must determine where inventory can be reduced and then begin enforcing those reductions Through recent efforts,Stout had successfully eliminated several million dollars of obsolete and slow-moving inventory. Production Planning and Scheduling The production planning and scheduling process is broken down into two parts--planning based on monthly forecasts,of assembly and component parts orders;and daily scheduling of packaging and sterilization based on finished goods inventory levels. During the fourth quarter of each fiscal year,the marketing and finance organizations determine an annual forecast.The annual forecast is then broken down proportionately,based on the number of weeks in the month,into monthly forecasts.As the year progresses,the Central Planners work with the Marketing organization to make forecast adjustments according to market trends and events.At the beginning of each month,the month's forecasts are adjusted and agreed upon by the Marketing organization and the Central Planners The planning of assembly for a particular instrument begins with the monthly demand forecasts Based on the month's forecast,the Central Planners determine the amount of product that needs to be transferred from bulk inventory into finished goods inventory to"meet"'the expected demand.This amount,termed the finished goods"transfer requirement",is determined by subtracting the current finished goods inventory level from(1)the demand forecast for the month plus(2)the required safety stock.(The current safety stock policy is to maintain three weeks'worth of demand). The transfer requirements,once completed for all 200-plus product codes,are passed throughout the organization for approval.This process typically takes place one to two weeks into the current month.While not actually used to schedule assembly or to alter the packaging and sterilization processes,the transfer requirements provide an estimate of the required overall production for the month.Any problems in being able to deliver to the plan can then be identified and resolved. Assembly schedules and replenishment orders for parts are based on the monthly demand forecasts and current inventory levels.By mid-month,the completed monthly plans,which contain the monthly forecasts,are sent to the assembly business units.A planner in the business unit plugs the forecasts into a Materials Requirement Planning(MRP)system,which determines weekly production schedules and component parts orders for each finished product.The MRP system determines assembly schedules and parts orders based on(1)the monthly forecasts,(2) the lead times for assembly,packaging,and sterilization,and (3)current parts,bulk,and finished goods inventory levels.Although the MRP calculation may be run several times each week,the planner is careful not to change weekly production schedules with less than a week's notice.(A schedule change often requires rescheduling workers and procuring more component parts. One week's notice for responding to scheduling changes,therefore,has been deemed adequate by the business unit managers.) 5must determine where inventory can be reduced and then begin enforcing those reductions. Through recent efforts, Stout had successfully eliminated several million dollars of obsolete and slow-moving inventory. Production Planning and Scheduling The production planning and scheduling process is broken down into two parts -- planning, based on monthly forecasts, of assembly and component parts orders; and daily scheduling of packaging and sterilization based on finished goods inventory levels. During the fourth quarter of each fiscal year, the marketing and finance organizations determine an annual forecast. The annual forecast is then broken down proportionately, based on the number of weeks in the month, into monthly forecasts. As the year progresses, the Central Planners work with the Marketing organization to make forecast adjustments according to market trends and events. At the beginning of each month, the month’s forecasts are adjusted and agreed upon by the Marketing organization and the Central Planners. The planning of assembly for a particular instrument begins with the monthly demand forecasts. Based on the month’s forecast, the Central Planners determine the amount of product that needs to be transferred from bulk inventory into finished goods inventory to “meet” the expected demand. This amount, termed the finished goods “transfer requirement”, is determined by subtracting the current finished goods inventory level from (1) the demand forecast for the month plus (2) the required safety stock. (The current safety stock policy is to maintain three weeks’ worth of demand). The transfer requirements, once completed for all 200-plus product codes, are passed throughout the organization for approval. This process typically takes place one to two weeks into the current month. While not actually used to schedule assembly or to alter the packaging and sterilization processes, the transfer requirements provide an estimate of the required overall production for the month. Any problems in being able to deliver to the plan can then be identified and resolved. Assembly schedules and replenishment orders for parts are based on the monthly demand forecasts and current inventory levels. By mid-month, the completed monthly plans, which contain the monthly forecasts, are sent to the assembly business units. A planner in the business unit plugs the forecasts into a Materials Requirement Planning (MRP) system, which determines weekly production schedules and component parts orders for each finished product. The MRP system determines assembly schedules and parts orders based on (1) the monthly forecasts, (2) the lead times for assembly, packaging, and sterilization, and (3) current parts, bulk, and finished goods inventory levels. Although the MRP calculation may be run several times each week, the planner is careful not to change weekly production schedules with less than a week's notice. (A schedule change often requires rescheduling workers and procuring more component parts. One week's notice for responding to scheduling changes, therefore, has been deemed adequate by the business unit managers.) 5