Core Business Processes - Manufacture Products

Process Name

Description

This process manages the activities that are used to produce the entity’s products.  The planning and materials management aspects are included in this process.

Sub Process Components

Production Planning & Material Management

Process Objectives

1. Efficient use of resources
2. Smooth supply chain flow
3. Minimal stock in supply chain
4. Plans which can meet customer needs
5. Maximisation  of capacity

Critical Success Factors (CSF’s)

     A.   Efficient delivery of raw materials (1,2,3)
     B.  Optimal raw material stocks (1,2,3)
     C.   Accuracy of management data and forecasts (3,4,5)
     D.   Integrated approach to planning (2,3,4,5)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Supplier on-time delivery percentage (A)
• Raw material inventory turns (B)
• Actual sales vs forecasts (C)
• Material usage vs planned (D)

Inputs

Suppliers Lead times Supply requisitions Labour force Promotional plans

Bills of Material (BOM) Opening stock levels Purchase orders Sales forecasts Customer orders

Materials storage Materials planning system Stock-holding policy New product development plans Material availability

Activities

Outputs

Closing stock levels Supplier delivery performance data Material requirements

Materials to meet plan Production schedules Maintenance requirements

Goods received notes Labour requirements

Systems

Purchase order system Bill of Material (BOM) files

Materials planning system Sales forecasting system

Production planning system Materials databases

Classes of Transactions

Routine Receipt of materials

Non-Routine

Accounting Estimates Reserve for obsolete inventory Inventory valuation (commodities businesses that record at market)

Risks Which Threaten Objectives

       A.  Sales forecasting and planning tools not integrated (1,2,3,4,5)
       B.  Poor communication internally and with suppliers (1,2,3,5)
       C.  Inaccurate BOM files (1,3)
       D.  Unresponsive suppliers (1,2,3)

Management Responses Linked to Risks Use of cross-functional production planning process (A) Continuously monitor actual vs plan and communicate changes (A,B) Frequently update/check BOM file accuracy (C) Monitor supplier performance (D

Other Symptoms of Poor Performance

Long lead time High inventory levels

Improper delivery quantities

Key drivers not included in planning

Performance Improvement Observations

Enterprise package solution Activity-based costing

Supply chain integration

Business process re-engineering

Conversion

Process Objectives

1. High quality products
2. Low unit costs
3. Customer responsiveness
4. Minimal inventory in supply chain
5. Production effectiveness

Critical Success Factors (CSF’s)

     A.  Optimum use of manufacturing resources (1,2,4,5)
     B.  Use of quality assurance and preventative maintenance programmes (1,2,3,4)
     C.  Use of good manufacturing practice (1,5)
     D.  Productive workforce (2,5)

Key Performance Indicators (KPI’s) Linked to CSF’s

• Capacity utilisation; changeover time; overall equipment effectiveness rate (A,B,C)
• Scrap rate; percentage of overhead (burden) rates and variances spending on preventative maintenance (B,C)
• Government/industry ratings (C)
• Labor efficiency rates (D)

Inputs

Opening finished goods stocks Consumables Production schedules

Stock-holding policy Plant and equipment Maintenance schedules

Raw / packing materials Labour Utilities (heat, power, etc.)

Activities

Outputs

Closing stocks of finished goods Production performance data

New stocks of materials

Work in process

Systems

Production scheduling

Production control

Inventory control

Classes of Transactions

Routine Production of inventory Movement of inventory (transfer pricing)

Non-Routine Bill and hold transactions

Accounting Estimates

Risks Which Threaten Objectives

      A.  Poor material flow and quality (1,2,4,5)
      B.  Production capability does not match production needs (2,3,4,5)
      C.  Badly maintained production equipment (2,4,5)
      D.  Workforce that is not committed to producing high quality goods (1,3)

Management Responses Linked to Risks

• Use of effective preventative maintenance programmes (A,C)
• Use of modular manufacturing systems or contract manufacturing (B)
• Monitor production/maintenance costs (C)
• Employee awareness programs which emphasize quality (A,D)
• Incentive pay base on performance (D)

Other Symptoms of Poor Performance

Sub-optimal capacity utilisation Lost time accidents

Absenteeism rates

Poor labour utilisation

Performance Improvement Observations

Activity-based costing Transfer pricing studies

Business process Improvement Production facilities optimisation

Quality Management programmes