Transcript Slide 1

Operations
Management
MRP
Lecture 22 (Chapter 14)
1
Dependent versus Independent
Demand
Item
Demand
Source
Material
Type
Method of
Estimating
Demand
Planning
Method
Materials With
Independent Demand
Materials With
Dependent Demand
Company Customers
Parent Items
Finished Goods
WIP & Raw Materials
Forecast & Booked
Customer Orders
Calculated
EOQ & ROP
MRP
2
Plans and their relationship
HIGH
SHORT TERM
SCHEDULING
MRP
MPS
APP
LOW
SHORT
MEDIUM
TIME FRAME
APP = Aggregate Production Planning: 3 – 18 months (medium/intermediate term)
MPS = Master Production Schedule: 1 – 12 weeks
MRP = Material Requirements Planning: Daily or weekly (short term)
Short term scheduling: hourly (very short).
LONG
3
MRP

Dependent demand technique that uses MPS,
BOM, inventory, expected receipts and lead times
to determine materials requirements

Basis for ERP

More preferable to EOQ models if relationship is
known between items i.e. dependency occurs for
the items under consideration

Precisely determines feasibility of a schedule
within capacity constraints
4
Dependent Inventory Model (MRP)
Requirements

MPS (what is to be made and when)

Specifications or Bill of Materials (BOM)

Inventory availability (what is in stock)

PO’s outstanding (what is on order)

Lead times (how long it takes to get various
components)
5
Master Production Schedule (MPS)

Timetable that specifies what is to be made
and when

Result of Aggregate/Production Planning
process

Disaggregates the AP (expressed in gross
terms) into specific terms

AP sets upper and lower bounds on the MPS
6
Aggregate Production Plan
Months
January
Aggregate Production
Plan shows the total
Weeks
February
1,500
quantity of bicycles
1
2
MPS
3
1,200
4
5
6
7
8
Master Production Schedule
Shows the specific type
and quantity of bike to be
produced
Road bike
Hybrid bike
Mountain bike
100
100
500
100
500
300
100
450
450
100
7
Typical Focus of the Master
Production Schedule
Make to Order
(Process Focus)
Number of end
items
Typical focus of the
master production
schedule
Number of
inputs
Schedule
orders
Assemble to
Order or
Forecast
(Repetitive)
Stock to Forecast
(Product Focus)
Schedule finished
product
Schedule
modules
Motorcycles, autos,
Examples: Print shop
Machine shop
TVs, fast-food
Fine dining restaurant
restaurant
Steel, Beer,
Bread Light
bulbs, Paper
8
Bill of Materials (BOM)

Listing of components, their description and qty of
each, required to make one unit of a product

Due to rush to get product into market, BOM may
be incomplete or non-existent

Adequate to provide product structure and
explode it to reveal requirements

Low level coding done for items occurring at
several levels
9
Bill Of Material
Product Structure Tree
Bicycle (1)
P/N 1000
Handle Bars (1)
P/N 1001
Frame Assembly (1)
P/N 1002
Wheels (2)
P/N 1003
Frame (1)
P/N 1004
10
Purchase Orders Outstanding

By-product of well managed purchasing and
inventory control depts

Prodn personnel should be well-informed
about the orders placed and their scheduled
deliveries
11
Lead times

Time reqd to acquire (purchase, produce or
assemble) an item

For manufactured item, lead time = move time +
setup time + assembly/run time

For purchased item lead time = time between
order placement and order receipt
12
Time-Phased Product Structure
Must have D and E completed here
so production can begin on B
Start production of D
1 week
D
2 weeks to
produce
B
2 weeks
E
A
2 weeks
2 weeks
E
1 week
1 week
G
C
3 weeks
F
1 week
D
0
1
2
3
4
Time in weeks
5
6
7
13
Example
14
MRP – Inventory Record
Item: B
Description: Frame
Lot Size: 1000 units
Lead Time: 2 weeks
assembly
Week
1
2
3
Gross
requirements
100
500
400
Scheduled
receipts
1000
0
0
Projected
on-hand
inventory
4
500
0
5
100
0
6
7
150
450
0
0
8
200
0
115
Planned
receipts
Planned order
releases
15
MRP – Planned Orders
Item: B
Description: Frame
Lot Size: 1000 units
Lead Time: 2 weeks
assembly
Week
1
2
3
Gross
requirements
100
500
400
Scheduled
receipts
1000
0
0
1015
515
115
Projected
on-hand
inventory
115
Planned
receipts
Planned order
releases
4
500
0
615
5
6
7
150
450
0
0
0
0
515
365
915
715
100
1000
1000
8
200
1000
1000
16
MRP – Inventory Record
Item: B
Description: Frame
Lot Size: 1000 units
Lead Time: 2 weeks
assembly
Week
1
2
3
Gross
requirements
100
500
400
Scheduled
receipts
1000
0
0
Projected
on-hand
inventory
4
500
0
5
100
0
6
7
150
450
0
0
8
200
0
115
Planned
receipts
Planned order
releases
17
MRP – Planned Orders
Item: B
Description: Frame
Lot Size: 1000 units
Lead Time: 2 weeks
assembly
Week
1
2
3
Gross
requirements
100
500
400
Scheduled
receipts
1000
0
0
1015
515
115
Projected
on-hand
inventory
115
Planned
receipts
Planned order
releases
4
500
0
615
5
6
7
150
450
0
0
0
0
515
365
915
715
100
1000
1000
8
200
1000
1000
18
Structure of the MRP System
Data Files
BOM
(Bill-of-Material)
Master Production
Schedule
Lead Times
(Item Master File)
O/p reports
MRP by period report
MRP by date report
MRP
Programs
Planned orders report
Inventory Data
Purchase requirements
Purchasing data
Exception reports
19
Lot-Sizing Techniques
Techniques used in determining order qty’s or lot
sizes

Lot-for-lot

Economic Order Quantity

Part Period Balancing
20
Lot-for-lot

Lot sizing technique that generates exactly
what is needed

No safety stock or anticipation of further
orders

Works most efficiently when

Frequent orders are economical (low set-up or
ordering costs)

JIT inventory techniques has been implemented
21
EOQ

Preferable when demand is relatively constant
and independent

Not preferable for dependent demand

Operations managers should take advantage
of demand info when it is available rather than
assuming constant demand
22
PPB

Dynamic approach that balances setup /
ordering and holding costs by changing the
lot size to reflect requirements of next lot
size in the future

Develops an EPP – ratio of setup to holding
cost

Adds requirements until the part
periods/holding costs approximate EPP
23
MRP in Services

Can be used when demand for service or
service items is directly related to or derived
from demand for other services

restaurant – demand for vegetables is dependent
on demand for meals

hospitals – equipment, materials and supply
dependent on demand for surgeries
24
MRP in services
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