A master production schedule is used by business organizations as a metric to ascertain whether or not their production (outputs) meets their supply demands (inputs). There are times when a business wants to have a surplus and at others letting inventory dwindle to smaller numbers is optimal.
The idea is to ensure that customers get their orders in a timely manner to retain loyalty, maximize profits, and reduce overhead and direct costs. The Realco Breadmaster Company has a new bread maker in the hopes of increasing their revenue. In question is the cost and efficiency of the new bread maker. The owner of Realco, Johnny Chang, wants a Master Production Schedule (MPS) designed. With the MPS on hand it is clear that Realco will indeed meet their customer’s requirements based on the production available to include the promised shipments in 3 weeks. On the 8th week however, they will have a surplus of inventory.
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Mr. Chang the owner stated that the ending inventory of 51,650 units was too high and should be used as a Reorder Point (ROP) to indicate that there is a problem with overproducing. Fortunately Realco has not overpromised since they are able to meet their customer’s demands with the excess inventory. This does indicate that production numbers need to be readjusted to accommodate consumer demand. According to Marketing Manager Jack Jones, “nearly all orders can be filled within two weeks, so we promise them three weeks. That gives us a cushion, just in case. (Bozarth & Handfield, 2008). The thinking behind this is to ensure that customers can get their orders without delay and provide a cushion if there is a delay somewhere upstream in the supply chain. The negative aspect to this is the inventory on hand is going to be higher than it should be which costs money to keep on hand without true need, it also limits the amount of orders that can be produced if each order is extended to 3 weeks instead of the 2 weeks actually needed. With a MPS inventory can be properly tracked and adjusted as needed for production and consumers requirements.
This would allow Realco to begin the lead/match capacity and match production to begin controlling the overhead in handling unnecessary inventory on the input and output side. It would also allow Realco to provide their bread makers in a timelier fashion making customers happier with services rendered. Although it may seem counter-intuitive, with Realco continuing to produce 20,000 bread makers a week as opposed to 40,000 every the surplus will drop considerably although after the 8th week there will still be considerable excess.
Johnny Chang now needs to make a decision; should Mr. Chang lower production and keep the excess after 8 weeks in order to fill orders quickly or lower total inventory to match production needs and possibly fail to meet a large order from a customer? With the information at hand there is not enough information to justify a proper MPS. From the 1st week at a whopping 23,500 units to the end of the 8th week to 1,800 units there is a considerably small amount that could cause hardship with customers who may have a high volume need.
In a few months there would be nothing on hand to send to customers. New methods of production whether it’s adjusting the capacity or your business, changing your production to match/chase or even using a different IS software are always a risk. Owners and business managers will never be fully sure if their new product or service will be able to meet consumer demand or if it will cause significant loss in purchasing more inventory than is needed or over production which could cost a lot in storing until needed.
Creating a Master Production Schedule can help businesses ensure that the correct of input/output is being utilized for maximum profits and customer’s needs. A MPS can prevent over/under ordering and can allow for adjustments when demand forecasting calls for a slowing down period or a period of higher demand. A properly designed and used MPS can assist large companies to constantly improve their efficiency, control costs and still meet customer demand. Introduction A Bumpy Road for Toyota
Throughout the years, Toyota has defined themselves as one of the top vehicle vendors in the world. Ending in March 2004, Toyota’s “net income [was] $10. 49 billion in yen,” which was more than General Motors and Ford Motor combined (Bozarth & Handfield, 2008). With Toyota’s car sales on the rise they wanted to focus on improving the quality of cars being produced. Unfortunately for Toyota, they found a series of errors and glitches in their entire assembly process with had a negative impact towards Toyota’s brand.
The Toyota Company viewed the Lean philosophy as, “a form of religion” (Bozarth & Handfield, 2008). The Lean methodology is a process in which every aspect of the business is looked at and improved to increase productivity of workers, assembly lines, and inventory and manager management among many others, all the while keeping a close eye on production. When Toyota began opening automobile factories in the United States they continued to maintain and enforce quality which was consistent with their lean philosophy.
One of the engineers would even draw chalk circles around an employee and told the employee to stay their watching that job until they could figure out how to improve it (Bozarth & Handfield, 2008). Having the workers involved in the lean process not only gave them some buy in, but gave the employees at all levels a sense that they mattered and instilled in them a thought process of constantly looking for improvements or Kaizen (Kaizen: a philosophy of constant personal and productivity improvement) (Kaizen Institute of America, 2011).
In searching for these constant improvements quality is also assured as apparent errors are immediately studied and improved upon. By doing so Muda (waste) (Kaizen Institute of America, 2011) is reduced and quality is assured through large and even extremely small increments. These processes help improve a company’s standings with suppliers, employees, peers in the industry and most importantly consumers. This is significantly one of major reasons why Toyota sales have been better than almost all of their competitors in the industry (Bozarth & Handfield, 2008).
Some of the most important people in these plants were so called “coordinators” (Bozarth & Handfield, 2008). These were experts with over 20 years of experience with the Toyota Production Systems (TPS). It was their responsibility to train American factory workers and managers to instill the lean production process to ensure efficiency and increase productivity. While at first it worked well and caught on quickly, the lean techniques became watered down and lose their value. Workers were said to be “creating a Buddha image and forgetting to inject soul in it. (Bozarth & Handfield, 2008). After a while employees cared less about the TPS and more about increasing productivity without regard to the quality associated with Lean Methodology. It was clear that as factories grew and moved away from TPS and lean production that the mindset taught by the Japanese experts was waning. Hajime Oba, Toyota’s top TPS engineer was very concerned with how the Detroit automakers made and cared about the cars they made. Auto workers moving at such a pace can tend to overlook the workmanship that goes into the products being made.
I do not agree with Hajime that quality is in the decline. While it is true that many organizations have lost their “soul” it is returning as senior executives try to regain the productivity, profitability and customer loyalty so crucial to being a top tier competitor in today’s world market. It could be argued that a lot is lost when companies outsource their work but on the other side of the coin is that companies can focus on “core competencies” that allow them to stand up above their industry peers.
By using available technology products like Master Production Schedules, Enterprise Resource Management and understanding the supply chain up and down stream allow a company to take a holistic look at all the functional and commodity areas. The stickler however is to invest in your employees to ensure employee buy-in to promote the quality and lean processes. In the era’s prior to Toyota arriving in America the 1950-70’s could be considered the golden age for automobile manufacturers.
Most vehicles were built by men of an age that hard work was the number one value a man could have to show his worth and purpose (almost justifying Ayn Rand) and later on by men who grew up watching John Wayne and spaghetti westerns. This is perhaps why cars built in those times are still sought after and purchased with a hefty sum for the privilege of ownership of these classical beauties. After the 1970’s automakers began to look after profit margins more than customer loyalty, after all there were really only three major manufacturers to choose from!
It can be argued and shown that when pure profit and greed are the going values cheaper materials and higher prices are soon to follow. Car quality went straight down hill and that trend is still apparent today when American automobiles haven’t made the top 10 list of vehicles purchased in America today (Bloomsberg Weekly, 2011). It is apparent that while profit is the motive, with a little bit of internal rearranging profit margins can be made solid by going back and beginning the lean process from the newest employee pulling a lever to the CEO and his decision-making matrixes.
Use the lessons learned from Mr. Oba and begin to hire and train lean process or “6 Sigma” individuals. During the 1990’s the massive Toyota factory which was based in Georgetown, Ky. , “routinely claimed the top spots in J. D. Power & Associates’ widely watched initial quality survey for cars sold in the U. S. ” (Bozarth & Handfield, 2008). In 2001 a Toyota factory in Canada was named the 2nd best plant and the Georgetown plant went into serious decline and was named 14th in Toyota’s spreadsheet.
The issue came from hastily made decision due to the over rapid expansion of the Toyota plants and Toyota management being spread too thin. The biggest mistake was promoting employees and floor managers too quickly without allowing for a proper train up on the total Toyota Production Systems. This allowed for poor decision making on all levels. The Toyota factory workers lost touch of the fine details and allowed their factory defects to reach a high of 117 problems per 100 vehicles. Though Toyota has definitely faced “a bumpy road,” they are slowly recovering and “scrambling to take Lean production to a new evel-one that is simple enough to function without the constant help of Japanese coordinators with 20 years of experience or more in Lean production” (Bozarth & Handfield, 2008). With the belief of increasing production and lowering profit leading to increased profit margins, we can see with the Toyota example that it can hurt the brand and ultimately reduce consumer confidence, lower sales and possibly even put a company out of business. In the case of Toyota; they stayed in business but have spent several decades repairing damage done due to a poor understanding of the lean process and attention to detail of the American auto worker.
Despite the rough patches this mega corporation has had to go through, it is certainly one of the most popular brands available on the market world-wide. One of the biggest benefits to the TPS is the complete changeover between the earlier employees and the new employees who are coming into the system as opposed to relearning a completely new way to do business. With Toyota fighting forward on lean production and instilling a sense of proper quality back in their vehicles they should reclaim their top tier place in the manufacturing industry and improve sales more and more every year.
All it takes is persistence, hard work and dedication from the top CEO and board members down to the newest employees who have bought into the philosophy in place. Once again, Toyota will be one of the top ranked vehicles in America. Works Cited Bloomsberg Weekly. (2011, January 01). Retrieved November 27, 2011, from Business Business Weekly: http://www. businessweek. com Bozarth, C. C. , & Handfield, R. B. (2008). Introduciton to Operations adn Supply Chain Management. Upper Saddle River: Pearson Prentice Hall. Kaizen Institute of America. (2011, January 01). Retrieved November 27, 2011, from Kaizen Institute: http://www. kaizen. com