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Materials Requirements Planning (MRP I) Manufacturing Resources Planning (MRP II). Manufacturing Systems History. 1950’s Stock Replenishment using EBQ, ROL, ROQ, etc. 1960’s MRP - Forward planning of dependent demands. 1970’s MRP - Rescheduling to keep order dates valid.
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Materials Requirements Planning (MRP I) Manufacturing Resources Planning (MRP II)
Manufacturing Systems History • 1950’s Stock Replenishment using EBQ, ROL, ROQ, etc. • 1960’s MRP - Forward planning of dependent demands. • 1970’s MRP - Rescheduling to keep order dates valid. JIT - Manufacturing in Japan. • 1975’s Closed loop MRP with feedback. OPT scheduling of bottlenecks. • 1980’s MRP2/RDBMS JIT linkages. • 1985’s Simulation and Factory Management's Systems. • 1990’s Computer Integrated Manufacturing + Enterprise Integration • 2000+ ERP, Extended Enterprise & Supply Chain Integration
Dependent Demand • When it is directly related to, or derives from, the demand for another inventory item or product • For example: Demand for a TV component is dependent upon the demands for TV sets • OR where demand is ‘derived’ • For example: The demand for TV sets at the factory is determined by demand from the retailer which is derived from ultimate demand in the market place
Independent Demand • When demand is unrelated to demand for other items. • Or When it is not a function of demand for other items. • In these cases we use Re-order point system OR Re-order cycle system
MRP Structure Master Production Schedule Bill of Materials MRP Analysis Stock Status Reports
MPS - Purposes • Links production plans to day to day operations • Forms basis for managerial control • Basis for integration of activities • Demand management functions
Master Schedule for Product X Output per week Weeks into Future
Spare Parts Demand for Assembly A Assembly A Firm Orders Forecast Orders Order Quantity 1 2 3 4 5 6 7 8 9 10 11 121 Weeks into Future
Inputs into the MPS Known Orders Forecast Deamnd Key Capacity Constraints Sister Plant Demand Master Production Schedule Inventory Levels R&D Demand Spares Demand Exhibition/ promotion Requirements Safety Stock Requirements
Master Schedule with Variable Length Time Periods Today Future MASTER SCHEDULE Days Weeks Months Quarters 1 2 3 4 5 2 3 4 2 3 4 5 6 3 4 5 6
Product Structure for chair Chair Level 0: Finished Product 4 1 2 2 1 1 Level 1: Sub- assembly Frame * Back Cushion * Seat Cushion * Wood End Cross-piece (Chair) 0.45 1.4 0.6 0.5 3 3 0.7 2.2 0.55 Level 2: Raw Material * Webbing * Tube * Fabric * Wood * Foam * Fastener Notes: * Indicates common item with settee. The number to the left of each link shows the number/quantity of the lower -level item needed in the manufacture of the higher-level item.
Bill Of Material - BOM • Maintains Parts and Structures used for Product definition in a manufacturing company • Parts in a BOM, include Assemblies, Sub-assemblies, parts, bought out items, and materials • Each part needs a unique identification - number, brief description, and other reference codes • The structure shows the relationships of one part with another • The BOM is not a parts list, but defines how a product is made • BOM is usually the first module to be installed
BOM Outputs • SINGLE LEVEL BOM Shows the structure of a BOM one level down. • MULTI LEVEL BOM Shows the structure of a BOM through all levels. • INDENTED BOM Where the part number within a multi level BOM is displaced by one digit for each level. 0.23456 Assembly 0.13247 Sub Assembly 0.33457 Part 0.13248 Sub Assembly 0.33468 Part
Uses of BOM • Product Definition • Manufacturing Instructions • Engineering Change Control • Services Parts Support • Materials Procurement • Production Scheduling • Parts Kitting • Costing
Inventory Analysis • Inventory classification by part or material type • Annual usage by quantity and value • Balance ‘on hand’ by quantity and value • Turnover ratio • Active inventory value (balance on hand not exceeding gross usage * unit cost) • Percent active inventory • Inactive inventory amount & value • Inventory valuations
Stock condition route for a part On Order Goods receiving uninspected Goods receiving inspected Raw Material Store Work in Progress Finished Parts Store Free Final Assembly Finished Parts Store Allocated Dispatched Kitting Dept
Work in Progress Stock Condition Raw Material Store Op 1 Cast Op 2 Mill Op 3 Grind Finished Parts Store Op 4 Inspect Op 6 Inspect Op 5 Paint
MRP LOGIC • Master Production Schedule • MRP explosion using BOM • Lower level gross requirements • Net requirements - netting out Inventory & scheduled receipts • Applying order policies • Order release dates obtained by off setting lead times • Planned / confirmed orders • Rescheduling
Definition of MRP Master Production Schedule (MPS) Bill of Materials (BOM) MRP Analysis Inventory Status Data Release Orders Planned Orders Reschedule Orders
MRP • Basic MRP handles material aspects of production control • Simple MRP systems based on MPS, BOM, inventory records and material requirements • A number of software companies have developed inter-related files to provide a more complete picture • MRP I assumes that resources available are constant
MRP II • called a closed loop system • a ‘push’ system • Forecasts are generated at the outset and manufacturing plan developed to meet these demands • The plan then drives the manufacture through the issue of work orders
MRP II • Essentially a computerized database of parts, components, finished goods, WIP and requirements • Lead time and relationships between parts are held in a database • The computer then calculates the best way to meet the MPS (which is based on forecasts & firm orders etc.)
MRP2 - Manufacturing Modules Production Planning Forecasts Resource Requirement Planning Rough Cut Capacity Planning Master Production Scheduling Customer Orders Material Requirement Planning Capacity Requirement Planning Production Activity Control Purchasing Dispatching Input/Output Control
MRP • best suited to companies making discrete multi-component items • it provides mgt with an accurate record of inventory related activities • it enables mgt to make accurate predications and highlight problems • it enables optimisation of resources • inventory levels or lead times generally reduced • mgt commitment essential to make a positive impact
MRP II system works as follows: • MPS is drawn up (based on forecasts, orders etc.) • MPS is checked for feasibility in gross capacity terms (rough cut capacity planning).Once a feasible plan is agreed it is input into the materials requirements planning module • Material requirements are calculated and schedule of quantity and time determined • These requirements are then ‘exploded’ in the BOM file (which provides a breakdown of a product into its constituent parts)
MRP II system works as follows: contd.. • Net requirements are then calculated by deducting available inventory from gross requirements. • In a closed loop system their capacity requirements would be checked against resource availability. (estimated capacity planning) with user able to decide on different variables such as lot sizes and start dates. • Finally works orders are fed into the live system where a schedule is calculated to take account of the day-to-day situation on the shop floor.
Materials Requirement Planning (MRP) • Assume currently week 1 • Orders are: Wk 8 200 settees Wk 9 350 chairs Wk 7 100 replacement seat cushions GR Gross requirements NR Net requirements OH On-hand stock OD Orders Due SS Safety Stock PO Planned Orders/start
MRP example: • For chair GR = 350 (wk 9) NR = GR - OH - OD + SS = 350 - 25 - 0 + 20 = 345 (wk 9) Since lead time 1 wk, PO = 345 (wk 8) • For settees GR = 200 (wk 8) NR = GR - OH - OD + SS = 200 - 30 -0 + 20 = 190 (wk 8) Since lead time 1 wk, PO = 190 (wk 7)
MRP example: Cascading down to level 1 items, all items should be considered, but for the purposes of this illustration only cushions will be considered. For back Cushions • GR 190 x 2 = 380 (wk 7) (PO for 190 settees in wk 7, 2 back cushions/settee) NR = 380 - 45 - 0 + 0 = 335 (wk 7) Since lead time 2 weeks, PO = 335 (wk 5) • GR = 345 (wk 8) (PO for 345 chairs in wk 8) NR = 345 - 0 - 0 + 0 345 (wk 8) Since Lead Time 2 wks, PO = 345 (wk 6)
MRP example: For seat cushions • GR = 190 x 2 + 100 (wk 7) (PO for 190 settees in wk 7, 2 seat cushions/settee + 100 replacement cushions) NR = 480 - 45 - 0 + 0 435 (wk 7) Since lead time 2 weeks, PO = 435 (wk 5) • GR = 345 (wk 8) (PO for 345 chairs in wk 8) NR = 345 - 0 - 0 + 0 = 345 (wk 8) Since Lead Time 2 wks, PO = 345 (wk 6)
MANUFACTURING Bill of Materials - BOM Master Production Scheduling - MPS Inventory - INV Material Requirements Planning - MRP Capacity Requirements Planning - CRP Production Activity Control - PAC Purchasing - PUR System Control - SYS BUSINESS/FINANCE Order Processing - ORD Costing & Cost Control - COST Sales Ledger - SL Purchase Ledger - PL General/Nominal Ledger - NL Financial Statements -FIN Asset Management - AM Payroll/Salaries- PAY MRP 2 Modules
Advantages of MRP2 • Reduced lead times • Inventory turnover increased, value of inventory reduced • Improved scheduling of purchased & made in items • On time deliveries improved • Greater throughput • Costs reduced
Summary • A tool enables managers to plan control a manufacturing business • A formal system for scheduling the needs of marketing, production and materials • A means of integrating management functions and their goals • The integrated planning tool for more advanced manufacturing technologies and CIM • A means of getting better results in business