How to Best Understand Make to Stock

This Article Covers

  • The Make to Stock Definition
  • The Relationship Between the Sales Order and the Replenishment Trigger
  • Where Make to Stock Environments Apply

Definition-2

Make to Stock Definition

Make-to-Stock (MTS, a.k.a. Build-to-Stock or Build-to-Forecast): Here the replenishment is triggered by a forecast. Probably misnamed, MTS should probably have been called make to forecast, as the forecast is the trigger for replenishment – which of course results in stock until the actual sales order arrives.

Make to stock, or sometimes called (MTS) is one of the major manufacturing environments. The others are

  • Assemble to order
  • Engineered to order
  • Make to order.

Make to stock is the most common of the manufacturing environments. While little discussed, make to stock allows for economies of scale in procurement, manufacturing, and distribution, which lowers the unit costs of items.

The Relationship Between the Sales Order and the Replenishment Trigger

All procurement and production are performed before the sales order is received. By contrast, both Engineering-to-Order and Make-to-Order all of the procurement and production is performed after a sales order is received.

And that is with the products in the BOM for Engineering-to-Order being procured and produced the latest after the sales order is received as, at the time of the receipt of the sales order, it is not known exactly what is to be built.

In MTS, the replenishment is triggered on the basis of a forecast.

Where Make to Stock Environments Apply

In markets or submarkets where customization is more important than volume or cost to the consumer, production can be postponed until after the sales order.

In markets or submarkets where costs are more important, and there are little in the way of benefits of customization for the product make to order is not an option.  A good example being light bulbs for instance. Here production should be performed before the receipt of the sales order. It should also be observed that multiple manufacturing environments are employed for the same category of product. For instance, one can either buy a dress shirt from Brooks Brothers in a store, which was produced with a make to stock manufacturing environment or can provide one’s measurements to a tailor and have the shirt custom made in a make to order manufacturing environment.

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork MRP & S&OP Explorer for Tuning

Tuning ERP and External Planning Systems with Brightwork Explorer

MRP and supply planning systems require tuning in order to get the most out of them. Brightwork MRP & S&OP Explorer provides this tuning, which is free to use in the beginning. See by clicking the image below:

References

Make to order, assemble to order and more topics related to replenishment triggers are covered in my book.

Replenishment Triggers Book

Replenishment Triggers

Getting the Terminology Right

The terms make to order and make to stock roll quickly off of people’s tongues regardless of their knowledge of other supply chain conditions. Many executives speak about “moving to make to order environment.” For most companies, this simply is not realistic. And many businesses that say they do make to order/configure to order/engineer to order are doing assemble to order planning.

The Universality of The Manufacturing Environment Type

These terms are specific types of manufacturing environments. They are embedded in almost all supply planning applications ranging from the most basic ERP to the most sophisticated advanced planning system. However, each manufacturing environment leads to some implications, implications that are most often not completely understood.

Getting Clear on Requirements Strategies

Requirements strategies are what control what drives the replenishment of supply in systems. In most cases, the need strategies control whether the forecast or the sales order triggers replenishment.

This book cuts down the amount of time that is required for people in companies to understand the relationship between manufacturing environments (the business) and requirements strategies (the technology setting in the supply planning application).

By reading this book you will learn:

  • What are the major manufacturing environments and what determines which manufacturing environment a company follows?
  • How do the different manufacturing environments impact how inventory is carried?
  • How are the various production environments configured in software?
  • What is mass customization, and how accurate is useful is this concept in real life?
  • What is the interaction between variant configuration and the manufacturing environment and the bill of materials?

Chapters

Chapter 1: Introduction
Chapter 2: The Different Manufacturing Environments
Chapter 3: Triggering Replenishment
Chapter 4: Requirements Strategies
Chapter 5: The Make to Order Illusion
Chapter 6: The Limitations to the Concept of Mass Customization
Chapter 7: Forecast Consumption
Chapter 8: Variant Configuration in SAP ERP
Chapter 9: Conclusion

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

software_ratings

How to Best Understand Engineered to Order

Executive Summary

  • Engineer to order or engineering to order has a specific definition.
  • Sales orders must be submitted consistent with engineered or configuration order as it relates to replenishment trigger.

Introduction to Our Engineer to Order or Engineered to Order or Engineering to Order Definition

Engineer to Order or Engineered to Order or Engineering to Order, or sometimes called (ETO) is one of the major manufacturing environments. Engineered to order is an extension to make to order where the company receives specifications from the customer. In this article you will learn how engineered to order is managed.

The Major Manufacturing Environments

The primary manufacturing environments are the following:

  • Assemble to Order
  • Make to Order
  • Make to Stock
  • Engineered to Order

An Engineer to Order or Engineered to Order or Engineering to Order approach is one in which a company designs and manufactures a product based on very specific customer requirements.

The Similarity Between Engineered to Order and Make to Order

In both engineered to order and make to order all of the procurement and production is performed after a sales order is received. With the products in the BOM for Engineering to Order being procured and produced the latest as, at the time of the receipt of the sales order, it is not known precisely what is to be built. However, with Assemble to Order, procurement is performed before the sales order is received; however, production is performed after the sales order is received.

At the heart of the question of which manufacturing environment to use, is the tradeoff between not producing items that will not be in demand versus the efficiency of producing items in large quantities.

The Unique Manufacturing Environment of Engineer to Order or Engineered to Order or Engineering to Order

It is confusing as to what exactly engineer to order is on supply planning. If “what is to be produced” is not yet agreed upon, it would seem strange that a sales order would be created at all. There is a type of transaction in ERP systems, as well as CRM systems called a quotation. The quotation precedes the sales order. A quotation is essentially a request for information – which is normally a price but can be other information as well.

If the sales order has to go through a significant amount of coordination and estimation work, a supply chain system does not need to see the sales order. It can rely on the forecast. The quotation would be the right transaction to use when there is a higher probability that the inquiry will lead to a sales order. Quotations do not flow through to supply planning, as they are not committed demand.

The degree of interaction between companies on engineered to order is explained in the following quotation from Arena Solutions.

“Typically with the engineered to order approach, production information and specifications are constantly moving between the ETO company and the customer. Because most product data (design specifications, requirement files, engineering changes, etc.) is often tossed back and forth several times between the ETO company and the customer, either party can become confused if the exchange of product information is poorly managed. For example, it might be difficult to answer questions like how much and what inventory should be lined up for production. Because engineere to order products are well-tailored, they are often built from difficult to source parts, expensive parts and highly engineering components. Acquiring the necessary product components can be both a time consuming and costly endeavor causing issues before and during production runs.”Engineering to Order

Submitting Sales Orders that Must Be Engineered/Configured to Order

In some industries, particularly in products with electrical components, it turns out it is quite common for the companies to submit sales orders to their suppliers that must be engineered or configured before production can begin. In these situations, a high percentage of these orders do eventually become built. In the case where the sales order has a high likelihood of coming to fruition, it does make sense to enter the demand as a sales order. However, a primary benefit of this is that it would allow the supplier to procure the material in the bill of materials before the production date, providing a faster order cycle time to the customer. In this way, engineering to order can just be considered as make to order but with a much greater delay in production and procurement after the sales order is created.

What is Engineered to Order

Engineered to order is a perplexing manufacturing environment for supply chain management for the following reasons:

Reason 1: Changing the Rules of the Transaction Location

In all other manufacturing environments, the sequence is for the bill of materials or recipe to be created by engineering and when complete to be transferred to the ERP system. Up until this time, the supply chain systems do not even see the bill of materials or recipe. This is a good thing because, during product development, the bill of material or recipe are going through constant revision. Supply chain systems have enough problems with managing BOMs and recipes without having to deal with some intermediate bill of materials and recipes that will never be sold. Engineering to order switches the typical sequence by adding the sales order into the supply chain system before the bill of material or recipe is complete.

For the supply chain system to make sense of the sales order, it is necessary to assign a sales bill of material or sales recipe to the sales order. This is a proxy for the real bill of material because the final bill of material is not known at the time that the sales order is accepted. Once the final bill of material is determined, a new sales order can be created and the old sales order deleted. This new sales order is assigned to the final BOM version, and this can be done when the final configured product is ready to be scheduled for procurement and production.

Reason 2: The Missing Replenishment Trigger

Engineer to Order it is the only manufacturing environment where neither the forecast nor the sales order initiates production or procurement. Rather, there is a further confirmation step, often quite a bit after the sales order is accepted, that finally initiates production and procurement. Supply planning systems (both ERP and specialized external systems) typically use demand (sales orders or forecasts) or the consumption-based approach – such as when the planned or actual inventory level drops below a reorder point to initiate production and procurement. For this reason, the trigger is typically performed manually.

Optimally the interaction on the bill of material or recipe will be managed through a dedicated bill of material or recipe management systems – often referred to as a PLM or product lifecycle system. In fact, unknown to many people with a supply chain rather than product management background, the ERP system should never be the system of record for the BOM or recipe.

Engineer to Order and Configure to Order

Because the end product tends to be complex, customers engage with the engineer to order company throughout the entire design and manufacturing phases to ensure their specifications are met. From the supply chain perspective, there is little difference between engineer to order and make to order. In both cases, the company should not be purchasing input items to make the finished good until a sales order is placed. However, the engineering lead time, of course, precedes the order lead time.

Configure to order can be seen a midway point between make to order and engineer to order. That is under configure to order product is configured using a combination of parts that are already in stock. All that remains is for the customer to select the options. A good example of configuring to order is a computer purchasing web page.

Imagine if a good finished product has options in 10 different categories (color, trim level, etc..). If the ten different categories have an average of 4 options, this will come out to 1,048,576 BOMs – which would not be feasible to keep as individual BOMs in a system. Unless one has worked with configurable products, it can be difficult to relate to environments where there are so many options. For instance, BMW has 2500 possible wiring harnesses; the different wiring harnesses are primarily driven by the specific options that are selected by the variant – with the power required for some combination of components in some variants but not others. More examples of the available combinations of particular parts of a BMW include the following:

  • 18 owner’s manual languages
  • 500 side-mirror combinations
  • 1,300 front-bumper combinations
  • 5,000 possible seat combinations
  • 9,000 center-console combinations

Configuring can rapidly become quite complicated and requires configure to order software or variant configuration software.

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork MRP & S&OP Explorer for Constraining

Improving Your Constraint Planning

Brightwork Research & Analysis offers the following supply planning tuning software with a new approach to managing capacity constraints, which is free to use in the beginning. See by clicking the image below:

References

I cover make to order, assemble to order and more topics related to replenishment triggers in the following books.

Replenishment Triggers Book

Replenishment Triggers

Getting the Terminology Right

The terms make to order and make to stock roll quickly off of people’s tongues regardless of their knowledge of other supply chain conditions. Many executives speak about “moving to make to order environment.” For most companies, this simply is not realistic. And many businesses that say they do make to order/configure to order/engineer to order are doing assemble to order planning.

The Universality of The Manufacturing Environment Type

These terms are specific types of manufacturing environments. They are embedded in almost all supply planning applications ranging from the most basic ERP to the most sophisticated advanced planning system. However, each manufacturing environment leads to some implications, implications that are most often not completely understood.

Getting Clear on Requirements Strategies

Requirements strategies are what control what drives the replenishment of supply in systems. In most cases, the need strategies control whether the forecast or the sales order triggers replenishment.

This book cuts down the amount of time that is required for people in companies to understand the relationship between manufacturing environments (the business) and requirements strategies (the technology setting in the supply planning application).

By reading this book you will learn:

  • What are the major manufacturing environments and what determines which manufacturing environment a company follows?
  • How do the different manufacturing environments impact how inventory is carried?
  • How are the various production environments configured in software?
  • What is mass customization, and how accurate is useful is this concept in real life?
  • What is the interaction between variant configuration and the manufacturing environment and the bill of materials?

Chapters

Chapter 1: Introduction
Chapter 2: The Different Manufacturing Environments
Chapter 3: Triggering Replenishment
Chapter 4: Requirements Strategies
Chapter 5: The Make to Order Illusion
Chapter 6: The Limitations to the Concept of Mass Customization
Chapter 7: Forecast Consumption
Chapter 8: Variant Configuration in SAP ERP
Chapter 9: Conclusion

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

software_ratings

How to Best Understand Assemble to Order

Executive Summary

  • Assemble to order, engineer to order, make to order is defined by when the replenishment trigger occurs versus the sales order.
  • We cover all of the manufacturing environments.

Introduction to Assemble to Order

Assemble to order, or sometimes called (ATO) is one of the major manufacturing environments. The others are:

  • Make to stock
  • Engineered to order and
  • Make to order.

Using this environment, companies will have some sub-assemblies already built, stocked and ready to assemble based on the customers’ requirements.

Once an order is received, final assembly begins, and the product is delivered to the appropriate specifications.

  • A key advantage of an ATO environment is minimal inventory is required, and the final product can be delivered quickly. The disadvantage is that the lead time to customer delivery is longer.
  • The disadvantage is that the lead time to customer delivery is longer.

An essential feature of the various manufacturing environments is that the relationship between the demand signal and the beginning of production or procurement is not always the same for all of the products in the BOM or recipe.

Engineer to Order and Make to Order After the Sales Order is Received

In both ETO and MTO all of the procurement and production is performed after a sales order is received – with the products in the BOM for Engineering-to-Order being procured and produced the latest as, at the time of the receipt of the sales order, it is not known exactly what is to be built. However, with Assemble to Order, procurement is performed before the sales order is received; however, production is performed after the sales order is received.

At the heart of the question of which manufacturing environment to use, is the tradeoff between not producing items that will not be in demand versus the efficiency of producing items in large quantities.

Assemble to Order and Supply Chain Planning

How the forecasts and orders are managed or used by the supply planning system is normally referred to as the requirements strategy. In assemble to order manufacturing environments, the forecast at the finished good is not relevant for supply planning, because assemble to order environments do not use a forecast at the finished good level to drive replenishment.

This does not mean the forecast is not generated, a forecast will probably still be generated by the system – and possibly used for other purposes outside of supply planning.

At their essence, requirements strategies control what drives the replenishment. The requirements strategies must be set to model the manufacturing environment or manufacturing environments of the company.

Our Work on Assemble to Order

We are the most prominent research entity that tells the real story of how to assemble to order works.

We are published in the space. Most consulting companies don’t understand how to test for whether a product should be set as assemble to order or not. However, we have a very robust way of determining this through analyzing a company’s data.

Moving to full make to order is only feasible for a small fraction of the companies that would like to move to it, but assemble to order is available to many more companies than take advantage of it. We can show you how, and provide the mathematical justification for the change.

For more information fill out the form at the end of this page.

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork MRP & S&OP Explorer for Tuning

Tuning ERP and External Planning Systems with Brightwork Explorer

MRP and supply planning systems require tuning in order to get the most out of them. Brightwork MRP & S&OP Explorer provides this tuning, which is free to use in the beginning. See by clicking the image below:

References

Make to order, assemble to order and more topics related to replenishment triggers are covered in my book.

Replenishment Triggers Book

Replenishment Triggers

Getting the Terminology Right

The terms make to order and make to stock roll quickly off of people’s tongues regardless of their knowledge of other supply chain conditions. Many executives speak about “moving to make to order environment.” For most companies, this simply is not realistic. And many businesses that say they do make to order/configure to order/engineer to order are doing assemble to order planning.

The Universality of The Manufacturing Environment Type

These terms are specific types of manufacturing environments. They are embedded in almost all supply planning applications ranging from the most basic ERP to the most sophisticated advanced planning system. However, each manufacturing environment leads to some implications, implications that are most often not completely understood.

Getting Clear on Requirements Strategies

Requirements strategies are what control what drives the replenishment of supply in systems. In most cases, the need strategies control whether the forecast or the sales order triggers replenishment.

This book cuts down the amount of time that is required for people in companies to understand the relationship between manufacturing environments (the business) and requirements strategies (the technology setting in the supply planning application).

By reading this book you will learn:

  • What are the major manufacturing environments and what determines which manufacturing environment a company follows?
  • How do the different manufacturing environments impact how inventory is carried?
  • How are the various production environments configured in software?
  • What is mass customization, and how accurate is useful is this concept in real life?
  • What is the interaction between variant configuration and the manufacturing environment and the bill of materials?

Chapters

Chapter 1: Introduction
Chapter 2: The Different Manufacturing Environments
Chapter 3: Triggering Replenishment
Chapter 4: Requirements Strategies
Chapter 5: The Make to Order Illusion
Chapter 6: The Limitations to the Concept of Mass Customization
Chapter 7: Forecast Consumption
Chapter 8: Variant Configuration in SAP ERP
Chapter 9: Conclusion

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

software_ratings

How to Best Understand Supply Chain Multisourcing

What This Article Covers

  • How Multisourcing Works
  • The Reasons for Multisourcing
  • The Reality of Multisourcing

Definition-3

Introduction

Within supply planning systems, in the vast majority of instances, single locations are assigned to fulfill the demand of internal locations. Multisourcing is the opposite of this and can mean the fulfillment of demand from more than one, but up to many sources of supply.

  • Multisourcing is the ability for a supply planning system to intelligently choose between alternate sources of supply. This can apply both to the selection of suppliers as well as to the selection of a source of supply along the supply network for internal locations.
  • The functionality’s driving logic can be multidimensional, from total costs to meeting order dates, etc..

The Reasons for Multisourcing

  • One common reason for multisourcing is when one location is the primary location, but cannot handle the capacity of the order, then the supply planning system would move to a second or even third location in order to satisfy the demand.
  • Another reason can be to spread, by rough percentages, the total demand among various sources of supply in order to meet contract responsibilities.

The Reality of Multisourcing

Very few supply planning applications can actually perform multisourcing. And I am unaware of any ERP system that can do this. Some applications like SAP SNP that are sold on the ability to perform multisourcing actually cannot practically do so because of the computation time, and therefore after great expense, the functionality is turned off by companies that implement it.

For this reason, in the vast majority of instances, multisourcing continues to be a manual decision and a change made to the purchase order or stock transfer. Sourcing teams within companies contain individuals who know what the various sources of supply are. They alter the purchase order or stock transfer to account for the need.

Multi sourcing is a motivator for companies to implement cost optimization, as it is stated that the cost optimizer can be used to perform multi-sourcing. It should not be simply assumed that your company will be able to get multi-sourcing to work. Still, multi-sourcing is a major motivating factor for the selection of cost optimization as a method of supply planning.

Multi-Sourcing Due Diligence

Before merely assuming your company will be able to enable multi-sourcing successfully, and therefore choosing cost optimization, it makes sense to evaluate the problems other companies have had in activating this functionality and the likelihood your company has in doing the same.

Introduction to Multi-Sourcing

One of the exciting features of software selection is why companies select one method of supply planning over another.

Primary reasons companies select cost optimization are:

  • To perform constraint-based planning.
  • To perform multi-sourcing.

Constraint-based planning is the ability to restrict capacity. Primarily in the production resources. Although hypothetically companies are told, they will be constrained by other supply chain constraints. Constraints like transportation and warehousing.

Multi-Sourcing

Multisourcing is the ability to pull sourcing from multiple locations and to make decisions based upon costs. It is easy to setup locations as sources of supply for an area, and this is performed in all supply planning systems, through the master data setup by making the locations valid to and from shipping point. The logic for when to source from one location versus another and making this match the business requirements is where the trick comes. The way that cost optimization accomplishes this is with the combination of transportation lane costs and resource constraints.

The Multi-Sourcing Requirement

In the perfect state, one location would have a higher cost to supply the second location. However, when the primary sourcing location runs out of capacity, the optimizer, in concept, will then move to the secondary source of supply, without the planner having to do anything. The diagram below can be used to help understand this.

In this scenario, two producing locations have been set up as sources of supply for Location A, which is a DC. If the requirements are within location B’s capacity, location B fulfills the requirements from location A, because the transportation lane cost is only $1 per mile, versus $2 per mile as with location C. When the costs are set up in this way, nothing further is needed to be done. The system will naturally source from location B.

However, if in any one period, the requirements are higher than 100 units, location C will begin to serve as a source of supply to location A.

If the resource that produces the product for location A goes down for maintenance, the resource has no capacity in location B, and C becomes the sole source of supply for this material to location A.

A major reason this is so appealing is that this hypothetical example auto-adjusts. Executive decision makers love this idea and foresee great cost savings from such a system. However, the reality of what tends to occur with multi-sourcing is quite a bit different from this hypothetical example.

The Reality of Multi-Sourcing in SAP

The fact is, in SAP SNP, at least few companies make the jump to multi-sourcing. There are several reasons for this, and these reasons should be considered when selecting both a supply planning method as well as selecting software.

  1. SNP is a very high maintenance application. This means that there are always many other issues to fix and other things to focus on before multi-source can be reviewed. It can and often is years of fixing problems and focusing on other things until multi-source can be reconsidered.
  2. Multi-source significantly increases the run time of the optimizer.
  3. Several clients, I have had that started out with multi-source turned on, ended up turning it off because of the run-time specifically.
  4. Turning on multi-sourcing in addition to getting resource constraints right and keeping them updated is a heavy burden for even the biggest companies, and both of these capabilities must be present in order for multi-sourcing to work. Therefore, while seeming relatively simple in concept, it is, in fact, one of the most evolved uses of cost optimization for supply planning.

Conclusion

The assumption that a company will be able to multi-source with a cost optimizer drives a decision to the cost optimization method over others. It is not an assumption that is practical. To perform multi-sourcing with SAP SNP, a company must maintain the master data. They must do this for the multi-source option. But must also spend on the servers to make the multi-sourcing model run. In short, multi-sourcing is expensive to do.

If companies are not willing to support this expensive solution, it makes little sense to head down this path. Right now, across the US, there are plans to turn on multi-sourcing in supply planning applications, that may never work properly. This is one of the major areas of cost optimization that promises great things. But which companies are not able to successfully implement.

Connections

Multi-plant planning is considered (by this site) to be the second method within the Superplant Concept (see link for definition).

Remote Supply Planning Consulting

  • Questions About This Area?

    The software space is controlled by vendors, consulting firms and IT analysts who often provide self-serving and incorrect advice at the top rates.

    • We have a better track record of being correct than any of the well-known brands.
    • If this type of accuracy interests you, tell us your question below.

Brightwork MRP & S&OP Explorer for Tuning

Tuning ERP and External Planning Systems with Brightwork Explorer

MRP and supply planning systems require tuning in order to get the most out of them. Brightwork MRP & S&OP Explorer provides this tuning, which is free to use in the beginning. See by clicking the image below:

References

Superplant Book

 

SUPERPLANT

Superplant: Creating a Nimble Manufacturing Enterprise with Adaptive Planning Software

What is the Superplant Concept?

This book addresses several production and supply planning software functionalities that are all related to the location-based adaptability of the supply chain planning application (multi-plant planning and subcontracting, and contract manufacturing planning).

Solving a Historic Weakness in Production Planning and Scheduling Software

This adaptability is a historical weakness of both advanced planning applications as well as ERP systems. Some of this functionality is rarely found in commercially-available applications, while other functionality is more commonly found but ‘s hard to implement. This book explains these how these multiple functionalities can be leveraged to provide the ultimate in planning flexibility in both supply and production planning.

Why This Book is Unique

The only book about planning for a “Superplant,” by the author who coined the term.

In an environment of increasingly globalized manufacturing, a very long production line that spans the globe is more common than ever. For an increasing number of corporations, multi-plant planning is a reality. “Superplant” describes the ability to plan separate locations as if they were part of one giant plant – or superplant, and is the more accurate modeling of location interdependencies for production and supply planning than is provided by standard advanced planning functionality.

This book delves into the three advanced functionalities that must be enabled for superplant planning: multi-plant planning, subcontracting and multi-source planning. By reading this book you will:

  • Investigate how multi-site planning works from a design perspective.
  • Learn about the functionality that exists to specifically address multi-plant planning and understand why most supply planning software can do nothing with multiple plants.
  • Explore in-depth the PlanetTogether application, which targets the unique planning requirements of a superplant.
  • Learn how to set up master data objects to support multi-plant planning functionality.
  • Improve Key Performance Indicators (KPIs) through proper deployment of multi-plant planning functionality.
  • Examine how subcontracting, and contract manufacturing fit into the superplant concept

Who is This Book For?

This book was written for those with interest in leveraging leading approaches in the supply network for planning improvement. The particular audience would range from executive decision makers to software implementers to supply and production planners.

Chapters

  • Chapter 1: Introduction
  • Chapter 2: Understanding a Superplant Conceptually
  • Chapter 3: Multi-plant Planning
  • Chapter 4: Single Versus Multi-pass Planning
  • Chapter 5: Multi-source Planning
  • Chapter 6: Subcontracting Planning and Execution
  • Chapter 7: Combining All Three Superplant Functionalities
  • Chapter 8: The Superplant and the Integration Between ERP and the External Planning System
  • Chapter 9: Superplant-enabled Capable-to-promise
  • Chapter 10: Conclusion
  • Appendix A: Labor Pools in Galaxy APS
  • Appendix B: Time Horizons in Galaxy APS
  • Appendix C: Prioritizing Internal Demand for Subcomponents over External Demand

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

software_ratings

How to Best Understand Supply Chain Inventory

Executive Summary

  • Considering inventory it is necessary to understand why it is held.
  • We cover the components that makeup inventory that is held.

Introduction

In supply planning, inventory is that product that his held in the company’s supply network to satisfy demand. In this article you will learn the various reasons for holding supply chain inventory. 

Inventory and the Manufacturing Environment

Finished goods inventory is necessary for make to stock environments. Component inventory is necessary in assemble to order environments. In make to order environments, if followed faithfully, no inventory should be necessary. Fundamentally inventory is necessary due to the lag between when a product is demanded, and when it can be supplied.

Sales and Statistical Forecasting Combined: Mixing Approaches for Improved Forecast Accuracy

Like the question of what is inventory, the reasons for holding inventory or stock inventory boil down to the fact the lead-times for production and procurement are longer than the customer demand lead-time.

Not all companies need to forecast all of their finished goods products. One example of this is defense contractors that frequently know years in advance, what they will build as they have firm contracts containing quantities and dates from the government.

However, even these companies are still required to create forecasts for the service parts that support the products that they sell.

How is Inventory Positioned? 

Inventory is positioned in different locations by the supply planning system. The assumptions that the software uses to perform positioning very much depends upon the supply planning method selected.

This is described in this article.

What Makes Up Inventory?

The total inventory at a location is the total stocking level, which is made up of cycle stock (the stock held between ordering) and safety stock (the stock designed to ensure there is enough stock to satisfy demand while mitigating demand and supply variability)

  • The total stocking level is not necessarily the correct amount of stock that should be held.
  • This is referred to as the target stocking level (only MEIO vendors refer to it like this, but it is quite a logical term)

What are the Functions of Inventory to Keep Inventory, or the Reasons for Holding Inventory and to Stock Inventory?

Fundamentally the functions of inventory are to allow the company or entity to have something available at the time of sale. The reason for holding inventory or to stock inventory is because, in the vast majority of cases, the lead time required by the customer, or the order period is shorter than the

The reason to keep inventory or to stock inventory is because, in the vast majority of cases, the lead time required by the customer, or the order period is shorter than the replenishment lead time. This is the reason to keep inventory or stock inventory because not to do so will result in not being able to fulfill demand.

Understanding how the various lead time connects is required to get to the essence of the functions of inventory.

The True Reasons for Holding Inventory

This is important to consider the true reasons for holding inventory. This is because many Lean inventory advocates propose that stock can be drastically cut and in fact refer to inventory as a liability.

That is technically inaccurate. When inventory is excessive that portion of the stock is a liability, but it is only really a liability if the inventory is either not used or if it is significantly marked down when sold.

The costs of carrying inventory for short periods of time is quite low. And of course, the cost of having a stock out is much higher than having too much inventory. Therefore the reasons for holding inventory really required illumination.

Conclusion

Inventory is controlled by the supply planning system and is designed to be moved and stocked to satisfy future demand. The reasons for holding inventory are often not fully explained and the costs of maintaining inventory versus not having inventory when it is needed, are in most situations not quantified.

Remote Supply Planning Consulting

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Brightwork MRP & S&OP Explorer for Order Optimization

Order Sizing and Optimization

Order optimization is necessary in order to get the predicted value from ERP and other supply planning applications. The Brightwork MRP & S&OP Explorer does exactly this, and it is free to use in the beginning until it sees “serious usage.” It is permanently free to academics and students. See by clicking the image below:

References

Replenishment Triggers Book

Replenishment Triggers

Getting the Terminology Right

The terms make to order and make to stock roll quickly off of people’s tongues regardless of their knowledge of other supply chain conditions. Many executives speak about “moving to make to order environment.” For most companies, this simply is not realistic. And many businesses that say they do make to order/configure to order/engineer to order are doing assemble to order planning.

The Universality of The Manufacturing Environment Type

These terms are specific types of manufacturing environments. They are embedded in almost all supply planning applications ranging from the most basic ERP to the most sophisticated advanced planning system. However, each manufacturing environment leads to some implications, implications that are most often not completely understood.

Getting Clear on Requirements Strategies

Requirements strategies are what control what drives the replenishment of supply in systems. In most cases, the need strategies control whether the forecast or the sales order triggers replenishment.

This book cuts down the amount of time that is required for people in companies to understand the relationship between manufacturing environments (the business) and requirements strategies (the technology setting in the supply planning application).

By reading this book you will learn:

  • What are the major manufacturing environments and what determines which manufacturing environment a company follows?
  • How do the different manufacturing environments impact how inventory is carried?
  • How are the various production environments configured in software?
  • What is mass customization, and how accurate is useful is this concept in real life?
  • What is the interaction between variant configuration and the manufacturing environment and the bill of materials?

Chapters

Chapter 1: Introduction
Chapter 2: The Different Manufacturing Environments
Chapter 3: Triggering Replenishment
Chapter 4: Requirements Strategies
Chapter 5: The Make to Order Illusion
Chapter 6: The Limitations to the Concept of Mass Customization
Chapter 7: Forecast Consumption
Chapter 8: Variant Configuration in SAP ERP
Chapter 9: Conclusion

Software Ratings: Supply Planning

Software Ratings

Brightwork Research & Analysis offers the following free supply planning software analysis and ratings. See by clicking the image below:

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