Inventory deduction rules and constraints in production scheduling-APS system principle

Inventory is a key constraint in production scheduling. This article introduces the constraints and deduction rules of inventory in production scheduling. To simplify the problem, we will not discuss the minimum inventory strategy and the need for automatic production to stock.

Before explaining the inventory strategy of the production scheduling system, let us first clarify a few concepts:

Finished product: The final product is also the product specified in the customer’s order, such as computers, TVs, air conditioners, etc. The customer’s demand is the quantity of finished products, and the specific production requirements broken down into each component must be completed by the company itself.

Semi-finished products: components that need to be produced by yourself and finally involved in assembly. For example, circuit boards and casings in home appliances need to be produced in different workshops and finally assembled.

Purchased parts: parts that need to be purchased and assembled. Usually there are many such parts, but in scheduling constraints, it can be simplified and only key parts are defined, such as compressors and motors in air conditioners.

Finished products, semi-finished products, and purchased components are related through BOM relationships. BOM can be divided into multiple levels, and semi-finished products can define BOM to generate lower-level production tasks.

Type of inventory:

Inventory in stock: refers to the inventory items that have been put into storage, which can be purchased parts or finished and semi-finished products that have been produced.

In-transit inventory: refers to materials that are expected to arrive at a specified time point in the future. For example, for purchasing parts, a purchase order has been placed and is expected to arrive at a certain time in the future. This batch of materials can be included in the schedule as in-transit inventory.

Note: In-transit inventory generally only includes purchased parts. Semi-finished products that need to be manufactured exist in the form of WIP. If the parts are not put into storage, the production tasks are still on the production line and cannot be used as inventory.

Procurement lead time: This originally refers to the time required from placing a purchase order to when materials are put into storage. We use procurement lead time to determine when a purchase order should be placed.

In production scheduling, the lead time cannot usually be defined based on reality (the lead time of some parts is very long and the delivery date is uncertain), but should be considered from the perspective of scheduling delay. The definition of lead time in Planmate is: if this material is in short supply, how long the production plan should be delayed.

Inventory handling of manufactured parts:

Principle: Semi-finished products that need to be manufactured are not used as constraints. After deducting existing inventory, production tasks are created from finished product orders.

Example analysis:

Assuming that a certain model of air conditioner is to be assembled, the finished product BOM is as follows:

Control circuit board: manufacturing
Injection Molded Chassis: Manufacturing

We make the following assumptions to see how APS arranges production (assuming that purchased parts are already in stock):

Assumption 1: There is enough finished product inventory and no production is needed
Order: 3000

Assumption 2: There is some inventory: after deducting the inventory, produce according to actual needs
Order: 3000

Assumption 3: Some semi-finished products have sufficient inventory and are produced according to actual production. Semi-finished products in inventory do not need to be produced.

Inventory constraints for purchased parts

If the BOM is determined in the model and a certain material needs to be consumed in production, follow the following strategy:

1. First use the inventory in the warehouse. If there is insufficient material in the warehouse, use the inventory in transit;
2. If there is insufficient inventory, production is scheduled after the lead time (based on the current date). For example, if the day is 9/1 and the lead time is 15 days, the task can only be scheduled after 9/16;
3. If one of the BOM components of a product is insufficient, it cannot be produced. Do not allocate some materials;
4. If multiple tasks share a material, but the material cannot meet the needs of all tasks at the same time, allocate the material to the task with an earlier time point (or a higher priority task);
5. If the procurement lead time is 0, the material will not constrain the schedule;

According to the previous BOM definition, the lead time is defined as follows:

Compressor: Procurement, lead time 10 days;
Motor: 1, procurement, lead time 15 days;

Assume the current date of the schedule: 9/1;

Improve inventory with scheduling systems

Using a production scheduling system to improve inventory strategies, we recommend scheduling in two modes:

1. Turn off purchasing material inventory constraints and only use resource constraints. This method is generally used for long-term plans, such as monthly or quarterly production plans. Under this condition, the system only considers the resource constraints in the model and does not consider the material conditions. After scheduling, the material requirements plan (MRP) is output according to the production date and BOM of the order plan. Material requirements planning can help the purchasing department communicate with suppliers and obtain material supply plans in a timely manner.

Note: ERP is usually used to calculate MRP requirements. In order to improve the accuracy of procurement plans, the scheduling results of the APS system should be returned to ERP. The APS system itself can also output material requirements, which is only used as a reference for the purchasing department.

2. Actual schedule based on material conditions:

Import actual material inventory from ERP;
Export the work order issued materials list from ERP (the issued materials must be deducted when deducting inventory);
The purchasing department provides incoming material schedules as in-transit inventory;
Run the schedule using both model resource constraints and material condition constraints. Production tasks will be scheduled after the material collection date.