MTO Hierarchy

“Make To Stock” - Many J&J Companies
Make to Forecast - Push
Worst Case - Many Co.’s
6
Make-to-Order Hierarchy(2)
Supplier Materials
Process 1
Process 2
Packaging
s=1
Actual Data Mean = 17 s=3
8
11
14
17
20
23
26
Mean = X s=s
X–3s X–2s
X–s
X
Calculate the Z value for an USL of 25
X+s
X+2s X+3s
Z = USL – X = 25 – 17 = 2.67
s
3
25
14
Required capacity for MTO = 0.0
11
Safety Stock Calculations
Visualizing Variation: Distribution
Demand
20
Stable Demand
Distribution
15
10
Mean Demand
5
0
Weeks
4
Traditional Supply Chain
Plan
For anticipated
demand
Anticipated vs. Actual Demand
Manufacture
According to batch size requirements and ‘local’ efficiencies
0.000108 0.000072 0.000048
–2
0.022750 0.017864 0.013903
0.010724 0.008198 0.006210 0.004661
0.003467 0.002555 0.001866
–1
0.158655
0.135666 0.115070
0.096801
0.617911 0.655422 0.691462 0.725747
0.758036 0.788145 0.815940
1
0.841345 0.864334 0.884930
0.903199 0.919243 0.933193 0.945201
0.955435 0.964070 0.971284
2
variability
10
Exercise: Understanding the Requirements of MTO
1. Determine if Company A and/or B can Make To Order ?
•Company A has a capacity of 3,000 units/month
0.977250 0.982136 0.986097
0.989276 0.991802 0.993790 0.995339
0.996533 0.997445 0.998134
3
0.998650 0.999032 0.999313
0.999517 0.999663 0.999767 0.999841
0.999892 0.999928 0.999952
Z- Factor & Z-Table
The z-factor is the number of standard deviations above the
mean that corresponds to a certain percentage of the total
Tabled Area
Z
area under the normal distribution curve.
13
Z-factor
the number of standard deviations the value-ofinterest is away from the mean
Calculating the Z-factor
Standard Normal Mean = 0
–3Βιβλιοθήκη –2–10+1
+2
+3
Warehouse
Everything that is manufactured
Customer
Needs are not met Order not fulfilled (What the customer does not want, goes into FG)
Push
Push
Push
Push
Upstream locations determine the quantity of product to send to the downstream location - not necessarily in sync with actual customer demand
Shipping
Inventory
HFG/Bulk Inventory
FG Inventory
Customer
Make To
FPorleacnast
Make To Stock-ICP
PSactokacgke
To Order
Postpone-
Mamkeent to
Make To Order
Planning Inventory
•Company B has a capacity of 3,000 units/month
•Customer lead time is 30 days
•Cycle time is 25 days for company A and B
•No projected increase in demand (past demand is representative of future demand)
5
Make-to-Order Hierarchy
Make-to-Order - Pull
Ideal
Postponement - Push/pull
“Package To Order”
Inventory as a Control Point - Pull Inventory as a Control Point - Push/pull
0.8
0.9
–4
0.000032 0.000021 0.000013
0.000009 0.000005 0.000003 0.000002
0.000001 0.000001 0.000000
–3
0.001350 0.000968 0.000687
0.000483 0.000337 0.000233. 0.000159
0.080757 0.066807 0.054799
0.044565 0.035930 0.028716
–0
0.500000 0.460172 0.420740
0.382019 0.344578 0.308538 0.274253
0.241964 0.211855 0.184060
0
0.500000 0.539828 0.579260
•A 98% customer service level is desired
Company A
Product SKU
Month
1
2
3
4
5
6
7
8
9
10
11
12
A
26
35
19
23
22
26
20
18
21
1
0
0
B
78
100
84
75
72
70
57
69
53
53
74
40
C
153
120
56
87
45
63
90
103
84
Mean=
2. Calculate Standard Deviation Tip: Use Excel Function "Stdev"
Std Deviation =
3. Look up Z-factor for a service level of 98% Z factor =
4. Calculate required capacity for MTO with a service level of 98% Required capacity = Mean demand + Z factor x Standard deviation
Outline
2
The MTO Hierarchy
What is a Supply Chain?
The combination of processes from product definition through delivery and payment from the customer. (Includes both information based and physical processes.)
4
0.999968 0.999979 0.999987
0.999991 0.999995 0.999997 0.999998
0.999999 0.999999 1.000000
External Training Sharing
Prepared by: Shang Jie