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

5.7.4c Scenario: Master Planning Case — Procurement Plan and Animated Solution

Intended learning outcomes: Work out and explain the resulting procurement plan, on the basis of a long-term sales plan of a company in the wood industry. Enjoy the Animated Solution.

Continuation from previous subsection (5.7.4b)

Task b: Procurement plan: The management at Forest Clear Co. has asked you to give them a rough estimate of the quantity of raw material that Planing Co. will order from them in the next 12 months. As upper management at Planing Co. has just recently decided to build a partnership relationship with this timber supplier, they expect you to respond to Forest Clear by tomorrow at the latest. Your answer will depend on which of the three variants of the production plan you decide is the best.The raw material — the timber — is the same for all four final products. It is procured and calculated in units of cubic meters. However, as Forest Clear supplies boards of 100-mm width, 50-mm height, and 5-m length only, Planing Co. has to cut the boards to precut panels (see Figure before the precut panels can be planed. Because of the dimensions of the final products, two to three precut panels can be obtained from each raw board (see Figure The raw material must be available in the same month as the final products.

Fig.        Possible ways to cut the raw boards into panels.

Create a formula for calculating the raw material requirements for a given production plan. Hint: Derive the quantity of raw material in cubic meters (the wood boards) in dependency upon the specific final product, which is given in units of square meters. Company management is only interested in the total raw material requirements per month in Figure (the raw material requirement per product is important only to establish the subtotals).

Fig.        Procurement plan: raw material requirements.

Solution: For Variant 2 of the production plan, production per month is one-twelfth of the total annual demand. This results in raw material requirements of about 4900 m3 per month.

A mouse click on the icon “go to procurement plan” takes you to calculation of the procurement plan for the chosen variant; once there, click on “calculate.” The upper section shows the production plan for all variants; the lower section shows the raw material requirements. Run the mouse over the product identification numbers in the left-most column to see whether two to three precut panels can be cut out of a raw board.

To create another variant of the production plan, you can click again on the icon “return to production plan” and the raw material requirements can be calculated for that plan as well.

You can view the animated solution on the Internet here.
For all calculations, click on the “calculate” icon.

Course section 5.7: Subsections and their intended learning outcomes

  • 5.7 Scenarios and Exercises

    Intended learning outcomes: Disclose master scheduling for product variants. Calculate the quantity available-to-promise (ATP). Examine an example of the theory of constraints. Elaborate the master planning case.

  • 5.7.1 Exercise: Master Scheduling and Product Variants

    Intended learning outcomes: Determine the degree of overplanning of the number of variants in in the master production schedule (MPS).

  • 5.7.2 Exercise: Available-to-Promise (ATP)

    Intended learning outcomes: Calculate the quantity available-to-promise (ATP), whereupon the master production schedule as well as a list of customers’ orders that have already been promised are given.

  • 5.7.3 Exercise: Theory of Constraints

    Intended learning outcomes: Explain an example of the theory of constraints, whereupon you produce two products, which use the machine capacity of three machines with a certain load. Identify and speed up the bottleneck.