Operations Management Material Requirements Planning

1. Operations ManagementMaterial Requirements Planning • Material Requirements Planning (MRP) • MRP Logic and Product Structure Trees • Time Fences • MRP Example • MRP II • Lot Sizing in MRP Programs • Benefits of MRP Programs

2. M. R. P.The Planning Hierarchy AggregateProductionPlanning Forecast &Firm Orders MasterProductionScheduling CapacityRequirementsPlanning MaterialRequirements Planning Purchase Orders &Shop Floor Schedules

3. M. R. P.M.R.P. - Defined • Materials requirements planning (MRP) is the _________ for determining the number of parts, components, and materials needed to produce a product. • MRP provides time ________________ information specifying when each of the materials, parts, and components should be ordered or produced. • _____________ demand drives MRP. • MRP is a ______________ system.

4. M. R. P.Types of Demand • Independent Demand • Requirements that are ____ related to the demands for any other product • Products that face the demand of the _____________ • Demand must be ___________ • Dependent Demand • __________ on demand of a finished good • Demands can be ____________ • ordering in lots or batches, thus “ _______ ”

5. M. R. P.Demand Patterns • What is “Lumpy” demand • results from need to have all components available ________ a production run begins • Lumpy demand items are manufactured / ordered in a ____ - ________ manner • “time phasing” • not replenished when inventory level is low • is replenished when ___________

6. M. R. P.M. R. P. System Structure • The goal of MRP is getting“the right materials to the right place at the right time.” • Based on a master production schedule, a material requirements planning system: • Creates schedules identifying the _____________ parts and materials required to produce end items. • Determines ________ unit numbers needed. • Determines the _________ when orders for those materials should be released, based on lead times.

7. M. R. P.System Structure

8. Aggregate Plan (Product Groups) Inputs to M.R.P.Master Production Schedule (MPS) • Time-phased plan specifying ____ ______and ______ the firm plans to build each end item MPS (Specific End Items)

9. Inputs to M.R.P.Master Production Schedule

11. Inputs to M.R.P.Inventory Record • Part number • Stock-Keeping-Unit ( _____ ) • refers to a given part number at a given _________. • Captures ______ data about each SKU, including: • Quantity on hand • Quantity on order and when delivery is expected • Lead time • Ordering Policies • Other management data, e.g. part name, description, cost

12. Inputs to M. R. P.Bill of Materials • A list of components and quantities needed to make _____ assembly • each component has a unique part number • Provides product structure (tree) • Parents: Items _______ given level • Children: Items _______ given level • A purchased item has ___ children • Shows low-level coding • Lowest level in structure item occurs • Top level is 0; next level is 1 etc.

13. Bill of MaterialsLead Times, Exploding, and Offsetting Lead time: The time from when an order is placed until the part is _______ for use Offsetting: Placing the requirements in their _________time periods based on lead time Exploding: Multiplying the parent requirements by the usage ___________ through the product tree

14. Bill of MaterialsBackward Scheduling R = WK 10 Order for final assembly, item #A, due in week 20: R = Release F = Finish Component part #P F = WK 17 R = WK 17 F = WK 20 Final assembly item #A R = WK 5 F = WK 13 Component part #C R = WK 13 Subassembly part #I F = WK 17 R = WK 7 Component part #S F = WK 13 5 10 15 20 Time Weeks

15. Problem 4.1 Number of Gs needed? Purchased components?

17. M.R.P. WorksheetElements of Worksheet • Gross Requirements • the ________ demand derived from all parents at the MPS level and lower levels • Scheduled Receipts • total units that are on order, but _____ yet received. • Projected on-hand inventory (for a planning period) (aka. _________ __________ _____) = On-hand Amount (from the previous period)+ Scheduled Receipts + Planned Order Receipts- Gross Requirements

18. M.R.P. WorksheetElements of Worksheet • Net requirements • If the Projected on-hand inventory (PAB) is ______ than the Safety Stock, then..... Net Requirement = Safety Stock - PAB, otherwise Net Requirement = 0

19. M.R.P. WorksheetElements of Worksheet • Planned Order Receipt • how much we need to put on order to _______at the beginning of this planning period • Planned Order Release • when we need to ________ the order considering the delay of lead time

21. Problem 4.2 • Given the following product tree, explode, offset, and calculate the gross and net requirements. All lead times and the quantities required are shown in parenthesis. The master production schedule calls for 70 J’s in week 7. There is a scheduled receipt of 50 K’s in week 3. There are 20 J’s, 100 L’s, and 200 N’s on hand.

22. Problem 4.2{Insert mba782mrpworksheetho.xls”APICS BSCM Prob. 4.2(c)” here}

23. Problem 4.2 • An item is available at the __________ of the period • Proj. Avail. Balance is at the _____ of the period • Planned order release becomes the gross requirement at the _____ ________ level

25. M.R.P. Planning FactorsLot Sizing Rules • Lot-for-Lot (L4L) • Order just __________ to meet net requirement • Fixed Order Quantity (FOQ) • _____________ lot size • Least Total Cost • finds the order quantity that comes closest to _____________ ordering costs with holding costs • Least Unit Cost • selects the lot size with the _________ cost per unit

26. M.R.P.M.R.P. Outputs • The MRP logic will • Gross, net, offset, and explode requirements • _______ planned orders, and keep priorities current • Inventory status data • Action Notes • __________ new orders • adjust the due dates of scheduled receipts • Cancellations or suspensions of open orders • Capacity Reports • __________ time-phased labor requirements

27. MRP Benefits • ____________ customer satisfaction due to meeting delivery schedules • ____________ inventory levels without reduced customer service • Faster response to market changes • Improved labor & equipment utilization • Better inventory planning & scheduling

28. M.R.P.Resource Planning • Distribution Resources Planning (DRP) • application of M.R.P. concepts to ___________ • Manufacturing Resources Planning (MRP II) • ties M.R.P. to financial system • used by managers in _____ functional areas • Enterprise Resource Planning (ERP) • encompasses the customer and supplier firms • operate as if suppliers are ______ of the firm’s own processes

29. MRP in Services • Can be used when demand for serviceitems is directly _________ __ or __________ from demand for other services • restaurant - rolls required for each meal • hospitals - implements for surgery and availability of personnel

30. M.R.P.Implementation Issues Successful Implementation Requires • Management ___________ • Computer Support • ___________ and Realistic Input • B.O.M.s, M.P.S., Inventory status • Job Routings and Time Requirements • Machine Capacity • _____ Knowledge and Acceptance

32. M.R.P.Chapter Wrap-Up • Read Chapter 14 • Concepts / Terminology • Review Lecture notes • Recommended Problems