Advanced Inventory & Manufacturing

Net Requirements = Gross Requirements - On Hand - Scheduled Receipts + Safety Stock

Example Product A:
Gross Requirements (Week 5): 1,000 units
On Hand Inventory: 150 units
Scheduled Receipts: 300 units (Week 3)
Safety Stock: 100 units

Net Requirements = 1,000 - 150 - 300 + 100 = 650 units

Statistical Safety Stock Formula:
SS = Z × σ × √LT

Where:
Z = Service level factor (95% = 1.645)
σ = Standard deviation of demand
LT = Lead time in periods

Example:
Service Level: 95% (Z = 1.645)
Demand Std Dev: 50 units/week
Lead Time: 3 weeks

Safety Stock = 1.645 × 50 × √3 = 142 units

Action Messages in BigLedger:
1. "Expedite" - Move in planned order receipt
2. "De-expedite" - Move out planned order receipt
3. "Increase Qty" - Increase planned order quantity
4. "Decrease Qty" - Decrease planned order quantity
5. "Cancel" - Cancel planned order
6. "Release" - Convert planned order to firm order

Daily MRP Review Process:
1. Run MRP regeneration (overnight batch)
2. Generate exception reports
3. Review action messages by planner
4. Validate capacity constraints
5. Process high-priority actions first
6. Update planning parameters if needed
7. Communicate changes to production

Product: Bicycle (End Item)
Level 0: Bicycle (1 each)
├── Level 1: Frame Assembly (1 each)
│   ├── Level 2: Frame Tubing (1 each)
│   ├── Level 2: Welding Materials (0.5 kg)
│   └── Level 2: Paint (0.2 liters)
├── Level 1: Wheel Assembly (2 each)
│   ├── Level 2: Rim (1 each)
│   ├── Level 2: Spokes (36 each)
│   ├── Level 2: Hub (1 each)
│   └── Level 2: Tire (1 each)
└── Level 1: Component Kit (1 each)
    ├── Level 2: Chain (1 each)
    ├── Level 2: Gears (21 each)
    └── Level 2: Brake Assembly (2 each)

MRP Explosion Calculation:
If planning 100 bicycles:
- Frame Tubing: 100 × 1 = 100 each
- Spokes: 100 × 2 × 36 = 7,200 each
- Gears: 100 × 1 × 21 = 2,100 each

Load Calculation Example:
Work Order WO-001:
- Quantity: 500 units
- Setup Time: 2 hours
- Run Time: 0.5 hours/unit
- Total Load: 2 + (500 × 0.5) = 252 hours

Weekly Capacity Planning:
Week 15: Available 61.2 hours, Loaded 58.5 hours ✓ OK
Week 16: Available 61.2 hours, Loaded 75.2 hours ✗ Overload
Week 17: Available 61.2 hours, Loaded 45.3 hours ✓ OK

BOM Structure Types:
1. Manufacturing BOM (M-BOM)
   - Used for production planning
   - Includes manufacturing steps
   - Reflects assembly sequence

2. Engineering BOM (E-BOM)
   - Design-centric view
   - Component specifications
   - Engineering change control

3. Service BOM (S-BOM)
   - Field service parts
   - Replacement components
   - Maintenance items

ECO Workflow:
1. Change Request Initiated
   - Requestor: Engineering/Quality/Production
   - Reason: Design improvement/Cost reduction/Regulatory
   - Impact Analysis: Cost/Schedule/Quality

2. Change Evaluation
   - Technical review
   - Cost analysis
   - Implementation timing
   - Obsolete inventory handling

3. Approval Process
   - Engineering approval
   - Manufacturing approval
   - Quality approval
   - Customer approval (if required)

4. Implementation
   - BOM version update
   - Effectivity date setting
   - Training execution
   - System updates

BOM Version Control Example:
Product: Widget A
Current Version: Rev C (Effective: 01-Jan-2024)
Previous Version: Rev B (Effective: 01-Jun-2023 to 31-Dec-2023)

Revision Changes:
Rev B to Rev C:
- Component X123: Removed
- Component Y456: Added (Replacement for X123)
- Component Z789: Quantity changed from 2 to 3
- Labor Operation 30: Time reduced from 15 to 12 minutes

BOM Cost Analysis - Assembly A:
Material Costs:
  Component 1: MYR 25.00
  Component 2: MYR 15.50
  Component 3: MYR 8.75
  Total Material: MYR 49.25

Labor Costs:
  Operation 10: 0.5 hours × MYR 30/hour = MYR 15.00
  Operation 20: 0.3 hours × MYR 25/hour = MYR 7.50
  Total Labor: MYR 22.50

Overhead Costs:
  Variable Overhead: 1.5 hours × MYR 20/hour = MYR 30.00
  Fixed Overhead: 1.5 hours × MYR 15/hour = MYR 22.50
  Total Overhead: MYR 52.50

Total Standard Cost: MYR 124.25

MPS Development Steps:
1. Demand Aggregation
   - Sales forecasts
   - Customer orders
   - Service parts demand
   - Inter-plant transfers

2. Resource Validation
   - Capacity constraints
   - Material availability
   - Tooling requirements
   - Skilled labor availability

3. Schedule Optimization
   - Lot sizing optimization
   - Setup minimization
   - Capacity utilization
   - Due date performance

Master Production Schedule - Product Family A
Week:     1    2    3    4    5    6    7    8
Forecast: 100  120  110  130  125  140  135  150
Orders:   95   85   65   45   25   10   5    0
MPS:      100  120  110  130  125  140  135  150

Available to Promise (ATP):
Week 1: 100 - 95 = 5 units
Week 2: 120 - 85 = 35 units
Week 3: 110 - 65 = 45 units

Characteristics:
- Assumes unlimited capacity
- Schedules based on lead times
- Identifies capacity overloads
- Requires manual capacity adjustment

Example Output:
Work Center A (Week 5):
Required Hours: 120
Available Hours: 80
Overload: 40 hours (50% over capacity)

Characteristics:
- Considers actual capacity constraints
- Automatically reschedules when overloaded
- Provides realistic completion dates
- Optimizes resource utilization

Scheduling Logic:
1. Sort orders by priority
2. Schedule highest priority first
3. Check capacity availability
4. If capacity available, schedule
5. If not available, move to next period
6. Continue until all orders scheduled

TOC Implementation Steps:
1. Identify the Constraint (Bottleneck)
   - Work center with highest utilization
   - Resource limiting overall throughput

2. Exploit the Constraint
   - Maximize constraint utilization
   - Minimize setup time on constraint
   - Ensure constraint never starved

3. Subordinate Everything Else
   - Non-constraints support the constraint
   - Buffer before constraint
   - Manage flow to constraint

4. Elevate the Constraint
   - Add capacity to constraint
   - Improve constraint efficiency
   - Offload work from constraint

Example:
Constraint: Heat Treatment (40 hours/week capacity)
Non-Constraint: Machining (80 hours/week capacity)

Schedule machining to always feed heat treatment
Maintain 2-day buffer before heat treatment
Never let heat treatment sit idle

Optimization Parameters:
Objectives:
  1. Minimize total completion time (makespan)
  2. Minimize total tardiness
  3. Maximize resource utilization
  4. Minimize work-in-process inventory

Constraints:
  1. Precedence constraints (operation sequence)
  2. Resource capacity constraints
  3. Due date constraints
  4. Material availability constraints

Example Results:
Original Schedule: 15 days completion
Optimized Schedule: 12 days completion
Improvement: 20% reduction in makespan

Work Order: WO-2024-001
Product: Assembly X
Quantity: 100 units

Standard Costs:
Material: MYR 50/unit
Labor: MYR 30/unit
Overhead: MYR 40/unit
Total Standard: MYR 120/unit

WIP Calculation by Operation:
Operation 10 (50% complete): MYR 25/unit
Operation 20 (100% complete): MYR 30/unit
Operation 30 (75% complete): MYR 30/unit
Operation 40 (0% complete): MYR 0/unit
Total WIP Value: MYR 85/unit × 100 units = MYR 8,500

Actual Costs Incurred:
Materials Issued: MYR 5,200
Labor Hours: 80 hours × MYR 32/hour = MYR 2,560
Overhead Applied: 80 hours × MYR 38/hour = MYR 3,040
Total Actual WIP: MYR 10,800

Completion Percentage: 70%
Expected Total Cost: MYR 10,800 ÷ 0.70 = MYR 15,429
Variance from Standard: MYR 15,429 - MYR 12,000 = MYR 3,429 unfavorable

Data Collection Technologies:
1. Barcode Scanning
   - Employee badges
   - Work order numbers
   - Operation codes
   - Quantity reporting

2. RFID Technology
   - Automatic identification
   - Location tracking
   - Batch/lot tracking
   - Temperature monitoring

3. Mobile Devices
   - Touch screen interfaces
   - Voice recognition
   - Digital forms
   - Photo capture

4. Machine Integration
   - PLC connections
   - Sensor data
   - Automatic counts
   - Quality metrics

Work Order Lifecycle:
1. Created → Planned quantities and dates
2. Released → Materials allocated, ready to start
3. In Process → Production started
4. On Hold → Temporary stop (quality, material, etc.)
5. Completed → All operations finished
6. Closed → Financial and inventory transactions complete

Status Change Triggers:
Created → Released: Material availability confirmed
Released → In Process: First operation started
In Process → On Hold: Quality issue identified
On Hold → In Process: Issue resolved
In Process → Completed: Final operation finished
Completed → Closed: Month-end closing process

Work Order Variance Report - WO-2024-001:

Material Variances:
Standard Material Cost: MYR 5,000
Actual Material Cost: MYR 5,200
Material Price Variance: MYR 150 unfavorable
Material Usage Variance: MYR 50 unfavorable
Total Material Variance: MYR 200 unfavorable

Labor Variances:
Standard Labor Cost: MYR 3,000
Actual Labor Cost: MYR 3,200
Labor Rate Variance: MYR 100 unfavorable
Labor Efficiency Variance: MYR 100 unfavorable
Total Labor Variance: MYR 200 unfavorable

Overhead Variances:
Standard Overhead: MYR 4,000
Actual Overhead: MYR 4,100
Overhead Spending Variance: MYR 100 unfavorable
Total Overhead Variance: MYR 100 unfavorable

Total Work Order Variance: MYR 500 unfavorable

Production Lot Consumption:
Work Order: WO-2024-100
Product: Finished Good A
Quantity: 1,000 units

Input Lots:
  Raw Material X:
    Lot L2024-001-A: 250 kg (consumed)
    Lot L2024-002-B: 150 kg (consumed)
  
  Raw Material Y:
    Lot L2024-010-C: 100 kg (consumed)

Output Lot:
  Finished Good A:
    Lot FG-2024-050: 1,000 units (produced)
    
Genealogy Established:
FG-2024-050 ← L2024-001-A, L2024-002-B, L2024-010-C

Serial Number Format: PPPP-YYYY-NNNNN-CC
Where:
PPPP = Product Code (4 characters)
YYYY = Year of manufacture
NNNNN = Sequential number (5 digits)
CC = Check digits (mod 97)

Example: PUMP-2024-00001-23

Serial Number Generation Rules:
1. Unique across all products and time
2. Meaningful to manufacturing and service
3. Includes check digits for validation
4. Barcode/QR code compatible
5. Customer requirements compliant

Recall Process Steps:
1. Recall Initiation
   - Identify affected lot/serial numbers
   - Determine recall scope
   - Assess risk level
   - Form recall team

2. Traceability Analysis
   - Forward traceability (where did it go?)
   - Backward traceability (where did it come from?)
   - Generate affected item list
   - Identify customer locations

3. Customer Notification
   - Prepare recall notice
   - Contact affected customers
   - Provide return instructions
   - Track acknowledgments

4. Product Recovery
   - Coordinate returns
   - Track return quantities
   - Quarantine returned products
   - Verify recall effectiveness

5. Root Cause Analysis
   - Investigate cause
   - Implement corrective actions
   - Update procedures
   - Train personnel

Electronic Records Requirements:
1. Electronic Signatures
   - Unique user identification
   - Biometric or password authentication
   - Electronic signature linking
   - Non-repudiation controls

2. Audit Trails
   - Record creation timestamp
   - User identification
   - Original and changed values
   - Reason for change
   - Secure, time-stamped entries

3. System Controls
   - Access controls and permissions
   - Data backup and recovery
   - System validation documentation
   - Change control procedures

Inventory Transactions - Product A:
Jan 1:  Beginning balance: 100 units @ MYR 10 = MYR 1,000
Jan 5:  Purchase: 200 units @ MYR 12 = MYR 2,400
Jan 10: Sale: 150 units
Jan 15: Purchase: 100 units @ MYR 15 = MYR 1,500
Jan 20: Sale: 180 units
Jan 25: Purchase: 50 units @ MYR 16 = MYR 800

FIFO Cost of Goods Sold:
Jan 10 Sale (150 units):
  100 units @ MYR 10 = MYR 1,000
  50 units @ MYR 12 = MYR 600
  Total COGS: MYR 1,600

Jan 20 Sale (180 units):
  150 units @ MYR 12 = MYR 1,800
  30 units @ MYR 15 = MYR 450
  Total COGS: MYR 2,250

Ending Inventory:
  70 units @ MYR 15 = MYR 1,050
  50 units @ MYR 16 = MYR 800
  Total Ending Inventory: MYR 1,850

Moving Average Method - Product B:
Date    Transaction    Qty   Unit Cost   Total    Avg Cost
Jan 1   Beginning      50    MYR 20     MYR 1,000  MYR 20.00
Jan 3   Purchase       30    MYR 22     MYR 660    
        New Average:   80               MYR 1,660  MYR 20.75
Jan 8   Issue         (25)   MYR 20.75  MYR 518.75
        Balance:       55               MYR 1,141.25 MYR 20.75
Jan 12  Purchase       40    MYR 24     MYR 960
        New Average:   95               MYR 2,101.25 MYR 22.12
Jan 18  Issue         (60)   MYR 22.12  MYR 1,327.20
        Balance:       35               MYR 774.05  MYR 22.12

Standard Cost System - Product C:
Standard Cost: MYR 25.00/unit

Actual Purchases:
Date      Qty    Unit Cost   Total      Variance
Jan 5     100    MYR 24.50   MYR 2,450  MYR 50 favorable
Jan 12    150    MYR 25.80   MYR 3,870  MYR 120 unfavorable
Jan 20    80     MYR 24.20   MYR 1,936  MYR 64 favorable

Inventory Valuation:
All inventory carried at standard cost: MYR 25.00/unit
Purchase price variances recorded separately
Variance analysis for management reporting

Variance Journal Entries:
Jan 5 Purchase:
Dr. Inventory (100 × MYR 25.00)        MYR 2,500
    Cr. Accounts Payable                      MYR 2,450
    Cr. Purchase Price Variance               MYR 50

Jan 12 Purchase:
Dr. Inventory (150 × MYR 25.00)        MYR 3,750
Dr. Purchase Price Variance             MYR 120
    Cr. Accounts Payable                      MYR 3,870

Specific Identification - Luxury Watches:
Item      Serial Number    Cost      Sale Price   Margin
Watch A   W001234         MYR 5,000  MYR 8,000   MYR 3,000
Watch B   W001235         MYR 4,500  MYR 7,500   MYR 3,000
Watch C   W001236         MYR 5,500  MYR 9,000   MYR 3,500

Sale Transaction - Watch B:
Dr. Cash/Accounts Receivable           MYR 7,500
    Cr. Sales Revenue                         MYR 7,500

Dr. Cost of Goods Sold                 MYR 4,500
    Cr. Inventory                             MYR 4,500

Remaining Inventory:
Watch A: MYR 5,000
Watch C: MYR 5,500
Total: MYR 10,500

ABC Analysis Based on Annual Usage Value:
Class A Items (70% of value, 20% of items):
  - Count frequency: Weekly or bi-weekly
  - Tolerance: ±2%
  - Immediate investigation of variances
  - Root cause analysis required

Class B Items (20% of value, 30% of items):
  - Count frequency: Monthly
  - Tolerance: ±5%
  - Variance investigation if significant
  - Quarterly trend analysis

Class C Items (10% of value, 50% of items):
  - Count frequency: Quarterly
  - Tolerance: ±10%
  - Focus on major variances only
  - Annual procedure review

Preparation Checklist:
□ Freeze inventory transactions during count
□ Complete all pending receipts and issues
□ Organize counting areas
□ Prepare count sheets/mobile devices
□ Assign counting teams
□ Review procedures with counters
□ Verify scales and measuring equipment
□ Identify problem areas from previous counts

Blind Count Procedures:
1. Generate count sheets without quantities
2. Assign counters to unfamiliar areas
3. Require independent second counts for variances
4. Use different teams for recounts
5. Supervisor spot checks of 10% of counts
6. Document all unusual situations

Count Team Structure:
Primary Counter: Physical counting
Secondary Counter: Independent verification  
Recorder: Data entry and documentation
Supervisor: Quality control and exception handling

Variance Investigation Steps:
1. Immediate Verification
   - Recount suspected variances
   - Check for recent transactions
   - Verify unit of measure
   - Confirm product identification

2. Transaction Review
   - Review recent receipts/issues
   - Check for timing differences
   - Verify posting dates
   - Investigate unposted transactions

3. Physical Investigation
   - Check alternate locations
   - Look for damaged products
   - Verify lot/serial numbers
   - Check for misidentified items

4. Root Cause Analysis
   - Identify cause category
   - Document contributing factors
   - Assign responsibility
   - Develop corrective actions

5. Adjustment Processing
   - Supervisor approval required
   - Document business justification
   - Process inventory adjustment
   - Update cycle count results

Root Cause Categories:
Transaction Errors (40%):
  - Incorrect quantities posted
  - Wrong location updates
  - Timing differences
  - Missed transactions

Physical Handling (30%):
  - Damaged goods not recorded
  - Theft or shrinkage
  - Incorrect put-away location
  - Product deterioration

System Issues (20%):
  - Unit of measure errors
  - Product code mix-ups
  - BOM errors
  - System processing errors

Process Gaps (10%):
  - Inadequate training
  - Poor procedures
  - Insufficient controls
  - Communication breakdowns

Inventory Accuracy Metrics:
1. Overall Accuracy Rate
   Target: >95%
   Calculation: (Items within tolerance ÷ Total items counted) × 100

2. Value Accuracy Rate
   Target: >98%
   Calculation: (Value within tolerance ÷ Total value counted) × 100

3. Location Accuracy Rate
   Target: >99%
   Calculation: (Correct locations ÷ Total locations) × 100

4. Record Accuracy Rate
   Target: >95%
   Calculation: (Records with no errors ÷ Total records) × 100

Monthly Accuracy Trending:
Month     Overall   Value    Location   Record
January   94.2%     97.8%    98.9%      93.5%
February  95.1%     98.2%    99.1%      94.8%
March     95.8%     98.6%    99.3%      95.2%
Target    >95%      >98%     >99%       >95%

Physical Inventory Timeline:
Week -4: Planning and Preparation
  - Form inventory committee
  - Develop count procedures
  - Train count teams
  - Prepare count materials

Week -2: Pre-Inventory Activities
  - Complete cycle count corrections
  - Clean and organize warehouse
  - Update location codes
  - Freeze purchase orders

Week -1: Final Preparations
  - Final transaction processing
  - Inventory cut-off procedures
  - Team assignments
  - Equipment testing

Count Day: Execution
  - Morning briefing
  - First count completion
  - Variance identification
  - Second count (variances only)
  - Supervisor reviews

Week +1: Post-Count Activities
  - Final variance resolution
  - Inventory adjustments
  - Financial reporting
  - Process improvement review

Multi-Stage Verification Process:
Stage 1: Initial Count
  - Blind count by assigned team
  - Document quantities and conditions
  - Note any discrepancies or issues

Stage 2: Verification Count
  - Independent team recounts
  - Compare to initial count
  - Flag variances >±5%

Stage 3: Supervisor Review
  - Review all variances
  - Authorize additional recounts
  - Approve final quantities

Stage 4: Final Validation
  - Management approval for significant adjustments
  - Financial impact assessment
  - Audit trail documentation