BASICS OF SUPPLY CHAIN

FORMULAS-

Seasonal

Index

Period average demand

Average demand for all periods

seasonal demand (seasonal index) x (De-seasonalized demand)

(De-seasonalized demand : Average demand per period)

De-seasonalized

demand

Actual seasonal
Seasonal

Mean absolute deviation

Moving

average

(MAD) :

demand :

index

Annual demand forecast

Number of periods

Sum of absolute deviations :

Number of observations

Sum of period sales

Number of periods

Newforecast

(a) (latestdemand)
(Exponential Smoothing)

+ (l-a) (previousforecast)

Sum of absolute errors

Number of periods

,SE^S,SION

3: MASTER PLANNING

Level Production Plan

Total production needed

Total forecast demand

Production required each period

Ending inventory for period

1:

Ending inventory for period 2

- Opening inventory

Total production required

Number of periods

Opening inventory

+:

Ending inventory

+ Production -

Forecast Demand

Previous period's ending inventory

Forecast Demand

Production

Master Production Schedule

Projected available balance (PAB)

PAB for period

1:

PAB for period 2

Supply

Quantity on hand

onward

+ Scheduled

Prior period's PAB

Available to promise (ATP) for period

Demand

I :

MPS Receipt

Forecast Demand

Scheduled MpS Receipt

Forecast Demand

Quantity on hand The sum of customer orders due before

the next MPS scheduled receipt

ATP for period 2 onward MPS scheduled receipt

MPS scheduled receipt

The sum of customer orders due before the next

,s,s^s/o1v
Net

4: MATEfuIAL REQUTREMENTS hLANNING (MRp)

requirements

CAPACITY MANAGEMENT & PRODUCTION ACTIVITY

^SES^S1OAT5..

CONTROL

Available time (hrs)

Utilization

Gross requirements - Available inventory

Number of machines or workers

x Number of days per week

ffi

Efficiency

Standard hours of work

Hours of operation per day

t00%

nroduced X

100%

Hours actually worked

Rated caacity (std hrs)
(Calculated capacity)

Demonstrated capacity (std

(Measured capacity)

Available time

hrs) :

utilization (%)

or

Operation

time

Efficiency (%)

Average capacity

critical ratio (and the different ways of wording the

Time remaining
Work remaining

Actual time remaining

Lead time remaining

Due date - Present date

Lead time remaining

Setup time + Run time

and move times

same formula)

Time to due date remaining _

Expected elapse time to finish the job

er routing or work centre files) + Allow for queue, wait

Total

load :

time

Setup

Operation time per

order :

Manufacturing Lead

(Run time per piece

Order quantity

Time :

Queue

Backlog

Previous backlog
(Input / Output Control)

Cumulative Variance :
(Input / Output Control)

Input

cost :

Capital costs

Ordering

cost

Production control costs

Owners

Income

Liabilities

equity

Cost of goods sold

Run

+ Wait *

+ Actual -

Storage costs

Risk costs

Setup and teardown costs

Liabilities

Expenses

margin)

Revenue

Move

Planned

Owner's equity

Assets

Revenue

Gross profit (Gross

- Ouut

Carrying

Assets

Operation time per piece

Setup

Previous variance

x Order quanttty)

Total cost of goods sold

Lost capacity costs

Net income

rofit) :

Inventory turns

ratio :

Average inventory in

Days of

Gross

supply

profit - General

Annual cost of goods sold _

Average inventory in dollars

dollars

and administrative expenses

Annual cost of goods sold

Inventory turns ratio

Inventory on hand
Average daily usage

SESSION 7: ITEM INVENTORY MANAGEMENT _

Number of orders per

Average

year

inventory

Annual demand
Order quantity

Order quantitv
2

Annual cost of ordering

or

Annual cost of

:
:

carrying

Annual demand
Order quantity

Cost of ordering

Number of orders x Cost per order

order quantitv

x unit cost x

cost of carrying

Total inventory

cost

Annual ordering cost

Annual carrying cost

Economic order quantify

(EOO :

Where:

Order point

:
:
:
:

A
S
i
C

(OP) : DDLT +

Annual usage in units

Ordering costs in dollars
Annual inventory carrying costs (as a decimal)
Unit cost

SS

Demand during lead time

+ Safety stock

Periodic Review

Target level (T)

-: ,B"ffi:HJ"

Order

quantity

ABC classfication
o/o

review period

* Demand during the lead time) + safety stock

- Quantity on hand

Target level

of items (one unit's

worth)

100

Number of observations

80 120 Rule

ABC
Classification

%o

of

Vo

of

Impact

Items
20

B
C

30
50

15

80
5

,SES,SIOI

8: PURCHASING & PHYSICAL DISTRIBUTION

Physical dstribution
Total cost

Transportation costs

Dis tribution r e quirements

planning

Inventory carrying costs

Central supply's gross requirements

SESSION

The sum of all distribution centres planned order releases for the
Period

10: TIIEORY OF CONSTRAINTS

Throughput

Salesrevenue

Truevariablecosts