Also, the MRP calculations of TPiCS-X allow you to make the schedule with the same quantity as the customer orders’ on the following day after the temporarily fixed period is over. (I guess it is a little difficult to understand here, I will explain it for detail later.) When orders for the current day are issued with the result of the MRP calculations and the final processing is performed, the temporarily fixed period extends one day with the scheduled quantity remaining. Continuing this for a week results in the production schedule before the leveling in the week after next week. After making adjustments to the schedule for the week after next week for the leveling and the setup every Friday, it becomes the final production schedule.
At the same time, you can also review the production schedule for the next week as required.
When you make adjustments to the schedule for the week after next week and if you keep the weekly total for each product unchanged, you can make the schedule that constantly produces just as much quantity as the customer orders’ this week. At the same time as this schedule planning work, you can also adjust the operation capacity. That is, if you had too many orders this week to be able to produce all of them using even the week after next week, you would have to carry it forward to the following week. If you had too few, it may be that you would have to make some extra hot-selling products. These kinds of things are incorporated in the schedule after going through managerial decision-making.
Even if you made the schedule with extra quantities for the week after next week in the process this week, the production schedule from which those are subtracted would be shown in the next week. Therefore, there’s no bias in inventory even if careful attention is not paid to inventory. Once you make the production schedule for products, you have to execute the MRP calculations for the second time. The first MRP calculations only go though the finished goods level and the second ones go through semi-finished goods and parts.
TPiCS-X can be recalculated as many times as you like unless you issue instructions.
By running the operation like this, you can achieve the “scheduled production” with as little inventory as possible, making “production to meet your customers’ needs.”
■ I’m going to explain specific settings and system behavior based on simple “operating assumptions” here.
① The production schedule is updated in a weekly cycle (every Friday.)
② There are no forecast or sales plans and the MRP calculations are performed based on customer orders that come in on a daily basis.
③ The customer orders come in for today’s and tomorrow’s shipments.
④ The scheduled production is run for the nearest 2 weeks and the sale is to be reflected in the schedule from the third week on.
⑤ It is assumed that the next day’s instructions will be issued for the work instructions for the product.
⑥ The customer orders for typical products come in 10 pieces per day on an average.
(When you think about this, you can assume 10 pieces are actually shipped out every day in the beginning, and then think over the case where it changes on a daily basis.)
⑦ 5 each of the above products exist in inventory in the beginning.
⑧ In the meantime, assume there will be no lot-sizing.
⑨ There will be no consideration necessary for lead time, either.
⑩ In addition, focus on the schedule for products only.
Orders of 10 pieces with no lot-sizing every day mean that 10 pieces must be produced every day.
Then, the figures for production, sales, and inventory will look like shown below:
Receiving orders of 10 pieces for Monday’s shipment in the evening of the current day (Friday, Day 0,) you expect 10 pieces in the production schedule on Monday in the week after next week (the 11th day) at the MRP calculations. The MRP calculations of TPiCS have a characteristic of making the production schedule to compensate the shortfall on the day right after the fixed period if the scheduled inventory exceeds the standard inventory. Since the scheduled inventory is 95 on the 10th, 10 will come up in the schedule if you set the standard inventory to 105.
The fixed period is set to 11 since 11 days ahead of the current day are to be fixed. Tomorrow’s instructions will be issued, so set it to 1.
With this setting, if you issue an instruction sheet and perform final processing, the plan will be temporarily fixed until the 11th.
10 pieces are shipped out and 10 pieces of products are completed in parallel with that. The actual results for those are to be entered.
Next, let’s assume that the current day becomes Monday and you have a lot of customer orders for today, which results in 13 pieces.
When the MRP calculations are performed, 13 will come up in the schedule on Tuesday, the 12th day this time.
With this continuing on for one week, the quantities of customer orders received every day from the day 0 to the 4th will appear from the 11th to the 15th as the production schedule. Since daily customer order quantities are unequal, some days have much in the production schedule and some days have a little, which means they are not leveled at all. That’s where you have to make adjustments to the schedule on the 5th (Friday,) considering the leveling and the setup.
■ I’m going to think about the standard inventory and the physical inventory now.
In the operating method like this, you have to set the standard inventory to a large value. As you understand it right away, however, what actually remains in inventory must be less. If you have customer orders worth 10 pieces every day, this setting should be about 5.
■ Let me think about the variation of customer orders.
Though you think the standard inventory you set is large enough, this setting unchanged may cause immediate journal writing and changes to the production schedule to happen when big customer orders (more than 15) come in at one time. When considering the variation of quantities of daily customer orders, the standard inventory should be a larger value. On the contrary, if only a small amount of customer orders comes in, the production schedule from the week after next week gets small and is adjusted accordingly.
You might think setting the standard inventory is difficult to a certain extent, but using the “automated improvement function of the standard inventory” in TPiCS-X, you can leave it to the system, too.
■ I’m going to think about the situation where lot-sizing is applied here.
Suppose the lot-size is 30. That results in the production worth about 3 days at one time. In other word, some quantity appears in the schedule (is to be produced) once every three days.
(Suppose initial inventory is 15.)
It is all right that nothing appears in the production schedule on the 11th in the processing for the day 0.
It is all right for today, too, that nothing appears in the production schedule.
When the 2nd (Tuesday) comes, the scheduled inventory becomes 95 on the last day of the temporarily fixed period. And if you set the standard inventory to 105, 1 lot (30 pieces) will appear in the production schedule. In the case of the lot sizing like this, it is obvious that the quantities will appear in the production schedule in the frequency comparable to the customer orders’.
■ I’m going to think about the actual operation image.
We have thought about just one product so far, but we do have a lot of products in reality. We have more variation of quantities of customer orders, too. And we may also have larger lot-sizes. As a result of that, there are some products that will not be produced for a week, and the schedule on a day will have a large figure. You have to make adjustments to it once a week. Keeping the total value of the week unchanged at that time, you learn to constantly have inventory at the set level at the end of every week. On the other hand, even if you adjust the production schedule to change the total value, it will return to the set level of inventory at the end of the following week as it is re-adjusted in the schedule for the following week as long as the standard inventory is not changed.
The schedule for child parts follows the normal f-MRP calculations based on the required quantities calculated from their parent items as long as it is within the period where the schedule for products is temporarily fixed. Parts that have long legs in procurement are calculated in a similar logic to that for products as explained here.
The f-MRP calculations of TPiCS calculate in exactly the same logic for finished goods, semi-finished goods, and purchased end items and materials.
This is the way to achieve the “production to meet your customers’ needs” and the “scheduled production” with as little inventory as possible.