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Operations Management MRP Lecture 22 (Chapter 14)

Operations Management MRP Lecture 22 (Chapter 14). 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. Calculated. Estimating.

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Operations Management MRP Lecture 22 (Chapter 14)

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  1. Operations ManagementMRPLecture 22 (Chapter 14)

  2. 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 Calculated Estimating Customer Orders Demand Planning EOQ & ROP MRP Method Dependent versus Independent Demand

  3. HIGH SHORT TERM SCHEDULING MRP MPS SHORT MEDIUM LONG 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). APP LOW Plans and their relationship

  4. 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

  5. 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)

  6. 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

  7. Aggregate Production Plan MPS Months January February Aggregate Production Plan shows the total quantity of bicycles 1,500 1,200 Weeks 1 2 3 4 5 6 7 8 Master Production Schedule Shows the specific type and quantity of bike to be produced Road bike 100 100 100 100 Hybrid bike 500 500 450 450 Mountain bike 300 100

  8. Assemble to Order or Forecast (Repetitive) Stock to Forecast (Product Focus) Schedule finished product Make to Order (Process Focus) Number of end items Typical focus of the master production schedule Schedule modules Schedule orders Number of inputs Motorcycles, autos, TVs, fast-food restaurant Print shop Machine shop Fine dining restaurant Steel, Beer, Bread Light bulbs, Paper Examples: Typical Focus of the Master Production Schedule

  9. 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

  10. Bicycle (1) P/N 1000 Frame Assembly (1) Handle Bars (1) P/N 1001 P/N 1002 Wheels (2) Frame (1) P/N 1003 P/N 1004 Bill Of MaterialProduct Structure Tree

  11. 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

  12. 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

  13. 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 E 1 week 2 weeks 1 week G C 3 weeks F 1 week D 0 1 2 3 4 5 6 7 Time in weeks Time-Phased Product Structure

  14. Example

  15. MRP – Inventory Record Item: B Description: Frame assembly Lot Size: 1000 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 100 500 400 500 100 150 450 200 Scheduled receipts 1000 0 0 0 0 0 0 0 Projected on-hand inventory 115 Planned receipts Planned order releases

  16. MRP – Planned Orders Item: B Description: Frame assembly Lot Size: 1000 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 100 500 400 500 100 150 450 200 Scheduled receipts 1000 0 0 0 0 0 0 0 Projected on-hand inventory 115 1015 515 715 515 915 115 615 365 Planned receipts 1000 1000 Planned order releases 1000 1000

  17. MRP – Inventory Record Item: B Description: Frame assembly Lot Size: 1000 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 100 500 400 500 100 150 450 200 Scheduled receipts 1000 0 0 0 0 0 0 0 Projected on-hand inventory 115 Planned receipts Planned order releases 17

  18. MRP – Planned Orders Item: B Description: Frame assembly Lot Size: 1000 units Lead Time: 2 weeks Week 1 2 3 4 5 6 7 8 Gross requirements 100 500 400 500 100 150 450 200 Scheduled receipts 1000 0 0 0 0 0 0 0 Projected on-hand inventory 115 1015 515 715 515 915 115 615 365 Planned receipts 1000 1000 Planned order releases 1000 1000 18

  19. Structure of the MRP System Data Files O/p reports Master Production Schedule BOM (Bill-of-Material) MRP by period report Lead Times MRP by date report (Item Master File) MRP Programs Planned orders report Inventory Data Purchase requirements Purchasing data Exception reports 19

  20. Lot-Sizing Techniques Techniques used in determining order qty’s or lot sizes Lot-for-lot Economic Order Quantity Part Period Balancing 20

  21. 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

  22. 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

  23. 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

  24. 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

  25. MRP in services 25

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