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Chapter 14

Chapter 14. Material Requirements Planning. Independent Demand (Chapter 13). Dependent Demand (Chapter 14). A. C(2). B(4). D(2). E(1). D(3). F(2). Independent demand is uncertain. Dependent demand is certain. “Lumpy” demand. Demand. Stable demand. Demand. Time. Time.

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Chapter 14

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  1. Chapter 14 Material Requirements Planning

  2. Independent Demand (Chapter 13) Dependent Demand (Chapter 14) A C(2) B(4) D(2) E(1) D(3) F(2) Independent demand is uncertain. Dependent demand is certain. MTSU Management 362

  3. “Lumpy” demand Demand Stable demand Demand Time Time Amount on hand Amount on hand Safety stock Time Time Figure 14-1 Dependent Demand vs Independent Demand MTSU Management 362

  4. MRP Inputs MRP Processing MRP Outputs Changes Order releases Master schedule Planned-order schedules Primary reports Exception reports Bill of materials file Planning reports MRP computer programs Secondary reports Performance- control reports Inventory records file Inventory transaction Figure 14-2 MTSU Management 362

  5. Inventory Records File • A computerized file with a complete record of each material (part number) held in inventory • Provides current status and planning factors used by MRP • quantity currently on hand (perpetual inventory) • quantities on order and delivery dates • customer orders (service parts) • lot size • lead time • safety stock level • scrap rate MTSU Management 362

  6. Master Schedule • States which end items (finished goods) are to be produced, when these are needed, and in what quantities MTSU Management 362

  7. Bill-of-Materials • A listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a finished product • Typically shown a product tree structure where all components and their relationships are listed by levels MTSU Management 362

  8. Chair Leg Assembly Back Assembly Seat Cross bar Side Rails (2) Cross bar Back Supports (3) Legs (2) Figure 14-5 Product Structure Tree Level 0 1 2 3 MTSU Management 362

  9. Item Chair Leg Assembly Seat Back Assembly Leg Cross Bar Side Rail Back Support Amount on hand 10 5 7 2 8 14 12 20 Netting Process Assume the following on-hand amounts for each item MTSU Management 362

  10. Planning Horizon • Cumulative lead time: The sum of the lead times that sequential phases of a process require, from ordering of parts or raw materials to completion of final assembly. • Time fences: Series of time intervals during which order changes are allowed or restricted (see Figure 12-12, page 548). MTSU Management 362

  11. Item Chair Leg Assembly Seat Back Assembly Leg Cross Bar Side Rail Back Support Lead time 1 1 1 2 1 1 1 2 Netting Process Assume the following lead times for each item MTSU Management 362

  12. Place order with supplier Assembly Time Chart Procurement of back supports Procurement of cross bar Back assembly Final assembly and inspection of chair Procurement of side rails Procurement of seat Procurement of cross bar Leg assembly Procurement of front legs 5 4 0 3 2 1 Release order to department MTSU Management 362

  13. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases MRP Logic 10 15 20 12 5 The MPS is converted into the gross requirements for each component for each time period (time bucket) in the planning horizon using the bill of materials. MTSU Management 362

  14. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 The scheduled receipts are orders that have been placed and are on the way. It is assumed that receipts arrive and are available at the beginning of a time period. MTSU Management 362

  15. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 The initial inventory is added to period 1’s scheduled receipts and placed in period 1 of the projected on hand line. In this case, assume that the initial inventory is 16. Add period 1’s scheduled receipt (7) and initial inventory (16) to obtain the projected on handamount for period 1 (23). MTSU Management 362

  16. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 -13 Subtract the projected on handamount for period 1 (23) from period 1’s gross requirement (10) to find the net requirement (-13). MTSU Management 362

  17. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 -13 If the net requirement is negative or zero, that amount (13) is added to the period 2’s scheduled receipt (9) to find the period 2’s projected on hand amount (22). MTSU Management 362

  18. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 -13 -7 Subtract the projected on handamount for period 2 (22) from period 2’s gross requirement (15) to find the net requirement(-7). MTSU Management 362

  19. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 If the net requirement is negative or zero, that amount (7) is added to the period 3’s scheduled receipt (0) to find the period 3’s projected on hand amount (7). MTSU Management 362

  20. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 13 Subtract the projected on handamount for period 3 (7) from period 3’s gross requirement (20) to find the net requirement (13). If the net requirement is positive, an order receipt must be planned to cover that amount. MTSU Management 362

  21. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 13 13 If lot-for-lot lot sizing is being used, the planned order receipt is equal to period 3’s net requirement. MTSU Management 362

  22. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 13 13 13 The planned order receipt is then offset (moved forward in time) to allow for the lead time. This is the planned order release. MTSU Management 362

  23. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 13 12 13 12 13 12 Repeat the steps for period 4. MTSU Management 362

  24. Item 1 2 3 4 5 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 10 15 20 12 5 7 9 23 22 7 -13 -7 13 12 5 13 12 5 13 12 5 Repeat the steps for period 5 MTSU Management 362

  25. A C(3) B(2) Bill of Materials MTSU Management 362

  26. Assumptions Master production schedule: 100 in week 5 Item On hand Lead Time Scheduled Receipts A 15 1 0 B 20 2 0 C 10 1 15 in wk 2 MTSU Management 362

  27. MRP Dynamics • Modes of operation • regenerative - batch mode • net change - on-line, real time mode • System nervousness - frequent changes of inputs to a net change MRP system • Pegging - tracing upward in the BOM from the component to all of the parent items MTSU Management 362

  28. MRP Outputs • Planned orders - schedule indicating the amount and timing of future orders. • Order releases - authorization for the execution of planned orders. • Changes - revisions of due dates or order quantities, or cancellations of orders. MTSU Management 362

  29. MRP Secondary Reports • Performance-control reports • Planning reports • Exception reports MTSU Management 362

  30. Other Considerations • Safety Stock • Lot sizing • Lot-for-lot ordering • Economic order quantity • Fixed-period ordering • Part-period model MTSU Management 362

  31. Capacity Planning • Capacity requirements planning: The process of determining short-range capacity requirements. • Load reports: Department or work center reports that compare known and expected future capacity requirements with projected capacity availability. MTSU Management 362

  32. Develop a tentative master production schedule Use MRP to simulate material requirements Revise tentative master production schedule Convert material requirements to resource requirements No Can capacity be changed to meet requirements Is shop capacity adequate? No Yes Yes Firm up a portion of the MPS Change capacity Figure 14-17 MRP Planning MTSU Management 362

  33. Benefits of MRP • Low levels of in-process inventories • Ability to track material requirements • Ability to evaluate capacity requirements • Means of allocating production time MTSU Management 362

  34. Desirable Characteristics for MRPImplementation (1 of 2) • An effective computer system • Accurate computerized bills of material and inventory status files • Manufactures discrete products that are processed through many production steps • Processes requiring long processing times MTSU Management 362

  35. Desirable Characteristics for MRPImplementation (2 of 2) • Relatively reliable and stable lead times • Master schedule frozen for a period of time sufficient to procure materials without expediting and confusion • Top management support and commitment MTSU Management 362

  36. MRP II • Expanded MRP with and emphasis placed on integration • Financial planning • Marketing • Engineering • Purchasing • Manufacturing MTSU Management 362

  37. Market Demand Production plan Rough-cut capacity planning Requirements schedules Problems? Figure 14-19 Master production schedule Finance Manufacturing Marketing MRP Adjust master schedule Capacity planning Adjust production plan No Yes No Yes Problems? MTSU Management 362

  38. WOW!!! M R P MTSU Management 362

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