Intended learning outcomes: Describe the reasons for order proposals for production or procurement. Differentiate between the dealing of order proposals for C items and of other items. Explain purchase order release. Explain production order release and describe the availability test of resources.
The order proposal, or planned order, states the goods to be produced or procured, the order quantity, the proposed latest completion date, and — often given implicitly — the earliest start date.
The reasons for order proposals for production or procurement vary:
- An unplanned demand is submitted, that is, demand for customer or production orders not covered by projected available inventory or scheduled or planned receipts. In certain cases, the proposal corresponds to the customer’s demand in terms of quantity as well as delivery date. In other cases, order proposals stipulate production or procurement of a larger batch.
- A purchase requisition is submitted. This is an authorization to the purchasing department to purchase specified materials in specified quantities within a specified time, usually short term (cf. [ASCM22]).
- Stock of an item falls below the order point. Here the planned order proposal stems from medium-term planning. See also Section 11.3.1.
- Net requirements planning specifies production or procurement of a lot of an item. This type of order proposal stems from long- or medium-term planning. See also Section 12.3.1.
There are two possible forms of presenting order proposals: either as simple lists of proposals or as planned orders in the order database. In the case of direct procurement for a customer order, the identification of the order proposal should refer directly to the identification of the order position in the customer order.
If there are only a few order proposals to release, or proposals based on unplanned customer demand, planners will release these individually. Keeping track of orders to be released among numerous order proposals is difficult. It is useful to sort the orders by planner and weekly time window:
- An order proposal for C items in an ABC classification, particularly for goods to be purchased, can be released directly — with the proposed order quantity, proposed latest completion date, and standard supplier. Spot verifications will suffice for these automatically released orders.
- For other items the rhythm of selection, and thus ordering, depends on the items’ importance. This rhythm may be periodic, such as daily, weekly, biweekly, or monthly. However, an order may be released as soon as a demand event occurs.
In collective materials management, all items belonging to the same planning group are checked at the moment of order release. Joint ordering avoids procurement costs that are lot-size independent, but leads to additional carrying costs due to premature procurement.
Purchase order release does not necessarily have to be a formal procedure. According to specific agreements, certain suppliers can take on themselves the restocking of C items in the warehouse. This is common practice not only in the grocery retail trade but also with suppliers of consumable material in industrial production (compare the Kanban technique in Section 6.3).
A purchase order, for procurement both of goods and work (see Section 1.2.1), essentially corresponds in form and structure to a customer order.
As the current trend is to shorten administrative times between manufacturer and supplier, techniques supported by information technology are coming into increasing use. The detailed order data structures behind the “order” business object in Section 1.2.1 have undergone increasing standardization. This has led to the development of the EDI/EDIFACT interface. Thanks to Java programming and the CORBA standard (Common Object Request Broker Architecture), an increasing number of organizations are now making use of transmissions via the Internet.
Production order release reasonably comprises, for every order, a check on availability, at least of critical resources. This also holds for order proposals stemming from long, or medium-term planning, even if availability checks have been carried out earlier.
An availability test consists of:
- Calculation of lead time, to determine the start dates for operations at critical work centers, as well as dates for the demand of critical components. We presented the techniques for calculating lead time in Sections 13.3 and 13.4.
- Availability test of the components on the start date of the operation for which they are needed. We outlined the techniques for this in Section 12.1. As an aside, in releasing contract work, the availability of any accompanying material that must be provided for the (external) operations must also be checked.
- Availability test of required capacity on the start date of operations using techniques that were outlined in Sections 14.2, 14.3, 15.1.2, or 15.1.3.
Even with computer support, checking resource availability is a complicated and lengthy process. It is often impossible to gain rapid and exact results. As a common compromise solution, planners will test at least component availability at the start date of the order or the relevant partial order.
Continuation in next subsection (15.1.1b).
Course section 15.1: Subsections and their intended learning outcomes
15.1 Order Release
Intended learning outcomes: Describe order proposals for production and procurement as well as order release. Explain load-oriented order release (Loor) and capacity-oriented materials management (Corma).
15.1.1 Order Proposals, Order Release for Procurement and Production
Intended learning outcomes: Describe the reasons for order proposals for production or procurement. Differentiate between the dealing of order proposals for C items and of other items. Explain purchase order release. Explain production order release and describe the availability test of resources.
15.1.1b Production Order Release: Allocation, Staging, Accompanying Documents and Container Logistics
Intended learning outcomes: Disclose issues linked with allocation and staging. Identify accompanying documents such as the traveling card and container logistics such as the two-bin inventory system.
15.1.2 Loor — Load-Oriented Order Release
Intended learning outcomes: Produce an overview on the principle of the technique and the planning strategy. Describe the regulator analogy for load-oriented order release. Differentiate between time filter and load filter.
15.1.2b Load-Oriented Order Release: Example and Evaluation
Intended learning outcomes: Explain the steps of load-oriented order release. Present an evaluation of the technique. Identify its limitations and typical areas of application.
15.1.3 Corma — Capacity-Oriented Materials Management
Intended learning outcomes: Disclose the main objective of mixed-mode manufacturers. Produce an overview on the three parts of the generic principle of the technique.
15.1.3b Corma, Part 1: Criterion for early order release, and Part 2: Scheduling technique for control of operations.
Intended learning outcomes: Identify the calculation of anticipation time in the stochastic case. Explain the critical ratio of an order.
15.1.3c Corma, Part 3: Coupling shop floor control with materials management
Intended learning outcomes: Describe rescheduling of orders in process according to current materials management status
15.1.3d Corma: Example and Evaluation
Intended learning outcomes: Present an example and an evaluation of the technique. Identify its limitations and typical areas of application.
