Revision sheet: Operations Planning and Demand Management

📋 Course Outline

1. Matching supply and demand in operations management
2. Classification of demand types: runners, repeaters, and strangers
3. Independent and dependent demand concepts in production
4. Master Production Schedule (MPS) and demand smoothing techniques
5. Bill of Materials (BOM) structure, hierarchical relationships, and dependent demand calculations
6. Lead times and time-phased product structure in production scheduling
7. Material Requirements Planning (MRP) sheets and scheduling details

📖 1. Matching supply and demand in operations management

🔑 Key Concepts & Definitions

• Supply and Demand Matching : The ability of an organization to supply sufficient resources to fully meet consumers’ demand for their products.
• Supply can fluctuate Seasonal demand : Supply variations caused by seasonal factors, such as increased demand for umbrellas during rainy seasons or holiday-related products.
• Supply chain management : The coordination and management of activities involved in sourcing, procurement, conversion, and logistics to meet demand efficiently.

📝 Essential Points

• Matching supply and demand involves providing enough resources to meet consumer needs for products.
• Demand can fluctuate due to seasonal changes, income variations, fashion trends, competitor actions, natural disasters, and raw material price surges.
• Supply can fluctuate because of workforce issues, supply chain disruptions, and operational challenges.
• Effective matching enhances planning stability and resource efficiency.

💡 Key Takeaway

Understanding the dynamic causes of supply and demand fluctuations is essential to effectively align operational resources with market needs.

📖 2. Classification of demand types: runners, repeaters, and strangers

🔑 Key Concepts & Definitions

• Repeaters : Products frequently demanded during specific periods such as Diwali, Christmas, New Year, or Summer Breaks, requiring setup and production of limited quantities.
• Strangers : Never made before.

📝 Essential Points

• Runners are products made continuously every day with optimized processes for quality and flow, representing routine 'bread and butter' work.
• Strangers are products never made before, requiring design attention and possibly facility redesign if demand becomes repetitive.
• Strangers – never made before.
• Optimised processes for quality, low hand time and flow’.

💡 Key Takeaway

Classifying demand types enables operations to customize production approaches for routine, seasonal, and novel products effectively.

📖 3. Independent and dependent demand concepts in production

🔑 Key Concepts & Definitions

• Independent Demand : Demand for finished products driven by marketing and customer orders, which is not directly dependent on the demand for other items.

📝 Essential Points

• Dependent demand refers to demand for components or materials that depend on the production of parent items.
• Understanding the distinction between independent and dependent demand is critical for accurate production planning and supplier management.

💡 Key Takeaway

Differentiating independent and dependent demand clarifies what drives production needs and informs scheduling and procurement decisions.

📖 4. Master Production Schedule (MPS) and demand smoothing techniques

🔑 Key Concepts & Definitions

• Forecast Customer orders Dependent demand : Customer orders that are included in the demand forecast to anticipate future production needs.
• Orders Dependent demand Interplant orders : Orders between different plants to balance production and inventory.

📝 Essential Points

• The MPS integrates multiple demand sources including netted sales forecast, customer orders, dependent demand, and safety stock adjustments.
• Demand smoothing aims to even out demand over future periods to achieve stability, predictability, and resource efficiency.
• Capacity planning within MPS ensures production capacity aligns with smoothed demand to maintain sustainability and resilience.
• Even demand through MPS reduces variability, enabling constant demand and regular supply.

💡 Key Takeaway

Using MPS and demand smoothing techniques stabilizes production flow, enhancing operational predictability and efficiency.

📖 5. Bill of Materials (BOM) structure, hierarchical relationships, and dependent demand calculations

🔑 Key Concepts & Definitions

• Item On-Hand Inventory Dependent Demand : The quantity of a component or item currently available in stock.

📝 Essential Points

• Dependent demand for components is calculated based on parent demand and on-hand inventory, ensuring correct ordering and production quantities.
• Parent items comprise one or more components, and the hierarchical relationships are defined in the BOM.
• The Lowest Level Code identifies the lowest level at which a BOM item appears, which is critical for scheduling and inventory management.

💡 Key Takeaway

Understanding BOM structure and dependent demand calculations is fundamental to precise component planning and inventory control.

📖 6. Lead times and time-phased product structure in production scheduling

🔑 Key Concepts & Definitions

• Lead Time : The total time required to purchase, produce, or assemble an item, including order, wait, move, setup, store, and run times.
• Time-Phased Product Structure : A scheduling method that works backward from the customer delivery date to ensure all components and assemblies are ready when needed for final assembly.

📝 Essential Points

• Time-phased product structure schedules production backward from the customer delivery date to ensure timely completion.
• Clawback can be many times the order margin.

💡 Key Takeaway

Incorporating lead times and time-phased structures enables precise scheduling to meet delivery deadlines efficiently.

📖 7. Material Requirements Planning (MRP) sheets and scheduling details

🔑 Key Concepts & Definitions

• MRP sheets : A tool that converts the master production schedule into a detailed schedule for purchasing raw materials and components, specifying demand, inventory, and order timing.
• 3 Stock on hand : The quantity of inventory available at the beginning of a period, used to calculate net requirements and plan orders.
• Capacity : The production capability or maximum output of a system or resource within a given period, used to plan feasible production schedules.
• Gross Requirements (GR) : The total demand for an item derived from all its parent items, representing the full demand without considering inventory or scheduled receipts.
• Scheduled or Planned Receipts (S/PR) : Orders that are planned or expected to be delivered during a specific period, including incoming shipments from suppliers.

📝 Essential Points

• MRP sheets convert the master schedule into detailed schedules for purchasing and production.
• Gross requirements represent total demand from all parent items, ignoring current inventory.
• Scheduled or planned receipts are orders expected to arrive in a period.
• Planned order receipts specify the quantities and timing of orders to be received.
• Planned order releases determine when and how much to order or produce to meet net requirements, considering inventory and lead times.
• Newlands MRP sheets: MRP tables For A & BItem: A LLC: 0 Period Lot size: 1 LT: 3 PD 1 2 3 4 5 6 7 8 Gross requirements 100 Scheduled receipts Projected on hand 10 Net requirements Planned order receipts Planned order releasesItem: B LLC: 0 Period Lot size: 1 LT: 2 PD 1 2 3 4 5 6 7 8 Gross requirements 200 Scheduled receipts Projected on hand 5 Net requirements Planned order receipts Planned order releases MRP sheets: MRP tables For A & BItem: A LLC: 0 Period Lot size: 1 LT: 3 PD 1 2 3 4 5 6 7 8 Gross requirements 100 Scheduled receipts Projected on hand 10 10 10 10 10 10 10 10 0 Net requirements 90 Planned order receipts 90 Planned order releases 90Item: B LLC: 0 Period Lot size: 1 LT: 2 PD 1 2 3 4 5 6 7 8 Gross requirements 200 Scheduled receipts Projected on hand 5 Net requirements Planned order receipts Planned order releases MRP sheets: MRP tables For A & BItem: A LLC: 0 Period Lot size: 1 LT: 3 PD 1 2 3 4 5 6 7 8 Gross requirements 100 Scheduled receipts Projected on hand 10 10 10 10 10 10 10 10 0 Net requirements 90 Planned order receipts 90 Planned order releases 90Item: B LLC: 0 Period Lot size: 1 LT: 2 PD 1 2 3 4 5 6 7 8 Gross requirements 200 Scheduled receipts Projected on hand 5 5 5 5 5 5 0 0 0 Net requirements 195 Planned order receipts 195 Planned order releases 195 MRP sheets: Alpha Beta Company Item On Hand Scheduled Receipts Lot Size MPS A 10 0 1 100, period 8 B 5 0 1 200, period 6 C 140 0 150 - - - D 200 250, period 2 250 - - - A LT=3 C(3) LT=4 D(2) LT=2 D(3) LT=2 B LT=2 MRP sheets: MRP tables For C & D Item: D LLC: 1 Period Lot size: 250 LT: 2 PD 1 2 3 4 5 6 7 8 Cross requirements Scheduled receipts 250 Projected on hand 200 Net requirements Planned order receipts Planned order releases 200 450 450 115 135 250 250 65 250 250 185 185 185 185 Item: C LLC: 1 Period Lot size: 150 LT: 4 PD 1 2 3 4 5 6 7 8 Cross requirements Scheduled receipts Projected on hand 140 Net requirements Planned order receipts Planned order releases 140 140 140 140 20 130 150 150 20 20 20 270 180585

💡 Key Takeaway

MRP sheets convert the master schedule into detailed schedules for purchasing and production.

📊 Synthesis Tables

Demand Types Comparison

Type	Demand Pattern	Production Focus
Runners	Continuous demand	Optimized processes for quality and flow
Repeaters	Seasonal demand	Limited setup and production
Strangers	Never made before	Design attention and possible facility redesign

⚠️ Common Pitfalls & Confusions

1. Confusing independent demand with dependent demand, which depends on parent items.
2. Misunderstanding demand smoothing as simply averaging demand without considering capacity.
3. Overlooking lead times when scheduling production and procurement.
4. Ignoring hierarchical relationships in BOM when calculating dependent demand.
5. Misinterpreting the role of MRP sheets as only inventory tracking tools.
6. Assuming supply can always fluctuate freely without operational constraints.
7. Confusing time-phased product structure with simple scheduling timelines.

✅ Exam Checklist

1. Understand the difference between independent and dependent demand.
2. Identify demand types: runners, repeaters, strangers.
3. Learn how to develop and interpret a Master Production Schedule (MPS).
4. Apply demand smoothing techniques to stabilize production.
5. Understand BOM structure and hierarchical relationships.
6. Calculate dependent demand based on parent items and inventory.
7. Incorporate lead times into production scheduling.
8. Use MRP sheets to plan procurement and production activities.
9. Determine net requirements and planned order releases.
10. Schedule production backward from delivery dates using time-phased structures.