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Ch. 15: Material Requirements Planning (MRP). PRODUCTION AND OPERATIONS MANAGEMENT. Distinguish dependent from independent demand inventory Define material requirements planning Explain the benefits of MRP Identify the requirements of MRP, DRP, and ERP Explain the inputs & outputs of MRP

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ch 15 material requirements planning mrp
POM - J. Galván

Ch. 15: Material Requirements Planning (MRP)

PRODUCTION AND OPERATIONS MANAGEMENT
learning objectives
POM - J. Galván

Distinguish dependent from independent demand inventory

Define material requirements planning

Explain the benefits of MRP

Identify the requirements of MRP, DRP, and ERP

Explain the inputs & outputs of MRP

Compute order releases

Learning Objectives
dependent versus independent demand
POM - J. GalvánDependent versus Independent Demand

Materials With

Materials With

Item

Independent Demand

Dependent Demand

Demand

Company Customers

Parent Items

Source

Material

Finished Goods

WIP & Raw Materials

Type

Method of

Forecast & Booked

Customer Orders

Calculated

Estimating

Demand

Planning

EOQ & ROP

MRP

Method

inputs to the production plan
POM - J. GalvánInputs to the Production Plan

Marketing

Customer

Demand

Production

Capacity

Inventory

Finance

Cash Flow

Human

Resources

Manpower

Planning

Production

Plan

Procurement

Supplier

Performance

Management

Return on

Investment

Capital

Engineering

Design

Completion

requirements for effective use of dependent demand inventory models
POM - J. GalvánRequirements for Effective Use of Dependent Demand Inventory Models

Effective use of dependent demand inventory models requires that the operations manager know the:

master production schedule

specifications or bills-of-material

inventory availability

purchase orders outstanding

lead times

the planning process
POM - J. GalvánThe Planning Process

Production Plan

Master Production

Schedule

Material

Requirements

Plan

Capacity

Requirements

Plan

No

Realistic??

Yes

Execute Capacity

Plans

Execute Material

Plans

typical level for the master schedule
POM - J. GalvánTypical Level for the Master Schedule

A customer order in a job shop (process focused/make to order) company

Modules in a repetitive (assemble-to-stock) company

An end item in a continuous (product focused/make to stock) company

bill of material
POM - J. Galván

List of components & quantities needed to make product

Provides product structure (tree)

Parents: Items above given level

Children: Items below given level

Shows low-level coding

Lowest level in structure item occurs

Top level is 0; next level is 1 etc.

Bill-of-Material
bill of material product structure tree
POM - J. GalvánBill-of-Material Product Structure Tree

Bicycle(1)

P/N 1000

Handle Bars (1)

Frame Assy (1)

P/N 1001

P/N 1002

Wheels (2)

Frame (1)

P/N 1003

P/N 1004

time phased product structure
POM - J. GalvánTime-Phased Product Structure

D

B

E

A

E

G

C

F

D

1

2

3

4

5

6

7

8

Must have D and E completed here so production can begin on B

Start production of D

1 week

2 weeks to produce

2 weeks

1 week

2 weeks

1 week

2 weeks

3 weeks

1 week

material requirements planning mrp
POM - J. Galván

Manufacturing computer information system

Determines quantity & timing of dependent demand items

Material Requirements Planning (MRP)
mrp requirements
POM - J. Galván

Computer system

Mainly discrete products

Accurate bill-of-material

Accurate inventory status

99% inventory accuracy

Stable lead times

MRP Requirements
mrp purpose
MRP PURPOSE
  • Coordination of Production and Inventory in large, multi-stage production systems
  • Capacity planning, scheduling, supplier coordination
  • Timely dissemination of information
  • Synchronized production and procurement
  • Central engineering and logistic database (Central element of the ERP system)
mrp problems
MRP PROBLEMS
  • Deterministicmodel
  • Large data requirements and GIGO (Garbage in garbage out)
  • Self-fulfilling lead-times, so thenwhathappensiffulfilmentisnotaccomplished?
  • Difficulty and cost of installation and maintenance
  • Centralized command and control mindset
mrp benefits
POM - J. Galván

Increasedcustomersatisfactionduetomeetingdeliveryschedules

Faster response tomarketchanges

Improved labor & equipmentutilization

Betterinventoryplanning & scheduling

Reducedinventorylevelswithoutreducedcustomerservice

MRP Benefits
variables in mrp
Variables in MRP
  • Master Schedule -WHEN
  • Bills of Material -WHAT
  • Stocks & Work in Progress (WIP) – HOW MUCH
  • Lead-times – WHEN TO HAVE AVAILABLE
  • Work orders / schedules – WHAT TO DO
  • Purchase orders / schedules –WHEN TO ORDER
  • Yields – WHAT IS LOST
  • Workingdays/ times - CALENDAR
structure of the mrp system
POM - J. GalvánStructure of the MRP System

Master Production

Schedule

BOM

(Bill-of-Material)

MRP by period report

Lead Times

MRP by date report

(ItemMasterFile)

MRP

Programs

Planned orders report

Inventory Data

Purchase requirements

Purchasing data

Exception reports

mrp and the production planning process
POM - J. Galván

Aggregate

Production

Planning

Forecast &

Firm Orders

Resource

Availability

Material

Requirements

Planning

Master

Production

Scheduling

Capacity

Requirements

Planning

Shop

Floor

Schedules

Realistic?

Yes

modify CRP, MRP, or MPS

MRP and The Production Planning Process

No

master production schedule
POM - J. Galván

Shows items to be produced

End item, customer order, module

Derived from aggregate plan

Master Production Schedule
master production schedule20
POM - J. Galván

Shows itemstobeproduced

Enditem, customerorder, module

Derivedfromaggregate plan

Example

Master Production Schedule

Item/Week

Oct 3

Oct 10

Oct 17

Oct 24

Drills

300

200

310

300

Saws

300

450

310

330

mrp dynamics
POM - J. GalvánMRP Dynamics

Supports “replanning”

Problem with system “nervousness”

“Time fence” - allows a segment of the master schedule to be designated as “not to be rescheduled”

“Pegging” - tracing upward in the bill-of-materials from the component to the parent item

Manager can react to changes, doesn’t mean he/she should

mrp and jit
POM - J. GalvánMRP and JIT

MRP - a planning and scheduling technique with fixed lead times

JIT - a way to move material expeditiously

Integrating the two:

Small bucket approach and back flushing

balanced flow approach

extensions of mrp
POM - J. GalvánExtensions of MRP

Closed loop MRP

Capacity planning - load reports

MRP II - Material Resource Planning

Enterprise Resource Planning

extensions of mrp closed loop mrp
POM - J. GalvánExtensions of MRPClosed Loop MRP

Production Plan

Priority Planning

Capacity Planning

Desired Master

Production

Schedule

Realistic?

Resource

Planning

First Cut

Capacity

No

Material

Requirements

(detailed)

Capacity

Requirements

(detailed)

Capacity Control

Priority Control

Input/Output

Dispatch List

Is

average capacity

adequate?

Is

specific capacity

adequate?

No

No

Yes

Yes

extensions of mrp capacity planning
POM - J. GalvánExtensions of MRPCapacity Planning

Tactics for smoothing the load and minimizing the impact of changed lead time include:

Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation

Operations splitting - sends the lot to two different machines for the same operation

Lot splitting - breaking up the order and running part of it ahead of the schedule

extensions to mrp enterprise resource planning
POM - J. GalvánExtensions to MRPEnterprise Resource Planning

MRP II with ties to customers and suppliers

mrp in services
POM - J. GalvánMRP in Services

Can be used when demand for service or service items is directly related to or derived from demand for other services

restaurant - rolls required for each meal

hospitals - implements for surgery

etc.

distribution resource planning
POM - J. GalvánDistribution Resource Planning

DRP requires:

Gross requirements, which are the same as expected demand or sales forecasts

Minimum levels of inventory to meet customer service levels

Accurate lead times

Definition of the distribution structure