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Mufroni Faizal Rizha

The document discusses material requirements planning (MRP) operations for supply chain management. It explains that MRP is used to determine what materials and parts are needed, and when they are needed, to complete production based on a master production schedule. It provides an example showing how MRP works step-by-step to calculate material requirements based on a bill of materials and production lead times. The example shows how MRP accounts for both dependent and independent demand.

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Material Requirements Planning Operations Planning & Control for Supply Chain Management
Independent Vs. Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 A B(4) C(2) D(2) E(1) D(3) F(2) Independent Demand Items Dependent Demand Items
Independent Vs. Dependent Demand Only independent demand (level 0) items need to be forecast Since forecasts are subject to error world-class businesses move toward blanket order arrangements Dependent (lower level items) should always be calculated using the MRP logic 250-450 Dr. Tom Bramorski Slide of 57
Independent Vs. Dependent Demand Dependent demand items are those subassemblies and components that are used internally for manufacturing finished goods Spare parts that are sold in the market are classified as independent demand items Dependent demand always comes from the higher level items (parents) 250-450 Dr. Tom Bramorski Slide of 57
Inventory Systems for Dependent Demand Master production schedule Material requirements planning (MRP) System structure Example MRP II MRP/JIT 250-450 Dr. Tom Bramorski Slide of 57
Material Requirements Planning How much of an item is needed? When is an item needed to complete A specified number of units. In a specified period of time? Dependent demand drives MRP 250-450 Dr. Tom Bramorski Slide of 57
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Create a production schedule to satisfy demand B(4) E(1) D(2) C(2) F(2) D(3) A Product Structure Tree for Assembly A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares)
Example - Dependent Demand The product structure tree is called the bill of materials (BOM) BOM indicates how many units of an item are needed to make one unit of a parent In our example, B(4) means that four units of B are needed to make one unit of A 250-450 Dr. Tom Bramorski Slide of 57
Example - Dependent Demand Some items may have multiple parents In these cases item requirements from all parents have to be pooled In our example, requirements for item D have to be pooled for parents B and C. The quantities are D(2) for one unit of B and D(3) for one unit of C 250-450 Dr. Tom Bramorski Slide of 57
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 4 B’s go into an A B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=2 days (from A) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=2 days (spares) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 C’s go into an A B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 C Required 100 Order placement 100
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day (from A) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 C Required 100 Order placement 100
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 D’s go into a B B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 40 400 300 Order placement 40 400 300
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 3 D’s go into a C B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 40 400 300 Order placement 40 400 300
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Demand for spares : 40+ 15 =55 B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=3 days (from B and C and spares) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 1 E goes into a B B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 E Required 20 200 Order placement 20 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=4 days (from B) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 E Required 20 200 Order placement 20 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 F’s go into a C B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 C Required 100 Order placement 100 F Required 200 Order placement
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day (from C) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 C Required 100 Order placement 100 F Required 200 Order placement 200
Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300 E Required 20 200 Order placement 20 200 F Required 200 Order placement 200
Master Production Schedule (MPS) Time-phased plan specifying how many and when the firm plans to build each end item 250-450 Dr. Tom Bramorski Slide of 57 Aggregate Plan (product groups) MPS (specific items)
Time Fences Frozen No schedule changes allowed within this window Moderately firm Specific changes allowed within product groups as long as parts are available Flexible Significant variation allowed as long as overall capacity requirements remain at the same levels 250-450 Dr. Tom Bramorski Slide of 57
Time Fences 250-450 Dr. Tom Bramorski Slide of 57 8 15 26 Weeks Frozen Moderately Firm Flexible Firm Customer Orders Forecast and available capacity Capacity
Material Requirements Planning Based on a master production schedule, a material requirements planning (MRP) system: Creates schedules identifying the specific parts and materials required to produce end items Determines exact numbers needed Determines the dates when orders for those materials should be released, based on lead times 250-450 Dr. Tom Bramorski Slide of 57
Production Planning Hierarchy 250-450 Dr. Tom Bramorski Slide of 57 Firm orders from known customers Forecast of demand from random customers Aggregate Product Plan Master Production Schedule (MPS) Material Requirements Planning (MRP) Engineering design changes Bill of Materials (BOM) file Inventory transactions Inventory records file Reports
Inputs To and Outputs From MRP 250-450 Dr. Tom Bramorski Slide of 57 Order Changes Planning Reports MRP System Inventory Transaction Data Bill of Materials File Master Production Schedule Inventory Status File Service-Parts Orders and Forecasts Performance Reports Inputs Outputs Planned Order Schedule Exception Reports
Bill of Materials (BOM) File A Complete Product Description Materials Parts Components Production sequence Modular BOM Subassemblies Planning BOM Fractional options 250-450 Dr. Tom Bramorski Slide of 57
Inventory Records File Each inventory item carried as a separate file Contains inventory positions of each item Shows status according to “time buckets” Pegging Identify each parent item that created demand 250-450 Dr. Tom Bramorski Slide of 57
Approaches to Processing MRP Net change approach Regenerative approach 250-450 Dr. Tom Bramorski Slide of 57
Net Change Approach Only products that were active since last review are processed (net change schedules) This mode of processing MRP reduces the amount of output Activity driven Potential for system nervousness 250-450 Dr. Tom Bramorski Slide of 57
Regenerative Approach All products are processed irrespective their activity status This mode of processing MRP produces large amounts of output and is hard to use 250-450 Dr. Tom Bramorski Slide of 57
Primary MRP Reports Planned orders To be released at a future time Order release notices To execute the planned orders Changes in due dates of open orders due to rescheduling 250-450 Dr. Tom Bramorski Slide of 57
Primary MRP Reports Cancellations or suspensions of open orders Due to cancellation or suspension of orders on the master production schedule Inventory status data 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology Gross requirements These requirements are typically forecast for independent demand items Today’s trend is to replace forecasts with blanket orders in order to reduce variability and shorten lead-time The customer is offered a price discount for placing blanket orders 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology On-hand inventory The inventory physically present in the facility Allocated inventory The inventory physically present in the facility but allocated to a particular work order or purchase order 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology Net requirements A quantity of an item that must be purchased or manufactured in order to be able to fully deliver independent demand requirements in a timely fashion Presence of positive net requirements signals that an order must be planned to be received in a given period Net requirement quantities are subject to adjustments due to lot sizes considerations. This may lead to some orders being received early (inventory is held) or late (order backlog) 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology Planned order receipts Quantities that must be planned to be received in some future periods in order to meet the requirements 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology Planned order released Quantities that must be planned to be released in some future periods in order to meet the requirements 250-450 Dr. Tom Bramorski Slide of 57
More MRP Terminology Scheduled receipts Quantities that will be received in some future periods as their corresponding orders have been released in the past Planned order receipts become scheduled receipts at the time when they are released to the shop or to suppliers 250-450 Dr. Tom Bramorski Slide of 57
Gross to net logic: Net requirements = Gross requirements + Allocated inventory + Safety stock - Inventory on hand + backorders More MRP Terminology 250-450 Dr. Tom Bramorski Slide of 57
Lot-size is the quantity ordered/produced at one time Large lots are preferred because: Changeovers cost less and capacity increases Annual cost of purchase orders decreases Price breaks and transportation economies of scale can be utilized Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
Small lots are preferred because of: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
Economic order quantity (EOQ) Does not consider quantity discounts Does not always provide the most economical approach with lumpy demands Lot-for-lot (LFL) Accommodates lumpy demand Period order quantity (POQ) Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
The best lot-sizing method, resulting in least cost … Depends on cost and demand patterns Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
Closed Loop MRP 250-450 Dr. Tom Bramorski Slide of 57 Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Realistic? No Feedback Execute: Capacity Plans Material Plans Yes Feedback
Manufacturing Resource Planning (MRP II) Goal: plan and monitor all resources of a manufacturing firm (closed loop): Manufacturing Marketing Finance Engineering Shop-floor control Simulation capability of the manufacturing system 250-450 Dr. Tom Bramorski Slide of 57
Enterprise Resource Planning (ERP) ERP systems available today integrate manufacturing with other functional areas in an organization ERP systems make it easier for management to obtain local information about performance of specific processes, bottlenecks resources, and products (or product groups), etc. Class I ERP software packages (for large companies) include PeopleSoft, SAP, and Oracle 250-450 Dr. Tom Bramorski Slide of 57
MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57 A(2) C(3) B(1) D(5) C(2) X Product Structure Tree for X Item Lead-time (weeks) On-hand quantity X 2 50 A 3 75 B 1 25 C 2 10 D 2 20
MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57 Create a planned order release schedule The requirements for product X include 95 units (80 firm orders and 15 forecast) for X in week 10. In addition, there is independent demand for other items (spares), as shown in the MPS below: Week Item 1 2 3 4 5 6 7 8 9 10 X 95 A 12 B 7 C 10 D 15
Solution: MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57
MRP Example #3 250-450 Dr. Tom Bramorski Slide of 57 What if we made the following changes to the previous example: There are positive quantities for safety stock and allocated inventory A firm order for 10 units of X is placed in period 7 A minimum order size is imposed on all items There are quantities scheduled to be received There is an added gross requirement for item X of 50 units due in period 7 Create a planned order release schedule
Solution: MRP Example #3 250-450 Dr. Tom Bramorski Slide of 57
The End 250-450 Dr. Tom Bramorski Slide of 57

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Mrp by Mufroni

  • 1. Material Requirements Planning Operations Planning & Control for Supply Chain Management
  • 2. Independent Vs. Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 A B(4) C(2) D(2) E(1) D(3) F(2) Independent Demand Items Dependent Demand Items
  • 3. Independent Vs. Dependent Demand Only independent demand (level 0) items need to be forecast Since forecasts are subject to error world-class businesses move toward blanket order arrangements Dependent (lower level items) should always be calculated using the MRP logic 250-450 Dr. Tom Bramorski Slide of 57
  • 4. Independent Vs. Dependent Demand Dependent demand items are those subassemblies and components that are used internally for manufacturing finished goods Spare parts that are sold in the market are classified as independent demand items Dependent demand always comes from the higher level items (parents) 250-450 Dr. Tom Bramorski Slide of 57
  • 5. Inventory Systems for Dependent Demand Master production schedule Material requirements planning (MRP) System structure Example MRP II MRP/JIT 250-450 Dr. Tom Bramorski Slide of 57
  • 6. Material Requirements Planning How much of an item is needed? When is an item needed to complete A specified number of units. In a specified period of time? Dependent demand drives MRP 250-450 Dr. Tom Bramorski Slide of 57
  • 7. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Create a production schedule to satisfy demand B(4) E(1) D(2) C(2) F(2) D(3) A Product Structure Tree for Assembly A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares)
  • 8. Example - Dependent Demand The product structure tree is called the bill of materials (BOM) BOM indicates how many units of an item are needed to make one unit of a parent In our example, B(4) means that four units of B are needed to make one unit of A 250-450 Dr. Tom Bramorski Slide of 57
  • 9. Example - Dependent Demand Some items may have multiple parents In these cases item requirements from all parents have to be pooled In our example, requirements for item D have to be pooled for parents B and C. The quantities are D(2) for one unit of B and D(3) for one unit of C 250-450 Dr. Tom Bramorski Slide of 57
  • 10. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50
  • 11. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 4 B’s go into an A B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
  • 12. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=2 days (from A) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
  • 13. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=2 days (spares) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200
  • 14. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 C’s go into an A B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 C Required 100 Order placement 100
  • 15. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day (from A) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 C Required 100 Order placement 100
  • 16. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 D’s go into a B B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 40 400 300 Order placement 40 400 300
  • 17. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 3 D’s go into a C B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 40 400 300 Order placement 40 400 300
  • 18. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Demand for spares : 40+ 15 =55 B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300
  • 19. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=3 days (from B and C and spares) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300
  • 20. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 1 E goes into a B B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 E Required 20 200 Order placement 20 200
  • 21. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=4 days (from B) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 B Required 20 200 Order placement 20 200 E Required 20 200 Order placement 20 200
  • 22. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 2 F’s go into a C B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 C Required 100 Order placement 100 F Required 200 Order placement
  • 23. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 LT=1 day (from C) B(4) E(1) D(2) C(2) F(2) D(3) A Lead Times A: 1 day B: 2 days C: 1 day D: 3 days E: 4 days F: 1 day Demand Day 10: 50 A Day 8: 20 B (Spares) Day 6: 15 D (Spares) Item Day: 1 2 3 4 5 6 7 8 9 10 C Required 100 Order placement 100 F Required 200 Order placement 200
  • 24. Example - Dependent Demand 250-450 Dr. Tom Bramorski Slide of 57 Item Day: 1 2 3 4 5 6 7 8 9 10 A Required 50 Order placement 50 B Required 20 200 Order placement 20 200 C Required 100 Order placement 100 D Required 55 400 300 Order placement 55 400 300 E Required 20 200 Order placement 20 200 F Required 200 Order placement 200
  • 25. Master Production Schedule (MPS) Time-phased plan specifying how many and when the firm plans to build each end item 250-450 Dr. Tom Bramorski Slide of 57 Aggregate Plan (product groups) MPS (specific items)
  • 26. Time Fences Frozen No schedule changes allowed within this window Moderately firm Specific changes allowed within product groups as long as parts are available Flexible Significant variation allowed as long as overall capacity requirements remain at the same levels 250-450 Dr. Tom Bramorski Slide of 57
  • 27. Time Fences 250-450 Dr. Tom Bramorski Slide of 57 8 15 26 Weeks Frozen Moderately Firm Flexible Firm Customer Orders Forecast and available capacity Capacity
  • 28. Material Requirements Planning Based on a master production schedule, a material requirements planning (MRP) system: Creates schedules identifying the specific parts and materials required to produce end items Determines exact numbers needed Determines the dates when orders for those materials should be released, based on lead times 250-450 Dr. Tom Bramorski Slide of 57
  • 29. Production Planning Hierarchy 250-450 Dr. Tom Bramorski Slide of 57 Firm orders from known customers Forecast of demand from random customers Aggregate Product Plan Master Production Schedule (MPS) Material Requirements Planning (MRP) Engineering design changes Bill of Materials (BOM) file Inventory transactions Inventory records file Reports
  • 30. Inputs To and Outputs From MRP 250-450 Dr. Tom Bramorski Slide of 57 Order Changes Planning Reports MRP System Inventory Transaction Data Bill of Materials File Master Production Schedule Inventory Status File Service-Parts Orders and Forecasts Performance Reports Inputs Outputs Planned Order Schedule Exception Reports
  • 31. Bill of Materials (BOM) File A Complete Product Description Materials Parts Components Production sequence Modular BOM Subassemblies Planning BOM Fractional options 250-450 Dr. Tom Bramorski Slide of 57
  • 32. Inventory Records File Each inventory item carried as a separate file Contains inventory positions of each item Shows status according to “time buckets” Pegging Identify each parent item that created demand 250-450 Dr. Tom Bramorski Slide of 57
  • 33. Approaches to Processing MRP Net change approach Regenerative approach 250-450 Dr. Tom Bramorski Slide of 57
  • 34. Net Change Approach Only products that were active since last review are processed (net change schedules) This mode of processing MRP reduces the amount of output Activity driven Potential for system nervousness 250-450 Dr. Tom Bramorski Slide of 57
  • 35. Regenerative Approach All products are processed irrespective their activity status This mode of processing MRP produces large amounts of output and is hard to use 250-450 Dr. Tom Bramorski Slide of 57
  • 36. Primary MRP Reports Planned orders To be released at a future time Order release notices To execute the planned orders Changes in due dates of open orders due to rescheduling 250-450 Dr. Tom Bramorski Slide of 57
  • 37. Primary MRP Reports Cancellations or suspensions of open orders Due to cancellation or suspension of orders on the master production schedule Inventory status data 250-450 Dr. Tom Bramorski Slide of 57
  • 38. More MRP Terminology Gross requirements These requirements are typically forecast for independent demand items Today’s trend is to replace forecasts with blanket orders in order to reduce variability and shorten lead-time The customer is offered a price discount for placing blanket orders 250-450 Dr. Tom Bramorski Slide of 57
  • 39. More MRP Terminology On-hand inventory The inventory physically present in the facility Allocated inventory The inventory physically present in the facility but allocated to a particular work order or purchase order 250-450 Dr. Tom Bramorski Slide of 57
  • 40. More MRP Terminology Net requirements A quantity of an item that must be purchased or manufactured in order to be able to fully deliver independent demand requirements in a timely fashion Presence of positive net requirements signals that an order must be planned to be received in a given period Net requirement quantities are subject to adjustments due to lot sizes considerations. This may lead to some orders being received early (inventory is held) or late (order backlog) 250-450 Dr. Tom Bramorski Slide of 57
  • 41. More MRP Terminology Planned order receipts Quantities that must be planned to be received in some future periods in order to meet the requirements 250-450 Dr. Tom Bramorski Slide of 57
  • 42. More MRP Terminology Planned order released Quantities that must be planned to be released in some future periods in order to meet the requirements 250-450 Dr. Tom Bramorski Slide of 57
  • 43. More MRP Terminology Scheduled receipts Quantities that will be received in some future periods as their corresponding orders have been released in the past Planned order receipts become scheduled receipts at the time when they are released to the shop or to suppliers 250-450 Dr. Tom Bramorski Slide of 57
  • 44. Gross to net logic: Net requirements = Gross requirements + Allocated inventory + Safety stock - Inventory on hand + backorders More MRP Terminology 250-450 Dr. Tom Bramorski Slide of 57
  • 45. Lot-size is the quantity ordered/produced at one time Large lots are preferred because: Changeovers cost less and capacity increases Annual cost of purchase orders decreases Price breaks and transportation economies of scale can be utilized Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
  • 46. Small lots are preferred because of: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
  • 47. Economic order quantity (EOQ) Does not consider quantity discounts Does not always provide the most economical approach with lumpy demands Lot-for-lot (LFL) Accommodates lumpy demand Period order quantity (POQ) Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
  • 48. The best lot-sizing method, resulting in least cost … Depends on cost and demand patterns Lot-Sizing in MRP 250-450 Dr. Tom Bramorski Slide of 57
  • 49. Closed Loop MRP 250-450 Dr. Tom Bramorski Slide of 57 Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning Realistic? No Feedback Execute: Capacity Plans Material Plans Yes Feedback
  • 50. Manufacturing Resource Planning (MRP II) Goal: plan and monitor all resources of a manufacturing firm (closed loop): Manufacturing Marketing Finance Engineering Shop-floor control Simulation capability of the manufacturing system 250-450 Dr. Tom Bramorski Slide of 57
  • 51. Enterprise Resource Planning (ERP) ERP systems available today integrate manufacturing with other functional areas in an organization ERP systems make it easier for management to obtain local information about performance of specific processes, bottlenecks resources, and products (or product groups), etc. Class I ERP software packages (for large companies) include PeopleSoft, SAP, and Oracle 250-450 Dr. Tom Bramorski Slide of 57
  • 52. MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57 A(2) C(3) B(1) D(5) C(2) X Product Structure Tree for X Item Lead-time (weeks) On-hand quantity X 2 50 A 3 75 B 1 25 C 2 10 D 2 20
  • 53. MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57 Create a planned order release schedule The requirements for product X include 95 units (80 firm orders and 15 forecast) for X in week 10. In addition, there is independent demand for other items (spares), as shown in the MPS below: Week Item 1 2 3 4 5 6 7 8 9 10 X 95 A 12 B 7 C 10 D 15
  • 54. Solution: MRP Example #2 250-450 Dr. Tom Bramorski Slide of 57
  • 55. MRP Example #3 250-450 Dr. Tom Bramorski Slide of 57 What if we made the following changes to the previous example: There are positive quantities for safety stock and allocated inventory A firm order for 10 units of X is placed in period 7 A minimum order size is imposed on all items There are quantities scheduled to be received There is an added gross requirement for item X of 50 units due in period 7 Create a planned order release schedule
  • 56. Solution: MRP Example #3 250-450 Dr. Tom Bramorski Slide of 57
  • 57. The End 250-450 Dr. Tom Bramorski Slide of 57

Editor's Notes

  • #2: 1 Material Requirements Planning
  • #3: 3 Independent vs. Dependent Demand
  • #4: 3 Independent vs. Dependent Demand Items
  • #5: 3 Independent vs. Dependent Demand Items
  • #6: 2 2 Managing Dependent Demand Items
  • #7: 3 3 MRP Issues – Quantity and Timing
  • #8: 4 4 MRP Example
  • #9: 3 3 MRP Example
  • #10: 3 3 MRP Example
  • #11: 4 4 MRP Example
  • #12: 4 4 MRP Example
  • #13: 4 4 MRP Example
  • #14: 4 4 MRP Example
  • #15: 4 4 MRP Example
  • #16: 4 4 MRP Example
  • #17: 4 4 MRP Example
  • #18: 4 4 MRP Example
  • #19: 4 4 MRP Example
  • #20: 4 4 MRP Example
  • #21: 4 4 MRP Example
  • #22: 4 4 MRP Example
  • #23: 4 4 MRP Example
  • #24: 4 4 MRP Example
  • #25: 4 4 MRP Example Solution
  • #26: 8 8 Master Production Schedule (MPS)
  • #27: 9 9 Time Fences in MPS
  • #28: 10 10 Time Fences in MPS
  • #29: 11 11 What Does MPR Do?
  • #30: 11 11 Production Planning Hierarchy
  • #31: Inputs To and Outputs From MRP
  • #32: 13 13 MRP Inputs - Bill of Materials (BOM)
  • #33: 14 14 MRP Inputs - Inventory Records File
  • #34: 16 16 Approaches to Processing MRP
  • #35: 17 17 Net Change Approach
  • #36: 17 17 Regenerative Approach
  • #37: 15 15 Primary MRP Outputs
  • #38: 16 16 Primary MRP Outputs
  • #39: 19 19 MRP Terminology
  • #40: 19 19 MRP Terminology
  • #41: 19 19 MRP Terminology
  • #42: 19 19 MRP Terminology
  • #43: 19 19 MRP Terminology
  • #44: 19 19 MRP Terminology
  • #45: Gross To Net Logic
  • #46: Lot Sizing in MRP
  • #47: Lot Sizing in MRP
  • #48: Lot Sizing in MRP
  • #49: Lot Sizing in MRP
  • #50: 22 22 Closed Loop MRP
  • #51: 23 23 MRP II
  • #52: 23 23 ERP
  • #53: 4 4 MRP – Example #2
  • #54: 4 4 MRP – Example #2
  • #55: 23 23 MRP – Example #2 Solution
  • #56: 4 4 MRP – Example #3
  • #57: 23 23 MRP – Example #3
  • #58: The End