Opration management chapter 5 material requirement planing MRP

Master Production Schedule MPS production plan demand, engineering, supplier performance execution, each step must be tested for feasibility planning process... Master Production Schedul

Learning Objectives

When you complete this chapter you

should be able to:

4 Determine lot sizes for lot-for-lot,

EOQ, and PPB

Learning Objectives

When you complete this chapter you

should be able to:

Wheeled Coach

ambulances in the world

 International competitor

Wheeled Coach

requirements of the master schedule and the capabilities of the production facility

Dependent Demand

to the demand for another item

 Given a quantity for the end item,

the demand for all parts and components can be calculated

schedule can be established for an item

Dependent Demand

2 Specifications or bill of material

Master Production Schedule

(MPS)

production plan

demand, engineering, supplier performance

execution, each step must be tested for feasibility

planning process

Master Production Schedule

(MPS)

products

reasonable length of time

the near term part of the plan

produced, not a forecast of demand

The Planning Process

Figure 14.1

Change production plan?

Master production schedule

Management Return on investment Capital

Engineering Design completion

Aggregate production plan

Procurement Supplier performance

Human resources Manpower

planning

Production Capacity Inventory

Marketing Customer demand

Finance Cash flow

The Planning Process

Is capacity plan being met?

Is execution meeting the plan?

Change master production schedule?

Change capacity?

Change requirements?

No

Execute material plans

Execute capacity

plans Yes Realistic?

Capacity requirements plan

Material requirements plan

Master production schedule

Aggregate Production Plan

(Shows the total

quantity of amplifiers)

Master Production Schedule

(Shows the specific type and

Master Production Schedule

(MPS)

(make-to-order) company

(assemble-to-order or forecast) company

(stock-to-forecast) company

Can be expressed in any of the

following terms:

Focus for Different Process Strategies

Stock to Forecast (Product Focus)

Schedule finished

product

Assemble to Order

or Forecast (Repetitive)

Schedule modules

Make to Order (Process Focus)

Schedule orders

Fine-dining restaurant Fast-food restaurant Paper

Typical focus of the

MPS Examples

Gross Requirements for Crabmeat Quiche

Gross Requirements for Spinach Quiche

Bills of Material

and materials needed to make product

parents

children

Std 12” Speaker booster assembly

0

Std 12” Speaker booster assembly

Bills of Material

 Modular Bills

components that can be assembled into multiple end items

and scheduling

Bills of Material

 Planning Bills (Pseudo Bills)

 Created to assign an artificial parent

to the BOM

reduce the number of items planned and scheduled

production

Bills of Material

only temporarily

never go into inventory

Accurate Records

absolutely required for MRP (or any dependent demand system) to operate correctly

99% accuracy

accurately reflect quantities and scheduled receipts

Lead Times

produce, or assemble an item

order, wait, move, setup, store, and run times

between the recognition of a need and the availability of the item for production

C E

Start production of D Must have D and E completed here so

production can begin on B

Figure 14.4

MRP Structure

Output Reports

MRP by period report

MRP by date report

Planned order report Purchase advice

Exception reports Order early or late

or not needed Order quantity too small or too large

Material requirement planning programs (computer and software)

Determining Gross

Requirements

end item – 50 units of Item A in week 8

determine the week in which the order

means the order for 50 units should be released in week 7

or “time phasing”

Determining Gross

Requirements

Item Bs – 100 Item Bs are required in week 7 to satisfy the order release for Item A

release an order for 100 units of Item B in week 5

requirements are determined by the order release of the parent(s)

Determining Gross

Requirements

BOM one level at a time – often called

“explosion”

with multiple parents are only processed once, saving time and resources and

reducing confusion

appears at only one level in the BOM

Gross Requirements Plan

Net Requirements Plan

Net Requirements Plan

Determining Net Requirements

end item – 50 units of Item A in week 8

only 40 are actually required – (net requirement) = (gross requirement - on- hand inventory)

week 8 is 40 units – 40 = 50 - 10

Determining Net Requirements

the planned order release for Item A is now 40 units in week 7

80 units in week 7

the net requirement is 65 units in week 7

 A planned order receipt of 65 units in

week 7 generates a planned order release

of 65 units in week 5

Determining Net Requirements

 A planned order receipt of 65 units in

week 7 generates a planned order release

of 65 units in week 5

is updated to reflect the use of the 15

items in inventory and shows no on-hand

calculation and is the third basic function

of the MRP process

Net Requirements Plan

The logic of net requirements

Available inventory

Net requirements

On hand + Scheduled receipts

Total requirements Gross

requirements + Allocations

Lead time = 6 for S Master schedule for S

Therefore, these are the gross requirements for B Gross requirements: B 10 40+10 =50 40 50 20 15+30 =45

Periods

MRP Planning Sheet

Figure 14.7

Safety Stock

and production quantities may not

MRP Management

occur

too many changes

 Pegging links each item to its parent

allowing effective analysis of changes

MRP and JIT

does not do detailed scheduling

which might actually vary with batch size

 JIT excels at rapidly moving small

batches of material through the system

Finite Capacity Scheduling

capacity during normal planning cycles

recognizes actual capacity limits

schedule is created with feasible capacities which facilitates rapid material movement

Small Bucket Approach

1 MRP “buckets” are reduced to daily or hourly

 The most common planning period (time

bucket) for MRP systems is weekly

2 Planned receipts are used internally to sequence

production

3 Inventory is moved through the plant on a JIT

basis

4 Completed products are moved to finished goods

inventory which reduces required quantities for subsequent planned orders

5 Back flushing based on the BOM is used to

deduct inventory that was used in production

Balanced Flow

 Used in repetitive operations

executed using JIT techniques based on “pull”

principles

 Flows are carefully

balanced with small lot sizes

held in a common area often called

a supermarket

 Inventory is maintained using JIT

systems and procedures

the MRP system

Lot-Sizing Techniques

 Lot-for-lot techniques order just what

is required for production based on net requirements

 If setup costs are high, lot-for-lot can

be expensive

demand and MRP systems often deal with unknown and variable demand

Lot-Sizing Techniques

 Part Period Balancing (PPB) looks at

future orders to determine most economic lot size

complex dynamic programming technique

burdensome

No on-hand inventory is carried through the system

Total holding cost = $0

There are seven setups for this item in this plan

Total setup cost = 7 x $100 = $700

EOQ Lot Size Example

EOQ Lot Size Example

Annual demand = 1,404

Total cost = setup cost + holding cost

Total cost = (1,404/73) x $100 + (73/2) x ($1 x 52 weeks)

Total cost = $3,798

Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) =

$730

Combine periods 2 - 5 as this results in the Part Period

closest to the EPP

Combine periods 6 - 9 as this results in the Part Period

closest to the EPP

Lot-Sizing Summary

whenever there is a lot size or order quantity change

nervousness and instability

be used when low-cost JIT can

be achieved

Lot-Sizing Summary

scrap, process constraints, and purchase lots

considerable distortion of requirements

at lower levels of the BOM

demand is reasonably smooth, PPB, Wagner-Whitin, or EOQ should give reasonable results

Extensions of MRP

 MRP system provides input to the capacity

plan, MPS, and production planning process

 MRP system generates a load report which

details capacity requirements

 This is used to drive the capacity planning

process

 Changes pass back through the MRP

system for rescheduling

Material Requirements

Planning II

data can be augmented by other useful information

Material Resource Planning

Material Resource Planning

Week

B Units (lead time 2 weeks,

Payable: Raw material at $5 each 1,000

C Units (lead time 4 weeks,

3 each required) 300

Payable: Raw material at $10 each 3,000

Closed-Loop MRP System

Figure 14.8

Closed-Loop MRP System

Figure 14.8

Capacity Planning

Resource planning First cut capacity

No

Capacity requirements

(detailed)

Yes

Material requirements

(detailed)

Priority Planning

Desired master production

schedule Realistic?

Production plan

Planning

Input/output report

Is average capacity adequate

?

Dispatch list

Is specific capacity adequate

?

Resource Requirements Profile

Lot 1

Lot

2 Lot 4

Lot 7

Lot 8 Lot

3 Lot 5

Lot

10 Lot 13

Lot

9 Lot 12

Lot

14 Lot 16

Lot 6

Lot 15

Lot

11 Available capacity

Capacity exceeded

in periods 4 & 6

Lot 1

Lot

2 Lot 4

Lot 7

Lot 8 Lot

3 Lot 5

Lot

10 Lot 13

Lot

9 Lot 12

Lot

14 Lot 16

Lot 6

Lot 15

Lot 11

Available capacity

Lot 6 “split” Lot 11 moved

Resource Requirements Profile

Figure 14.9

Lot 1

Lot

2 Lot 4

Lot 7

Lot 8 Lot

3 Lot 5

Lot

10 Lot 13

Lot

9 Lot 12

Lot

14 Lot 16

Lot 6

Lot 15

Lot

11 Available capacity

Capacity exceeded

in periods 4 & 6

Lot 1

Lot

2 Lot 4

Lot 7

Lot 8 Lot

3 Lot 5

Lot

10 Lot 13

Lot

9 Lot 12

Lot

14 Lot 16

Lot 6

Lot 15

Lot 11

Available capacity

Lot 6 “split” Lot 11 moved

Smoothing Tactics

 Sends part of the work to following

operations before the entire lot is complete

 Reduces lead time

 Sends the lot to two different machines for

the same operation

 Shorter throughput time but increased setup

costs

3 Order or lot splitting

 Breaking up the order into smaller lots and

MRP in Services

directly linked to demand for other services

demand services or items

Uncooked linguini

Helper one;

Work Center #2

Asst Chef;

Work Center #3

Cooked linguini

#20002 Spinach #20004

Prepared veal and sauce

#20003

(a) PRODUCT STRUCTURE TREE

Veal picante

#10001

Figure 14.10

MRP in Services

(b) BILL OF MATERIALS

Part Number Description Quantity Measure Unit of cost Unit

20003 Prepared veal and sauce 1 Serving —

MRP in Services

(c) BILL OF LABOR FOR VEAL PICANTE

Labor Hours Work Center Operation Labor Type Setup Time Run Time

3 Cook veal

and sauce Assistant Chef .0125 .0500

Distribution Resource Planning

(DRP)

Using dependent demand techniques

through the supply chain

become gross requirements

customer service levels

Enterprise Resource Planning

(ERP)

tie in customers and suppliers

many business processes

business practices

supplier evaluation to customer

Enterprise Resource Planning

(CRM)

ERP and MRP

Figure 14.11

Sales Order (order entry, product configuration, sales management)

Table 13.6

Bills of Material

Work Orders

Purchasing and Lead Times

Routings and Lead Times

Master Production Schedule

Inventory Management

ERP and MRP

Figure 14.11

MRP

ERP and MRP

Figure 14.11

Supply Chain Management

Vendor Communication (schedules, EDI, advanced shipping notice,

e-commerce, etc.)

Accounts Receivable

Payroll Accounts Payable

© 2008 Prentice Hall, Inc. 14 – 79

Enterprise Resource Planning

(ERP)

meet specific business requirements

 Enterprise application integration

software (EAI) allows ERP systems

Enterprise Resource Planning

(ERP)

information

 Facilitates a strategic emphasis on

JIT systems and integration

Advantages of ERP Systems

production, and administration

collaboration between business units and sites

Disadvantages of ERP

Systems

more so to customize

in the company and its processes

adjust to it

completed, process for implementation

problems

ERP in the Service Sector

for health care, government, retail stores, hotels, and financial

services

 Also called efficient consumer

response (ECR) systems

 Objective is to tie sales to buying,

inventory, logistics, and production