ASCP Recommendations Influenced by Order Modifiers for Make Items

Sankar Das BearingPoint Inc.

Agenda
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ASCP Process Overview Manufacturing Scenarios Planning Parameters Item Parameters Order Modifiers Suggested Parameters for MTO and MTS Items Q&A

ASCP Process Overview
MTO & MTS Products

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Manufacturing Scenarios
• Make to Order (MTO)
Some manufacturing units manufacture products only against customer orders. This is an example of make to order (MTO) scenario. In case of MTO products manufacturing lead time need to be low enough to meet the customer requirements. However organizations may stock sub assemblies used in multiple finished products to enable them to satisfy customer demand within a reasonable time.

Manufacturing Scenarios
• Make to Stock (MTS)
Products are also manufactured in advance expecting future customer orders. This is the example of make to stock (MTS) scenario. Organizations making MTS products are very much dependent on forecast. In such cases forecast accuracy is a very important factor to maintain a cost effective operation. There are manufacturing units which has both MTO and MTS type of products.

Manufacturing Scenarios
MTO & MTS Decision Factors
Depending on different factors like manufacturing lead time, product cost, market demand, competitor’s capability, storage space, change over time, change over cost etc, manufacturing organizations decide to operate the plant as MTO or MTS. The item parameters are to be set accordingly so that the recommendations provided by ASCP support MTO or MTS strategy.

Planning Parameters

Planning Parameters
• Demand Time Fence Control
When this parameter is set ‘Yes’, ASCP will drop all forecast within the demand time fence period. The demand time fence days can be set at item-organization level. Organizations having MTO products will set this parameter ‘Yes’. Even when the Organizations have MTS products, this parameter can still be set ‘Yes’ and the demand time fence days for all the items can be set zero.

Planning Parameters
• Planning Time Fence Control
Planning time fence days can be controlled at itemorganization level. MTS type manufacturing units having higher change over time may not like to change any production scheduling within the planning time fence. For such requirement the ‘Planning Time Fence Control’ can be set as ‘Yes’. In case organizations like to ship all sales order within due date (Enforce Demand Due Date – EDD type plan), ‘Planning Time Fence Control’ should be set as ‘No’ unless the ship date for customer orders is always promised beyond planning time fence days.

Planning Parameters
• Append Planned Orders
When this is set ‘No’, the plan output do not recommend additional planned orders for additional demand. In both MTO and MTS manufacturing scenarios to take care of additional demand it is suggested to set this parameter as ‘Yes’.

• Overwrite
This option works along with ‘Append Planned Orders’. Normally ‘Append Planned Orders’ is set ‘Yes’ for planning MTO and MTS products. ‘Overwrite’ has three different options: ‘All’, ‘None’ and ‘Outside Planning Time Fence’.

Planning Parameters
Overwrite – All
When option ‘All’ is used every time the plan runs all firm and un-firm planned orders are overwritten. MTS types of product are manufactured as per forecast in advance. As forecast is not adjusted frequently, a production schedule is prepared and it is not suggested to change the firm planned orders every time the plan runs. Thus in MTS scenario ‘Overwrite’ option normally will not set as ‘All’. However MTO type of manufacturing plants may need to support immediate customer requirements or change in customer orders. To support a rapid order change process it may be required to change the production scheduling frequently and so ‘Overwrite’ option can be set as “All’.

Planning Parameters
Overwrite – None
‘Overwrite’ option ‘None’ means every time the plan runs all firm planned orders is retained as it is. The un-firm planned orders however are deleted. For MTO type of products due to change in customer orders this option may result in additional stock and thus may not be a best option. For MTS type of product when there is no fixed days of production scheduling process, ‘Overwrite’ option ‘None’ may be used.

Planning Parameters
Overwrite – Outside Planning Time Fence
‘Outside Planning Time Fence’ is an option in between ‘None’ and ‘All’ and may be suitable for most of the MTO, MTS scenarios. When ‘Overwrite’ option is set as ‘Outside Planning Time Fence’, every time the plan runs all firm planned orders within the planning time fence days as defined for the specific items are retained as it is. Firm planned orders beyond planning time fence days and all unfirm planned orders beyond and within planning time fence are deleted. This option will keep the production scheduling intact for certain days decided by the planning time fence of respective items.

Item Parameters

Item Parameters

Item Parameters
• Inventory Planning Method
‘Min-Max’ and ‘Reorder point’ plan are known as ‘Inventory Planning’ method. Unless there is any specific requirement items which are planned by ASCP are set as ‘Not Planned’.

• Make or Buy
For all manufactured items this is to be set as ‘Make’.

• Planning Method
Unless MPS planning process are used, the planning method may be set as ‘MRP/DRP Planned’ so that ASCP can plan these items in both MRP and DRP planning processes.

Item Parameters
• Planner
Planners are persons in the manufacturing organization responsible for planning. A person can be associated with one or multiple planners. Sometimes planners are configured as departments. Planner can be used for grouping of items during releasing from planner work bench. Planners are also used for move order transaction. Planner specific folder will help planners to restrict view of items in the planner work bench for which the planner is not responsible. As planner may vary for same MTO, MTS or Sub-Assembly, planner code may be excluded from the basic item templates.

Item Parameters
• Safety Stock
(1) Non MRP Planned - MTO products are manufactured against sales order and safety stock is not maintained. ‘Safety Stock’ option for MTO products can be set as ‘Non MRP Planned’. In case of MTS items there may be a requirement of maintaining safety stock. This safety stock will bridge the gap created by forecast inaccuracy or will absorb the shock partially or completely due to sudden customer demand. There are two different ways to set the safety stock level (a) MRP Planned Percentage and (b) Fixed Safety Stock Level.

Item Parameters
(2) MRP Planned Percentage - MRP Planned Percentage method is a dynamic way of setting safety stock value. Every time the plan runs the safety stock level is calculated on the basis of the percentage of the average demand over a predefined period. The percentage and the period can be set at item organization level through ‘Bucket Days’ and ‘Percent’ item parameter under General Planning Tab. This option may not be suitable when there are space constraints for stocking of inventory. Under such circumstances organization would like to maintain safety stock at a fixed value and the safety stock item parameter is to be set as ‘Non MRP Planned’. The safety stock level is to be set at user defined item safety stock. Depending on business requirements safety stock levels are reviewed and adjusted from time to time.

• Forecast Control

Item Parameters
There are three options for forecast control (1) ‘None’, (2) ‘Consume’ and (3) ‘Consume and derive’. For MTS and MTO product scenario ‘Consume and derive’ may be used.

• Pegging
There are different options for setting up pegging at item level. The pegging output is influenced by other profile options and pegging option as set in the planning parameter definition. ‘Hard Pegging’ are normally used only in case of project manufacturing scenario. The most flexible way to set the pegging at item level for both MTO and MTS products is ‘End Assembly / Soft Pegging’.

Item Parameters
• Round Order Quantities
This is used to avoid decimal numbers. Once this is set ‘Yes’, planned orders are recommended as rounded up to next whole number.

• Planning Time Fence (PTF)
Planning time fence may be decided by the production scheduling sequences for the specific items. Production scheduling is indicated by firming the respective planned orders. In case the plant uses a specific production scheduling pattern such as scheduling three days in advance, ‘User – Defined’ planning time fence would be a better choice. PTF is low in case of MTO and high for MTS products.

Item Parameters
• Demand Time Fence (DTF)
For MTO products the DTF is to be set high enough (at least greater than planning time fence for scheduling only against customer orders) so that ASCP does not provide any recommendation in near term against forecast. However higher planning time fence will drop the forecast and consequently the dependent demand for sub assemblies and purchased items. Unless there is any specific requirement like planned production output being used for promising shipment date to customer, for MTO products the demand time fence may be set same as planning time fence days. Demand time fence for MTS product are normally set as zero.

Order Modifiers

Order Modifiers
• Order Quantity Minimum
To reduce the product changeover cost and time certain products may always run for some minimum time or quantity. Once this is set, ASCP will recommend planned orders at least for ‘Order Quantity Minimum’ quantity as set for the respective items and will adjust quantity with future demand. ‘Order Quantity Minimum’ are normally set for MTS but not for MTO products.

Order Modifiers
• Order Quantity Maximum
There are different reasons like limited storage capacity or requirements of product mix up plant may not be running some products longer than specific maximum time or quantity. ASCP will not recommend any single planned order more than the ‘Order Quantity Maximum’ value. ‘Order Quantity Maximum’ may be set for both MTS and MTO products.

• Fixed Order Quantity
‘Fixed

Order Quantity’ are used only when products are run for a fixed amount of time. This parameter is normally set for MTS but not for MTO products. Once ‘Fixed Order Quantity’ is set for an item, normally no other order modifiers are set for the specific item.

Order Modifiers
• Fixed Days Supply
This parameter is widely used when organization runs product at certain frequency for both MTS and MTO products. ASCP combines all the requirements for the number of days as set in ‘Fixed Days Supply’ and recommend a single planned order. For MTO products ‘Order Quantity Maximum’ can be set simultaneously with ‘Fixed Days Supply’. In case of MTS products ‘Fixed Days Supply’ can be used along with ‘Order Quantity Minimum’ and ‘Order Quantity Maximum’. ‘Fixed Days Supply’ is normally decided by the production frequency of the item.

Order Modifiers
• Fixed Lot Multiplier
This parameter is used when products are manufactured in multiple of specific quantity decided by truck size, pallet size, bundle size, packing size etc. Depending upon the situation this may be set for both ‘MTO’ and ‘MTS’ products and can be used with ‘Order Quantity Minimum’ , ‘Order Quantity Maximum’ and ‘Fixed Days Supply’.

Suggested Parameters - Planning
Parameters Demand Time Fence Control Planning Time Fence Control Append Planned Orders Overwrite Make to Stock (MTS) Yes For EDD plan set ‘No’. For other type set as required Yes As Required Make to Order (MTO)

Suggested Parameters - Items
Parameters Inv Planning Method Make or Buy Planning Method Planner Safety Stock Forecast Control Pegging Round Order Quantity Planning Time Fence Demand Time Fence Zero MTS Not Planned Make MRP/DRP Planned As Required As Required Non MRP Planned Consume and derive End Assembly / Soft Pegging As Required User Defined -High User Defined – Low Same as PTS MTO

Suggested Parameters – Order Modifiers
Parameters Order Quantity Minimum Order Quantity Maximum Fixed Order Quantity Fixed Days Supply Fixed Lot Multiplier MTS As Required As Required As Required. Others are null Null MTO Null

Number of production frequency days As Required

Q&A
sankar.das@bearingpoint.com