Nigel S., Chambers S., Johnson R. Operations Management

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The bill of materials (BOM)

From the master schedule, MRP calculates the required volume and timing of assemblies,

sub-assemblies and materials. To do this it needs information on what parts are required for

each product. This is called the ‘bill of materials’. Initially it is simplest to think about these as

a product structure. The product structure in Figure S14.2 is a simpliﬁed structure showing the

parts required to make a simple board game. Different ‘levels of assembly’ are shown with

the ﬁnished product (the boxed game) at level 0, the parts and sub-assemblies that go into

the boxed game at level 1, the parts that go into the sub-assemblies at level 2, and so on.

A more convenient form of the product structure is the ‘indented bill of materials’.

Table S14.4 shows the whole indented bill of materials for the board game. The term

‘indented’ refers to the indentation of the level of assembly, shown in the left-hand column.

Multiples of some parts are required; this means that MRP has to know the required number

of each part to be able to multiply up the requirements. Also, the same part (for example, the

TV label, part number 10062) may be used in different parts of the product structure. This

means that MRP has to cope with this commonality of parts and, at some stage, aggregate the

requirements to check how many labels in total are required.

Figure S14.2 Product structure for the Treasure Hunt game

Table S14.3 Example of a level master production schedule including available to promise

Week number

123456789

Demand 10 10 10 10 15 15 15 20 20

Sales orders 10 10 10 8 4

Available 31 32 33 34 30 26 22 13 4

ATP 31 1 1 3 7 11 11 11 11

MPS 11 11 11 11 11 11 11 11 11

On hand 30

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Supplement to Chapter 14 Materials requirements planning (MRP)

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Table S14.4 Indented bill of materials for board game

Part number: 00289

Description: Board game

Level: 0

Level Part number Description Quantity

0 00289 Board game 1

. 1 10077 Box lid 1

. 1 10089 Box base assy 1

. . 2 20467 Box base 1

. . 2 10062 TV label 1

. . 2 23988 Inner tray 1

. 1 10023 Quest cards set 1

. 1 10045 Character set 1

. 1 10067 Die 2

. 1 10062 TV label 2

. 1 10033 Game board 1

. 1 10056 Rules booklet 1

Inventory records

MRP calculations need to recognize that some required items may already be in stock. So, it

is necessary, starting at level 0 of each bill, to check how much inventory is available of each

ﬁnished product, sub-assembly and component, and then to calculate what is termed the

‘net’ requirements, that is the extra requirements needed to supplement the inventory so

that demand can be met. This requires that three main inventory records are kept: the item

master ﬁle, which contains the unique standard identiﬁcation code for each part or com-

ponent, the transaction ﬁle, which keeps a record of receipts into stock, issues from stock and

a running balance, and the location ﬁle, which identiﬁes where inventory is located.

The MRP netting process

The information needs of MRP are important, but it is not the ‘heart’ of the MRP procedure.

At its core, MRP is a systematic process of taking this planning information and calculat-

ing the volume and timing requirements which will satisfy demand. The most important

element of this is the MRP netting process. Figure S14.3 illustrates the process that MRP

performs to calculate the volumes of materials required. The master production schedule is

‘exploded’, examining the implications of the schedule through the bill of materials, checking

how many sub-assemblies and parts are required. Before moving down the bill of materials

to the next level, MRP checks how many of the required parts are already available in stock.

It then generates ‘works orders’, or requests, for the net requirements of items. These form

the schedule which is again exploded through the bill of materials at the next level down. This

process continues until the bottom level of the bill of materials is reached.

Back-scheduling

In addition to calculating the volume of materials required, MRP also considers when each

of these parts is required, that is, the timing and scheduling of materials. It does this by a

process called back-scheduling which takes into account the lead time (the time allowed for

completion of each stage of the process) at every level of assembly. Again using the example

of the board game, assume that 10 board games are required to be ﬁnished by a notional

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planning day which we will term day 20. To determine when we need to start work on all the

parts that make up the game, we need to know all the lead times that are stored in MRP ﬁles

for each part (see Table S14.5).

Using the lead-time information, the programme is worked backwards to determine

the tasks that have to be performed and the purchase orders that have to be placed. Given the

lead times and inventory levels shown in Table S14.5, the MRP records shown in Figure S14.4

can be derived.

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Figure S14.3 Example of the MRP netting process for the board game

Table S14.5 Back-scheduling of requirements in MRP

Part no. Description Inventory Lead time Re-order

on-hand day 0 (days) quantity

00289 Board game 3 2 20

10077 Box lid 4 8 25

10089 Box base assy 10 4 50

20467 Box base 15 12 40

23988 Inner tray 4 14 60

10062 TV label 65 8 100

10023 Quest cards set 4 3 50

10045 Character set 46 3 50

10067 Die 22 5 80

10033 Game board 8 15 50

10056 Rules booklet 0 3 80

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Figure S14.4 Extract of the MRP records for the board game

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MRP capacity checks

The MRP process needs a feedback loop to check whether a plan was achievable and whether

it has actually been achieved. Closing this planning loop in MRP systems involves checking

production plans against available capacity and, if the proposed plans are not achievable at

any level, revising them All but the simplest MRP systems are now closed-loop systems. They

use three planning routines to check production plans against the operation’s resources at

three levels.

● Resource requirements plans (RRPs) – involve looking forward in the long term to predict

the requirements for large structural parts of the operation, such as the numbers, locations

and sizes of new plants.

● Rough-cut capacity plans (RCCPs) – are used in the medium-to-short term, to check the

master production schedules against known capacity bottlenecks, in case capacity constraints

are broken. The feedback loop at this level checks the MPS and key resources only.

● Capacity requirements plans (CRPs) – look at the day-to-day effect of the works orders

issued from the MRP on the loading individual process stages.

Summary

■ MRP stands for materials requirements planning which is a dependent demand system that

calculates materials requirements and production plans to satisfy known and forecast sales

orders. It helps to make volume and timing calculations based on an idea of what will be neces-

sary to supply demand in the future.

■ MRP works from a master production schedule which summarizes the volume and timing of

end products or services. Using the logic of the bill of materials (BOM) and inventory records,

the production schedule is ‘exploded’ (called ‘the MRP netting process’) to determine how

many sub-assemblies and parts are required, and when they are required.

■ Closed-loop MRP systems contain feedback loops which ensure that checks are made against

capacity to see if plans are feasible.

■ MRP II systems are a development of MRP. They integrate many processes that are related to

MRP, but which are located outside the operation’s function.

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Introduction

This chapter examines an approach that we call ‘lean

synchronization’ or just ‘lean’. It was originally called ‘just-in-time’

(JIT) when it started to be adopted outside its birthplace, Japan.

It is both a philosophy and a method of operations planning

and control. Lean synchronization aims to meet demand

instantaneously, with perfect quality and no waste. This involves

supplying products and services in perfect synchronization with

the demand for them. These principles were once a radical

departure from traditional operations practice, but have now

become orthodox in promoting the synchronization of ﬂow

through processes, operations and supply networks. Although

we will focus on planning and control issues, in practice the ‘lean’

concept has much wider implications for improving operations

performance. Figure 15.1 places lean synchronization in the

overall model of operations management.

Chapter 15

Lean synchronization

Key questions

➤ What is lean synchronization?

➤ How does lean synchronization

eliminate waste?

➤ How does lean synchronization

apply throughout the supply

network?

➤ How does lean synchronization

compare with other approaches?

Figure 15.1 This chapter covers lean synchronization

Check and improve your understanding of this chapter using self assessment

questions and a personalised study plan, audio and video downloads, and an

eBook – all at www.myomlab.com.

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Seen as the leading practitioner and the main originator

of the lean approach, the Toyota Motor Company

has progressively synchronized all its processes

simultaneously to give high-quality, fast throughput and

exceptional productivity. It has done this by developing

a set of practices that has largely shaped what we

now call ‘lean’ or ‘just-in-time’ but which Toyota calls

the Toyota Production System (TPS). The TPS has

two themes, ‘just-in-time’ and ‘jidoka’. Just-in-time

is deﬁned as the rapid and coordinated movement of

parts throughout the production system and supply

network to meet customer demand. It is operationalized

by means of heijunka (levelling and smoothing the ﬂow

of items), kanban (signalling to the preceding process

that more parts are needed) and nagare (laying out

processes to achieve smoother ﬂow of parts throughout

the production process). Jidoka is described as

‘humanizing the interface between operator and

machine’. Toyota’s philosophy is that the machine is

there to serve the operator’s purpose. The operator

should be left free to exercise his or her judgement.

Jidoka is operationalized by means of fail-safeing (or

machine jidoka), line-stop authority (or human jidoka)

and visual control (at-a-glance status of production

processes and visibility of process standards).

Toyota believes that both just-in-time and jidoka

should be applied ruthlessly to the elimination of waste,

where waste is deﬁned as ‘anything other than the

minimum amount of equipment, items, parts and

workers that are absolutely essential to production’.

Fujio Cho of Toyota identiﬁed seven types of waste

that must be eliminated from all operations processes.

They are: waste from over-production, waste from

waiting time, transportation waste, inventory waste,

processing waste, waste of motion and waste from

product defects. Beyond this, authorities on Toyota claim

that its strength lies in understanding the differences

between the tools and practices used with Toyota

operations and the overall philosophy of their approach

to lean synchronization. This is what some have called

the apparent paradox of the Toyota production system:

‘namely, that activities, connections and production

ﬂows in a Toyota factory are rigidly scripted, yet at the

same time Toyota’s operations are enormously ﬂexible

and adaptable. Activities and processes are constantly

being challenged and pushed to a higher level of

performance, enabling the company to continually

innovate and improve.’

One inﬂuential study of Toyota identiﬁed four rules that

guide the design, delivery, and development activities

within the company.

● Rule one – all work shall be highly speciﬁed as to

content, sequence, timing, and outcome.

● Rule two – every customer–supplier connection must

be direct and there must be an unambiguous yes

or no method of sending requests and receiving

responses.

● Rule three – the route for every product and service

must be simple and direct.

● Rule four – any improvement must be made in

accordance with the scientiﬁc method, under the

guidance of a teacher, and at the lowest possible

level in the organization.

Operations in practice Toyota

Source: Corbis/Denis Balihouse

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Chapter 15 Lean synchronization

431

What is lean synchronization?

Synchronization means that the ﬂow of products and services always delivers exactly what

customers want (perfect quality), in exact quantities (neither too much nor too little), exactly

when needed (not too early or too late), and exactly where required (not to the wrong location).

Lean synchronization is to do all this at the lowest possible cost. It results in items ﬂowing

rapidly and smoothly through processes, operations and supply networks.

The beneﬁts of synchronized ﬂow

When ﬁrst introduced, the lean synchronization (or ‘lean’ or ‘just-in-time’) approach was

relatively radical, even for large and sophisticated companies. Now the lean, just-in-time

approach is being adopted outside its traditional automotive, high-volume and manufacturing

roots. But wherever it is applied, the principles remain the same. The best way to understand

how lean synchronization differs from more traditional approaches to managing ﬂow is to

contrast the two simple processes in Figure 15.2. The traditional approach assumes that each

stage in the process will place its output in an inventory that ‘buffers’ that stage from the

next one downstream in the process. The next stage down will then (eventually) take outputs

from the inventory, process them, and pass them through to the next buffer inventory. These

buffers are there to insulate each stage from its neighbours, making each stage relatively inde-

pendent so that if, for example, stage A stops operating for some reason, stage B can continue,

at least for a time. The larger the buffer inventory, the greater the degree of insulation between

the stages. This insulation has to be paid for in terms of inventory and slow throughput times

because items will spend time waiting in the buffer inventories.

But, the main argument against this traditional approach lies in the very conditions it seeks

to promote, namely the insulation of the stages from one another. When a problem occurs

at one stage, the problem will not immediately be apparent elsewhere in the system. The

responsibility for solving the problem will be centred largely on the people within that stage,

and the consequences of the problem will be prevented from spreading to the whole system.

However, contrast this with the pure lean synchronized process illustrated in Figure 15.2.

Figure 15.2 (a) Traditional and (b) lean synchronized ﬂow between stages

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Here items are processed and then passed directly to the next stage ‘just-in-time’ for them to

be processed further. Problems at any stage have a very different effect in such a system. Now

if stage A stops processing, stage B will notice immediately and stage C very soon after. Stage

A’s problem is now quickly exposed to the whole process, which is immediately affected by

the problem. This means that the responsibility for solving the problem is no longer conﬁned

to the staff at stage A. It is now shared by everyone, considerably improving the chances

of the problem being solved, if only because it is now too important to be ignored. In other

words, by preventing items accumulating between stages, the operation has increased the

chances of the intrinsic efﬁciency of the plant being improved.

Non-synchronized approaches seek to encourage efﬁciency by protecting each part of the

process from disruption. The lean synchronized approach takes the opposite view. Exposure

of the system (although not suddenly, as in our simpliﬁed example) to problems can both

make them more evident and change the ‘motivation structure’ of the whole system towards

solving the problems. Lean synchronization sees accumulations of inventory as a ‘blanket

of obscurity’ that lies over the production system and prevents problems being noticed.

This same argument can be applied when, instead of queues of material, or information

(inventory), an operation has to deal with queues of customers. Table 15.1 shows how certain

aspects of inventory are analogous to certain aspects of queues.

The river and rocks analogy

The idea of obscuring effects of inventory is often illustrated diagrammatically, as in

Figure 15.3. The many problems of the operation are shown as rocks in a river bed that

cannot be seen because of the depth of the water. The water in this analogy represents the

inventory in the operation. Yet, even though the rocks cannot be seen, they slow the pro-

gress of the river’s ﬂow and cause turbulence. Gradually reducing the depth of the water

(inventory) exposes the worst of the problems which can be resolved, after which the water

is lowered further, exposing more problems, and so on. The same argument will also apply

for the ﬂow between whole processes, or whole operations. For example, stages A, B and C

in Figure 15.2 could be a supplier operation, a manufacturer and a customer’s operation,

respectively.

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Table 15.1 Inventories of materials, information or customers have similar characteristics

Inventory

Cost

Space

Quality

De-coupling

Utilization

Coordination

Source: Adapted from Fitzsimmons, J.A. (1990) Making continual improvement: a competitive strategy for service

ﬁrms, in Bowen, D.E., Chase, R.B., Cummings, T.G. and Associates (eds) Service Management Effectiveness,

Jossey-Bass.

Of customers

(queue of people)

Wastes customers’ time

Needs waiting area

Gives negative

perception

Promotes job

specialization /

fragmentation

Servers kept busy by

waiting customers

Avoids having to match

supply and demand

Of information

(queue of information)

Less current information

and so worth less

Needs memory capacity

Defects hidden, possible

data corruption

Makes stages

independent

Stages kept busy by

work in data queues

Avoids need for

straight-through

processing

Of material

(queue of material)

Ties up working capital

Needs storage space

Defects hidden, possible

damage

Makes stages independent

Stages kept busy by

work-in-progress

Avoids need for

synchronization

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Synchronization, ‘lean’ and ‘just-in-time’

Different terms are used to describe what here we call ‘lean synchronization’. Our deﬁnition

– ‘lean synchronization aims to meet demand instantaneously, with perfect quality and no waste’ –

could also be used to describe the general concept of ‘lean’, or ‘just-in-time’ (JIT). The concept

of ‘lean’ stresses the elimination of waste, while ‘just-in-time’ emphasizes the idea of pro-

ducing items only when they are needed. But all three concepts overlap to a large degree, and

no deﬁnition fully conveys the full implications for operations practice. Here we use the term

‘lean synchronization’ because it best describes the impact of these ideas on ﬂow and delivery.

Lean synchronization and capacity utilization

Lean synchronization has many beneﬁts but these come at the cost of capacity utilization.

Return to the process shown in Figure 15.2. When stoppages occur in the traditional system, the

buffers allow each stage to continue working and thus achieve high-capacity utilization. The

high utilization does not necessarily make the process as a whole produce more. Often extra

‘production’ goes into buffer inventories. In a lean process, any stoppage will affect the whole

process. This will necessarily lead to lower-capacity utilization, at least in the short term.

However, there is no point in producing output just for its own sake. Unless the output is

useful and causes the operation as a whole to produce saleable products, there is no point in

producing it anyway. In fact, producing just to keep utilization high is not only pointless, it

is counter-productive, because the extra inventory produced merely serves to make improve-

ments less likely. Figure 15.4 illustrates the two approaches to capacity utilization.

The lean philosophy

Terminology in this area is sometimes a little confusing and has evolved over time, as men-

tioned previously. To make things more complicated, lean synchronization can be viewed as a

broad philosophy of operations management, a set of useful prescriptions of how to manage

day-to-day operations, and a collection of tools and techniques for improving operations

performance. Some of these tools and techniques are well known outside the lean sphere and

relate to activities covered in other chapters of this book. As a philosophy, lean synchroniza-

tion is founded on smoothing ﬂow through processes by doing all the simple things well, on

gradually doing them better and (above all) on squeezing out waste every step of the way.

Three key issues deﬁne the lean philosophy, the involvement of staff in the operation, the drive

for continuous improvement, and the elimination of waste.

We will look at the ﬁrst two issues

brieﬂy, but devote a whole section to the central idea of the elimination of waste.

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433

Figure 15.3 Reducing the level of inventory (water) allows operations management (the ship) to see the problems

in the operation (the rocks) and work to reduce them

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