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Upper Saddle River, New Jersey

Columbus, Ohio

Introduction to Materials

Management

SIXTH EDITION

J. R. Tony Arnold, P.E., CFPIM, CIRM

Fleming College, Emeritus

Stephen N. Chapman, Ph.D., CFPIM

North Carolina State University

Lloyd M. Clive, P.E., CFPIM

Fleming College

Editor in Chief:Vernon R. Anthony

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Marketing Assistant:Alicia Dysert

This book was set by GGS Book Services. It was printed and bound by R. R. Donnelley & Sons Company. The

cover was printed by Phoenix Color Corp. Copyright © 2008, 2004, 2001, 1998, 1996, 1991 by Pearson Education, Inc., Upper Saddle River,

New Jersey 07458.Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This

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10 9 8 7 6 5 4 3 2 1

ISBN-13: 978-0-13-233761-8

ISBN-10: 0-13-233761-4

Introduction to Materials Managementis an introductory text written for students in community colleges and universities. It is used in technical programs, such as indus- trial engineering and manufacturing engineering; in business programs; and by those already in industry, whether or not they are working in materials management. This text has been widely adopted by colleges and universities not only in North America but also in other parts of the world. APICS-The Association for Operations Management recommends this text as the reference for certification preparation for various CPIM examinations. In addition, the text is used by produc- tion and inventory control societies around the world, including South Africa, Australia, New Zealand, Germany, France, and Brazil, and by consultants who pre- sent in-house courses to their customers. Introduction to Materials Managementcovers all the basics of supply chain man- agement, manufacturing planning and control systems, purchasing, and physical dis- tribution. The material, examples, questions, and problems lead the student logically through the text. The writing style is simple and user-friendly-both instructors and students who have used the book attest to this. In the sixth edition, we have added the following: •More content on Theory of Constraints (Chapter 6)

•More content on supply chains (Chapter 7)

•More content on lean production (Chapter 15)

•Content on the use of technology in purchasing and warehousing (Chapters 7, 12) •The effect of global logistics and reverse logistics (Chapter 13)

•Six Sigma and QFD (Chapter 16)

•Small case studies at the end of several chapters •PowerPoint slides to accompany all the chapters (an online resource for instructors) iii

PREFACE

ivPreface In addition, we have retained several features from previous editions:

•Margin icons to note key concepts

•Key terms listed at the end of each chapter

•Example problems within the chapters

•Chapter summaries

•Questions and problems at the end of each chapter

APPROACH AND ORGANIZATION

Materials management means different things to different people. In this textbook, materials management includes all activities in the flow of materials from the supplier to the consumer. Such activities include physical supply, operations planning and con- trol, and physical distribution. Other terms sometimes used in this area are business logisticsandsupply chain management. Often, the emphasis in business logistics is on transportation and distribution systems with little concern for what occurs in the fac- tory. Whereas some chapters in this text are devoted to transportation and distribu- tion, emphasis is placed on operations planning and control. Distribution and operations are managed by planning and controlling the flow of materials through them and by using the system"s resources to achieve a desired customer service level. These activities are the responsibility of materials manage- ment and affect every department in a manufacturing business. If the materials management system is not well designed and managed, the distribution and manufac- turing system will be less effective and more costly. Anyone working in manufacturing or distribution should have a good basic understanding of the factors influencing materials flow. This text aims to provide that understanding. APICS defines the body of knowledge, concepts, and vocabulary used in pro- duction and inventory control. Establishing standard knowledge, concepts, and vocabulary is essential both for developing an understanding of production and inventory control and for making clear communication possible. Where applicable, the definitions and concepts in this text subscribe to APICS vocabulary and concepts. The first six chapters of Introduction to Materials Managementcover the basics of production planning and control. Chapter 7 discusses important factors in purchasing and supply chain; Chapter 8 discusses forecasting. Chapters 9, 10, and 11 look at the fundamentals of inventory management. Chapter 12 discusses physical inventory and warehouse management, and Chapter 13 examines the elements of dis- tribution systems, including transportation, packaging, and material handling. Chapter

14 covers factors influencing product and process design. Chapter 15 looks at the

philosophy and environment of just-in-time and lean production and explains how operations planning and control systems relate to just-in-time and lean production. Chapter 16 examines the elements of total quality management and Six Sigma quality approaches.

Prefacev

ONLINE INSTRUCTOR RESOURCES

To access supplementary materials online, instructors need to request an instructor access code. Go to www.prenhall.com, click the Instructor Resource Centerlink, and then click Register Todayfor an instructor access code. Within 48 hours after regis- tering you will receive a confirming e-mail including an instructor access code. Once you have received your code, go to the site and log on for full instructions on down- loading the materials you wish to use.

ACKNOWLEDGMENTS

Help and encouragement have come from a number of valued sources, among them friends, colleagues, and students. We thank the faculty of other colleges and the many members of APICS chapters who continue to offer their support and helpful advice. Many thanks to those who reviewed the fifth edition and provided suggestions for the sixth edition, including members of the APICS Basics of Supply Chain Management Certification Committee: Jim Caruso (Chair) of Tyco Healthcare; Carol Bulfer, Parker Hanninfin Corp.; William Leedale, IFS; and Angel Sosa, University of Puerto Rico at Bayamon. Academic reviewers included Sheila E. Rowe, North Carolina A&T State University; David Lucero, Greenville Technical College; Floyd Olson, Utah Valley State College; Ralph G. Kauffman, University of Houston-Downtown; Ronald J. Baker, Shoreline Community College; and Richard E. Crandall, Appalachian

State University.

Tony Arnold thanks his wife, Vicky Arnold, for her assistance throughout the years of writing and revising this text, and Steve Chapman thanks his wife, Jeannine, for her support as well. Lloyd Clive thanks his wife, Kathleen, for her continued support. Overall, this book is dedicated to those who have taught us the most-our students. J. R. Tony Arnold, Professor Emeritus, CFPIM, CIRM

Fleming College

Peterborough, Ontario

Stephen N. Chapman, Ph.D., CFPIM, Associate Professor Department of Business Management, College of Management

North Carolina State University

Raleigh, North Carolina

Lloyd M. Clive, CFPIM

Coordinator Materials Management and Distribution

School of Business

Fleming College

Petersborough, Ontario

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CHAPTER 1Introduction to Materials Management 1

Introduction 1

Operating Environment 2

The Supply Chain Concept 5

What Is Materials Management? 10

Supply Chain Metrics 15

Summary 17

Key Terms 17

Questions 17

Problems 18

CHAPTER 2

Production Planning System 20

Introduction 20

Manufacturing Planning and Control System 21

Sales and Operations Planning 26

Manufacturing Resource Planning 28

Enterprise Resource Planning 29

Making the Production Plan 30

Summary 42

Key Terms 42

Questions 43

Problems 44

CHAPTER 3

Master Scheduling 49

Introduction 49

Relationship to Production Plan 50

vii

CONTENTS

viiiContents

Developing a Master Production Schedule 53

Production Planning, Master Scheduling, and Sales 60

Summary 67

Key Terms 67

Questions 68

Problems 68

Case Study: Acme Water Pumps 76

CHAPTER 4

Material Requirements Planning 77

Introduction 77

Bills of Material 81

Material Requirements Planning Process 89

Using the Material Requirements Plan 102

Summary 107

Key Terms 108

Questions 108

Problems 109

Case Study: Apix Polybob Company 123

CHAPTER 5

Capacity Management 125

Introduction 125

Definition of Capacity 125

Capacity Planning 127

Capacity Requirements Planning (CRP) 128

Capacity Available 130

Capacity Required (Load) 135

Scheduling Orders 138

Making the Plan 141

Summary 142

Key Terms 143

Questions 144

Problems 144

Case Study: Wescott Products 149

CHAPTER 6

Production Activity Control 153

Introduction 153

Data Requirements 157

Order Preparation 159

Scheduling 159

Load Leveling 166

Scheduling Bottlenecks 167

Contentsix

Theory of Constraints and Drum-Buffer-Rope 170

Implementation 172

Control 174

Production Reporting 180

Summary 181

Key Terms 181

Questions 181

Problems 183

Case Study: Johnston Products 189

CHAPTER 7

Purchasing 191

Introduction 191

Establishing Specifications 195

Functional Specification Description 198

Selecting Suppliers 200

Price Determination 204

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