CPIM Section 1

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CPIM Section 1

• Our emphasis
• Overview of the material on the exam
• What material is easy "review" for Western MM
  students
• What material students might be new or require
  extra study.

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Business Wide Concepts

• Elements of the Supply Chain
• Materials Management Concept
• Operational function divided into 3 groups
• Manufacturing, materials, engineering
• Important concept here is to make people
  accountable, and giving them means to be
  accountable-essential in any company

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Links in the Chain

• Supplier
• Provider of goods and services
• Seller with whom the buyer does business
• Producer
• Manufacturing Organization
• Distributor
• Retailer
• Customer
• Service and Support

4
Organizational Fundamentals

• Internal Organizational Dynamics
• Departmental walls must come down and work
  together as a team

5
Operating Environments

• The Individual markets and manufacturing factors
  that combine to determine the specific operating
  conditions.
• Specifically, how customer requirements,
  manufacturing, engineering, and inventory affect
  each other.

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• Customer Expectations (Basic Requirements)
• Promise Dates are met, Personal level treatment,
  Do everything possible to assist them, Provide
  technical support, Respond quickly to inqueries.
• Cumulative Lead Time
• Longest planned length of time to accomplish the
  activity in question.
• How long the customer will have to wait to
  receive the product.
• Inventory
• Different functions within an organization will
  have different points of view about inventory.
• The common view is that inventory is EXPENSIVE.
• Product Life Cycle
• Life of a typical product has 6 stages.
• Pre-Product Development, Product Development,
  Testing and Introduction, Rapid Growth, Steady
  State, Phasing out.

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Product Life Cycle Flow Chart
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Process Choices

• Project
• Manufacturing of major capital equipment
• Lot/Batch/Intermittent
• Line/Repetitive
• High volumes, Produced on assembly or flow line
• Continuous
• 24 hours a day, 7 days a week

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Impact of Product Design

• The Design for Manufacturability Approach
• Simplification of parts, products, and processes
  to improve quality and reduce manufacturing
  costs.
• Early Manufacturing Involvement (EMI)
• Creating a design team which consists of a
  variety of members from different departments.
• Design engineers, marketing, production, value
  and quality engineers, and production planners.

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Production Environment

• Design/Engineer to order
• Final product design is part of the customers
  lead time.
• Make to Order
• Modify standard product to fit customer
  requirements, Produce products from material
  stocked against a forecast, or Only order the raw
  material and piece parts when customer order is
  received.
• Assemble or Package to Order
• Final assembly only starts when order is received.

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• Make to Store
• Manufacture either against a master schedule
  created from a forecast, or replenishment orders
  to replenish finished goods warehouse and
  distribution network.
• Remanufacture
• Process where worn-out parts are restored to
  like-new condition.

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Financial Fundamentals

• Statements
• Balance Sheet
• Statement of the financial situation at a point
  in time
• Inventory should be valued at the lower of cost
  or net realized value
• Income Statement
• Identifies the income and expenditure for a
  period of time

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Financial Fundamentals

• Three general costs
• Labor, material, overhead
• Activity-based Costing
• Cost accounting system that accumulates cost
  based on activities performed
• Then uses cost drivers to allocate the costs to
  the appropriate area
• Concept of Technology Accounting
• Overhead is allocated as a percentage of machine
  cost and not labor cost

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Financial Fundamentals

• Analysis
• Cash flow
• Compares the timing of money being received with
  expenses being paid
• Profit-when income exceeds costs
• Margin
• Profit Margin sales-fixed and variable cost
• Gross Margin sales-manuf. Fixed and var cost
• Inventory Turns
• Historical Inventory Turns
• Projected Inventory Turns

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MRPII

• Fully integrated planning and control system that
  serves as a master game plan
• Objective is to provide the tools and info for
  people to manage
• Marketing
• Finance
• Manufacturing
• Materials
• Engineering
• Costing
• Management

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Top-Management Planning Tool

• Strategic Business Plan
• Purpose- where company is going and how it will
  get there
• Planning Horizon- plans further out than
  production plan to allow current approaches to be
  followed and new ones started
• Level of Detail- and general families
• Planning Frequency- 6 mos/ annually
• Sales and Operation Plan
• Smaller scope to focus efforts and to achieve plan

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Top-Management Planning Tool

• Master Production Schedule
• Once you have operational plans, they must be
  broken down to know what must be accomplished in
  days
• Anticipated build schedule
• Master Scheduler must balance work load
• Integrated Planning Structure
• All plans are integrated and tied together (see
  page 45)

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Top-Management Planning Tool

• Cross Functional Integration
• MRPII requires company management to work as a
  team, not as individual departments
• Closed Loop (Feedback)
• Planning kept valid at all times through feedback
  from execution functions
• What-If Simulations
• Evaluating alternate strategies
• Financial Data

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Just-In-Time (JIT)

• Process that exposes, prioritizes, and motivates
  the continuous elimination of non-value added
  activities (waste).
• Resulting, in an increased speed or material flow
  from suppliers, through the manufacturing
  processes, and out to the customers.

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Objectives of JIT

• Gain Competitive Advantage
• Improve Responsiveness to Customer
• Achieve Perfect Quality
• Improve Quality of Life
• Improve Flexibility
• Improve Asset Productivity
• Reduce Lead Time
• Reduce Overall Product Cost

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Key Principles of JIT

• Flow Manufacturing
• Anything that stops or interrupts flow is costing
  money and increasing time, thus is wasteful.
• Process Flexibility
• Total Volume, Product Mix, Labor, and New Product
• Quality at the Source
• It is less costly and quicker to build quality in
  at the point of entry, than try to correct
  problems later.
• Continuous Improvement

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• Supplier Partnerships
• Less suppliers, Increased reliability
• Employee Involvement
• Total Productive Maintenance (TPM)
• Dont wait until its broken to service
  machinery.
• Pull Systems (Three Areas)
• Production, Material Control, Distribution
• Kanban Systems Brand Name, Generic
• Work Cells
• Linking together machines and operations
• Cellular layouts reduce move times, eliminate
  queues, cut lead time, reduce space, and simplify
  scheduling.

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Waste and Value-Added Activity

• Basic theory of JIT is to reduce and/or eliminate
  activities that cause waste.
• Activities that cause waste are those that do not
  add value to the process.
• Zero Defect Concept
• Reducing scrap waste through quality control.

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Total Quality Management (TQM)

• APICS A management approach to long term
  success through customer satisfaction.
• TQM is a term used to describe Japanese-styled
  management approaches to quality improvement.
• TQM goes hand in hand with JIT

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Objectives of TQM

• What makes customers satisfied?
• Price or Cost Higher cost vs. Higher Quality
• Quality Certified suppliers reduce inspection
  cost
• Delivery Speed A competitive advantage
• Delivery Reliability Being on time
• Customer Service Response to customer needs
• Flexibility Agile production processes/methods
• Image Positive image creates customer confidence

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Key Principles of TQM

• Problem-Solving Tools
• Costs of Quality
• Internal vs. External Failures, Appraisal,
  Prevention
• Customer Focus
• Determining the customers requirements
• Employee Empowerment
• Gives accountability and creates pride in work
• Continuous Process Improvements (CPI)
• Exposing and eliminating root causes

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Impact of Environment on System Design and
Development

• JIT using MRP
• MRPII is the planning system, where JIT is the
  tool used to perform the daily execution of the
  plan.
• JIT eliminates waste, reduces lead times,
  improves responsiveness to customers, makes total
  process quicker and smoother, and empowers
  employees. This in return makes the execution of
  plan easier and involves the employees in
  managing the daily process.
• Therefore, the plan is met more consistently.

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• Impact of TQM
• Using MRPII and JIT with the total involvement of
  the work force.
• This makes each employee responsible to meeting
  the customers needs.
• TQM integrates itself as a philosophy that
  effects all aspects of the manufacturing process
  and attempts to make sure that all actions are
  performed with the purpose of satisfying the
  customer.

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THANK YOU

• QUESTIONS?