CPIM - Body of Knowledge (Part 1)

okay so what we're going to be doing here is we're actually going to go into a little bit of understanding in terms of what the different modules are and in addition we want to understand what the

linkages are in this knowledge base Okay so we've created a slide here that will help us in this process okay so the the body of

knowledge really starts out with a very much a top down planning top- down planning meaning we need to start out with a strategic a business plan top

management will give us that plan and it will tell us what needs to happen what kind of a company are we who our customers going to be what kind of manufacturing environment we are all of

that all of that kind of very overview General um uh uh material needs to come from Top management once we have that then we can break that down into functional

requirements functional meaning like sales and marketing uh like operation like finance and so on and the way we do that is we we look at the master

planning of resources that'll be our first uh content uh uh module so Master planning a resource talks about our

studies the process of sales and operations planning and sales and operations planning starts with a plan starts with a marketing plan Compares

that to what we can do our capacity our operations plan marries the two together and makes sure that hey the sales plan is is is such that operations can

actually do that we and we we check that out through What's called the resource plan so the resource planning checks out to make sure that the demand and Supply

are pretty much in sync and it's doable okay and once we've come up with that sales and operations plan we have a company game plan that's cross functional and that everybody can buy

into even the other other functionals like HR like engineering and product development once we develop that sales and operations plan which is still pretty General we've taken the the very

general strategic plan the business plan and broken it down a little bit into some some real numbers we started out with n with dollars and now we have numbers and we're based on on families

which we'll talk about in in a in in a little bit once we have that plan we have a doable plan we have the handshake of all all the various functions that

says this is what I can do then we can we can break that down or we can disaggregate that sales and operations plan into a master schedule or the

process of Master scheduling Master scheduling will then look at at end items perhaps and and say this is what I

specifically am going to build sales and operations planning said this is what I'm going to build in general by family and by by in monthly units Master scheduling says this is what I'm going

to build by in units sellable in units which we call Independent demand well let me jump in here and uh talk a little bit more at a higher level because some of this terminology might be very

difficult for new people or students to appreciate so we will go more into depth in that but let's at this stage think about a few things we'll look at okay we'll look at here for example that the

modules that are going to be covered is m planning something called detail scheduling and execution those are the three middle ones okay and we'll come back to what the basic supply chain and

then what we do here is we look at what is involved and so we got the different areas like in terms of planning and then shop floor level execution and then we

also have tools so this is just trying to put a diagram a picture in terms of the different modules and what they cover and what you notice is that there's connections between the

different areas so you have those lines linking sales and operations planning with perhaps some tools that you're going to learn okay and also what we have is there's a sequence going from

top to down you know so what we have is Master planning resources going to something called detailed planning and then execution and control so there is

like in terms of your mind Focus you need to go from up going down down and that's why we tell you to take it in that order those exams right so um what

we're going to do is go in detail to the different modules a little later and we've got some uh graphs for that okay right let me let me just say what you said it perhaps a little bit

different we have a very broad General plan let me let me and and with sales with very broad General plan with Strategic Management top management has said this is the kind of company we are

then we go into sales and operations plan planning saying this is some specific numbers we check that out with can we actually do that and something called resource planning that's the

connection it from that then we develop the master schedule and that's more of a this is what I'm actually going to produce and then we'll take that and say

okay if I'm going to produce this finished unit let's say we're going to produce a pen then how many uh bodies do I need for the pen how much do I need

how much this and how much that we determine that through uh detailed scheduling and planning the tool is MRP or M material requirements planning

which has been around for a very long time and so ma material requirements planning will tell us okay this is what I need when I need it I call it the rights the

right the right product the the right uh component at the right time in the right place from that then we can develop a okay if I need this I have to cut a

schedule for it production activity control execution control of operations okay and we manage that through the in

something called input output and some other tools U order uh order sequencing order sequencing yes thank you so yeah so this gives us a little idea of how

this all is coming together and some of the tools and techniques so we'll go in more detail now you might not be familiar with these terms at this stage some of you might be

experts doing it every day but some of you might not be so don't be uh too concerned you know you might see these acronyms Pac MRP CRP don't worry we'll

you know when you study the material it'll just become secondhand knowledge okay so let's talk a little bit about the first module the basics of Supply Chain management because that's kind of

an overview and there's not much detail in it go ahead okay the basic Supply Chain man uh module um basics of supply

chain uh management it it B basically covers everything from from start to finish so we start at the at the highest

level and we work our way down uh not in any great detail at this point but we just want to get an understanding of how how things connect to one another how

demand management leads into Master planning and how Master planning leads into the MRP again so on and so on and so on where's where does inventory come into play with this and where does

purchasing and distribution and all of these things so uh so in this test this the students will not be expected to do MRP calculations or CRP calculations

again I'm using acronyms material requirement planning or capacity requirement planning you won't be expected to know those calcul you just have to have a general idea what it's

about yeah and and they'll ask questions um if this company if a company changes a manufacturing environment for instance let's say they were a professional they

made professional cameras for for the uh professionals and now they the Walmart has come in and said hey we want you to make tons of of these little cameras

that's a different uh manufacturing environment what needs to change that's what we will kind of learn at a very high level with the basics of supply chain okay and then there are other

things you go into there's some Pur purchasing this physical distribution how they fit in yeah and lean quality and also uh theory of constraints you

know bottleneck and so on right so um yeah I think people might be a little unsure in terms of taking the test in terms of how much I need to know you know I mean that'd be

a you get that question all the time Bob it and it's it's a little bit uh of a challenge to teach to to to expose this the new student to a enough of this so

that they understand it but not so much that it gets they get B down then the suggestion would be study all the material and take the test one after the

other uh I'm not say that again okay the idea maybe the best way to do it is go and study for all the modules instead of trying to do one and

then incrementally another one I mean go and try to study the whole material so then you're prepared you can hit all the modules I wouldn't Rec recommend that

because you want the the the three modules after the basics of Supply Chain management get relatively detailed okay and you want to you want to focus on

that yeah and then take that test and then take the the next detail test and take some students will take the basics of supply chain after the three okay I

would prefer they would they they take the basics because then they have a clue a better clue how everything is fitting together in the okay very good so that tells us a little

bit about the basic of Supply Chain management let's talk a little bit about the master planning of resources module what are some of the main components here okay and as you can see um the

master planning of of of resources is the the key is to balance our supply uh what we can produce with our demand what

the customer wants okay so we start out looking at demand management which is which is a combination of forecasting uh both number crunching and

and what we call Quality qualitative forecasting which is looking at other other aspects and and uh looking at the forecast that way we come up with that demand management and we say this is

what what we think we can sell and and demand management is not just forecasting though it's promotions it's it's looking at new product introduction

uh old product uh discontinuing and so on that kind of thing but it really is trying to

uh mold the the customers uh needs into the game plan uh specified by top management okay so then we have we have

the uh supply side then we need to say okay can I do that so then we compare there and there's a technique we'll go into a little later there's a technique

that says okay if I'm going to Supply or demand is this I'll look at that I'll increase or decrease my inventory according to plan and then I'll I'll

look at can I do that do I have the capacity so I need a load of load of what the demand is versus I what we can do is go in some further slides and show how it's all connected because again

there's this terminology that people are find difficult but you have to remember that in the heart of this is the sales and operations planning and we'll show it so let's take a look at this graph

here and Bob just can you uh quickly or go through and explain the different components and later we can actually go and look at some subcomponents too okay

so the body of knowledge where the numbers come from starts out with with the strategic planning that's very very high level top management longterm they're looking at do we enter a new

market do we do we go offshore do we do we build uh a new facility do we go into new product it's it's very strategic from that we can build that business plan okay and that's still top

management kind of thing then uh once we have the the business plan then we need to know okay what does that mean in terms of product okay what does that

mean in terms of what I'm going to build and how I'm going to build it okay so we come up with uh the first detailed module is Master planning of

resources Master planning of resources is is first it looks at the first break breakdown of the business plan and the first breakdown is we're looking at the

family level of products by that I mean we won't be looking at say a bicycle we won't be looking at if we make bicycles we won't be looking at an individual bike but we'll be looking at 10-speed

bikes versus uh uh maybe with drop down bars racing bikes versus the road bike versus the you know the granny bike that kind of thing and so we'll plan

everything by family okay and that's we're doing this in sales and operations so that's that's our our demand management uh portion

plan the families and and plan the uh how are we going to promote make promotions for those families how can we influence demand in

a way that fits in with the the Strategic plan okay so that's step one you want me to go into detail on on sales and operations well let's let's go

through that a little further but just try to give an overall view of U you know the different other Mo so what the sales and operations plan then creates a

production plan yes but uh also it's tied to some capacity issues okay so the capacity issue is is we need to look at resource uh

management okay re uh resource planning excuse me again we'll come up with a demand plan this is what I think I can sell then we need to look at our

operation side and say uh we create a load on the factory that this plan would create and then we say okay here's here's how much here's how much I can

make or here's how much I need excuse me in capacity but I only have this much okay and so there's a mismatch so we need to to work those two together we

can we can change change capacities you know work overtime if that's the case or subcontract or do all those kinds of things that's what the this the module

goes into is what can I do to make that happen once I can get it to where they're fairly the same you know the the the Demand versus our our capacity to to

produce the demand and Supply are fairly equal then I create what's called a production plan the production plan says this is what I plan to make at a high

level at a family level okay okay yeah so let me just kind of uh recap and how the is going so what we have is we we are at the Strategic level we start off and we come up with what the corporate

wants we come up with a business plan it can be in terms of several months then we come up with the sales and operations planning which is the heart and basically it involves two components one

is what we call the demand management which we'll look at next what is on the components and look at the capacity and what we're trying to do is balance it correct and we go through an interative process after this interative process we

get come up with a production plan which is somewhat that we think will work yes you know and then that will then generate something called master schedule okay so that we'll have the master schedule and that

will actually be much more detailed that'll be at the instead of when we're talking aggregate little bikes we know it ex exactly Different Bikes exactly the sales unit yeah and then that will

then feed into something called material requirement planning which is the next module that is also involved so this kind of provides a big picture and then let's look at the different components

okay so let's look at the next component of what goes into the demand management at the family level okay demand management is a combination of think think of this is what sales and

marketing do they're the owners of demand management they need to look at at what orders do I already have and then they need to forecast what they think is going to happen because we need

to forecast out over a period of time in order to get the right materials at the right place at the right time so they will they will they will look at history for forecasting they will look

at Trends the economic Trends they'll look at all kinds of different things we call it uh they'll look at numbers quantitative numbers or they'll look at

at other kinds of input qualitative kinds of things to come up with a game plan this is what we think we can sell okay so okay that's good okay orders is

we have orders on hand for orders and then we got forecast based on past historical data now what is distribution planning how does that come into the okay demand management okay certain

types of businesses especially make to stock usually need to to take the finished inventory and put it out into the field so like let's say I make

pencils yes and so pencils you're not going to be waiting for an order you're just going to push the system but it has to go through different layers of the distribution right so you have to make it sure it's in the different warehouses

and from the warehouses is sent out to the different rail because Walmart and Target will say I want this this much quantity and you don't have those lead times to go and actually get the lead

for the pencil and the wood stock means the stock is there right so that's that's so that's part of that whole complex of this family level uh demand

management right and we need to to know not only what does the ultimate customer want what does Walmart want and need but when do we need to have it in the regional

Distribution Center when do we have need to have it in the local Distribution Center when do we need to have it in Walmart's distribution center and so on call and that the whole there's a actually mechanics to it called

distribution resource planning right okay so that gives us an idea of demand management let's go through and look at this heart of sales and operations planning and uh so maybe just talk about

the different modules and I'll grab and bring it to the Erp this is this is the most fun part from a from a learning I think and a teaching St standpoint sales

and operations planning relatively new I mean it's it's it's come into play in the last 10 years or so sales and operations planning well let me let me

back up we used to have the high level the executive level decisions being made and then we would each function sales and marketing production Finance and so

on would make a plan based on the highlevel um uh decision uh U business plan so they take the business plan and they each make a plan but in the past

traditionally they didn't talk to one another something that we call a functional Silo now you can Envision that as being a silo like like in agriculture and all the information for

my function is in The Silo and the next Silo over there they're making their plans but they have no clue what we're doing in our silo so sales and operations planning is the way to

eliminate that and this is where we begin to collaborate amongst each individual unit each individual function so now we have the business plan sales

and and marketing need to make the demand plan but they can they can't make it in isolation anymore they're no longer siloed they have to have good

knowledge of what manufacturing can do what we can afford through Finance what and and what product development is going to do they have to have a lot of influence and knowledge of that so they

make their plan not only based on the top level decision- making uh business plan but also you know is it doable last thing they want is to go out and sell

sell something that can't be delivered that that would be you know that that would that would be terrible so now sales and operations planning what they do you come up with a demand plan okay

and then they work then with the supply folks folks to see if we can do it that's the process we we we just we talked about before here's my here's my

sales here's my uh uh my capacity and can I can I actually make the two together sales and operations planning is where all these functions come

together and collaborate and say this is the way I'm going to run my business for the next short to medium term okay so this gives us some idea of how it comes together so what we're trying to talk

about is an ated organizations so we got the sales people we got Finance executive decision product development we got engineering HR all this comes

together and then once we got this idea of it's going to kind of work and this then we can actually after checking with our capacity and production and making sure we got the supplies then we can

come up with an operational plan and that production plan is critical because now we say we got something that we can work on right and many companies actually now use Erp systems resour

that's a way to kind of put all these things in fact one of the critical modules of Erp or the heart in many cases is the manufacturing uh and the production you

know MRP part of it so and then we do tie that in with the uh CRM customer relationship management so those are different but if you want to think of it the sales and operations plan is the

heart that brings it all together this is where the conflicts will arise this is where the negotiations will happen this is this is where the the cross Silo occurs yeah it's a monthly process and

like you just said that's the give and take happens there and management gets involved because if if if the if the functions can't agree then the management has to come in and and have

the leadership role okay very good this is what I again this this is the handshake of the company this is the way this basically each function says this

is what I promise to do I will sell this mix I will operation says I will make this kind of production to the best

of my abilities okay now we know demand management can't dictate exactly what the customer is going to buy we know there's going to be some problems in manufacturing we know that the product

introduction may not happen exactly as planned so it's it's not set in concrete but it is a plan and we measure that and

we make sure that that we have we have uh tolerances and when when a tolerances is broken we all get back together and say okay this didn't work this isn't

working what uh what do we do about that okay so let this gives us some idea of this particular module in the heart of it okay so let's go through and now see

uh a little bit more in terms of how these different components add so we talked about um you know coming at you know in terms of of Master planning of

resources and different modules but we want to now talk about the role of a little bit of about available to promise talk a little bit about master

production schedule and how it ties into MRP because that will then link to the detail scheduling and planning so if you can just do a kind of a little just connections between them that would be

great okay we created in the module we just finished talking about we created this production plan and it said I will build this product or this family at

least in this quantity on a monthly basis now we need to take that and and that information feeds into the master scheduling process so the master

scheduling process is saying I'm going to break down into detail uh and items of what we need what what we're going to

produce and when so demand management still plays a part because now we need to know not but we above when we were looking at sales and operations planning

we were looking at families now we're going to be looking at end items so we need to take the forecast that we had for the family break that down into what

specific items does it matter so before we were talking about 10-speed bikes now we're talking about a particular sellable unit a bicycle and so uh

there's there's ways to break that down and and uh we'll we'll you know we go through that in in the process Master scheduling then will create a weekly uh

master schedule of of the individual bikes now we'll still keep for the month the bikes will be the same quantity but they'll be broken down individually week

by week we'll check that with our rough cut capacity planning if I can get there here we go with rough cut capacity planning which again takes a look at what are my critical resources that I

need to produce to make this plan and do I have the capacity and and you know will adjust the capacity up or down or or maybe move the maybe instead of

producing the the really complicated bike in week three we'll produce it steady Eddie all through the month so we can change the plan accordingly now you mentioned available promise M the

production plan and master scheduling are really an operations controlled um tool to in order to to plan exactly what

to produce and when to reduce it sales though still has a significant role in the master scheduling and what we call available appr promise and um there's

techniques to do that we won't get into that but basically it will say at any particular point in time throughout throughout the planning Horizon we we will have we we promise to

produce they promise to sell such that we will have X amount of units available for sales to promise now this is this this is what every production planner

would love their sales forc to have is to be able to go out be talking one-on-one with the customer and a customer says I would like to have this

bike in this quantity at this time and the sales uh person can look at their PDA whatever and say you can have it and

with confidence or no we we we can't do that here let's let's work this out what can we do so that's what available promised does

course so what we have here just so I'm now trying to capture that okay so we have information at the aggregate level and by families say we're talking about

pens and we got we can have 100 pens of this and another but we don't know the specifics so what we do is we come down and we have to make decisions at the specifics and the specifics and we look

at our capacity and in fact we might have excess capacity and then that allows us to come and say okay we actually we have our firm orders but we got some extra room and we can

communicate that to our sales people and say hey if you can make those sales that would be great you know so that's the available to promise am I getting that right little I mean it's a little more complicated look at how much inventory

there is how much is coming in but that is how much there's extra that the marketing can sell right so so the orders will come in and consume the

forecast and consume the inventory yeah and will be extra inventory left over and that's available to promise good okay so once we've done that then we got this master schedule and then this is a

you know this is a process it's an iterative process it's not just a it shouldn't be thought just like one step yes and then once we have something that we can commit so we have a schedule that

I think they use some terminology like freezing schedule once it got I I don't I maybe I shouldn't go into those terminology once they've got a commitment then they actually got a

master production schedule correct okay and Master's production schedule is going to tell us what particular end items to

produce it can get complicated but let's leave it at that yes okay so what we have to produce let's we have to produce at a detailed level and then that actually feeds the materials requirement

planning that we're going to cover next right okay