Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

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.

Mixed manufacturing or mixed production is concurrent make-to-stock production and make-to-order production, using a single set of plant and equipment.
Mixed-mode manufacturers are manufacturing companies with mixed production.

Mixed-mode manufacturers produce and sell standard products whereby stocks are carried at various levels of production, including the final product. Standard product manufacturing aims for maximum possible utilization of capacity (cost objective). At the same time, mixed-mode manufacturers also produce goods to customer order, often in one-of-a-kind produc­tion. Here, the manufacturer aims for the shortest possible lead times (delivery objective).

The main objective of mixed-mode manufacturers is on-time delivery. The on-time delivery of custo­mer production orders takes high priority. Stock replenishment orders must be fulfilled on time — as soon as stocks have been depleted. The volume of orders of both types of orders is about the same. Simple logistics would call for separation and segmentation of the produc­tion resources. However, the very strength of some medium-sized organi­zations lies in their flexible planning & control, which allows them to make use of one and the same production infrastructure. They manufacture a relatively wide range of products based on specialized competence in a relatively small number of production processes.

Planning strategy: Manufacturing firms with mixed production re­qui­re a flexible planning strategy. By observing the natural logics of production management as practiced in medium-sized mixed-mode manufactu­rers, the following generic principle could be derived. For convenience, it is called capacity-oriented materials management, or Corma.

Capacity-oriented materials management (Corma) is an operations management principle that enables organizations to play off work-in- process against limited capacity and short lead times for customer production orders. See [Schö95b].

Corma makes intelligent use of capacity that generally is fully utilized but available short term, which leads to balanced loading. This helps to reduce queuing and thus lead times. Essentially, stock replenishment orders are viewed as “filler” loadings, whenever such a capacity is looking for an order. Orders are released periodically, in “packages”, provi­ding for optimal order sequencing, which reduces setup times. Thus, shorter lead times in make-to-order production confront a higher level of work-in-process in make-to-stock production.

The generic principle consists of three parts:

  1. A criterion for order release that releases stock replenishment orders earlier than needed. An early order release is consi­dered as soon as there is available capacity in other­wise well-utilized work centers.
  2. A scheduling technique or scheduling algorithm that for such orders entails work-in-process rather than early stock replenishment. Still, orders will be completed on time. However, customer production orders can be delivered with a minimum lead time. The key is continual reassigning of order priorities by estimating order slack time by (re-)calculation of either the critical ratio or a suitable lead-time-stretching factor of all orders.
  3. A mechanism that couples shop floor scheduling with materials management. This is done by continually rescheduling stock replenishment orders according to the actual usage. The current physical inventory is converted into an appropriate latest completion date for the open replenishment order.

Thus, the Corma principle not only serves to release orders but also supports overall short-term planning & control from the order release to the moment when the goods either enter stock or are shipped to the customer. Long-term planning for goods and capacity is carried out independently of this. It can be based on traditional forecasting techniques: based on historical data for production with frequent repetition, or based on future projections for one-of-a-kind manufacture, for example.

Technique: In general, the generic principle is implemented manually. To do this, the planner uses a set of known planning and control techniques. Each of these techniques can (but does not need to) be supported by functions of conventional PPC software, or simply by personal implementation using Microsoft Excel or similar software. The following describes the techniques of the three parts of Corma in greater detail.

Continuation in next subsection (15.1.3b).

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.