Homework problems 2678913 1 MRP Foundation Material requirements planning MRP A computerbased information system that translates master schedule requirements for end items into timephased requirements for subassemblies components and raw materials ID: 553152
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Slide1
6. Material Requirements Planning (MRP)
Homework problems:
2,6,7,8,9,13.Slide2
1. MRP Foundation
Material requirements planning (MRP):
A computer-based information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.
The MRP is designed to answer three questions:What is needed?
How much is needed?
When is it needed?Slide3
1. MRP Foundation
Dependent demand
Demand for items that are subassemblies or component parts to be used in the production of finished goods.
Dependent demand tends to be sporadic or “lumpy”Large quantities are used at specific points in time with little or no usage at other timesSlide4
1. MRP FoundationSlide5
What went wrong when EOQ is used to manage a dependent demand item ?
Incorrect assumption of uniform, continuous demand
Incorrect assumption on item independence
Lack of Forward visibilitySlide6
6
Overview of MRPSlide7
7
Master Production Schedule (MPS)
Bill of Materials (BOM)
Inventory Records
MPR InputsSlide8
8
Product structure tree exampleSlide9
9
Inventory
records/status dataIncludes information on the status of each item by time period, called
time bucketsInformation aboutGross requirements
Scheduled receipts
Expected amount on hand
Other details for each item such as
Supplier
Lead time
Lot size
Changes due to stock receipts and withdrawals
Canceled orders and similar events
MRP Inputs: Inventory RecordsSlide10
10
Week
1
2
3
4
5
6
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
MRP Record
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Projected Available
Expected inventory on hand at the beginning of each time periodSlide11
11
Week Number
1
2
3
4
5
6
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
MRP Record
Net requirements
Actual amount needed in each time period
Planned-order receipts
Quantity expected to received at the beginning of the period offset by lead time
Planned-order releases
Planned amount to order in each time periodSlide12
Resource
planning
Sales and operations
planning
Demand
management
Master production
scheduling
Detailed capacity
planning
Detailed material
planning
Material and
capacity plans
Shop-floor
systems
Supplier
systems
Enterprise Resource Planning (ERP) System
Front End
Engine
Back End
Manufacturing Planning and Control System
Time-phased requirement (MRP) records
Routing file
Inventory status data
Bills of materialSlide13
13
MPR: Development
The MRP is based on the product structure tree diagram
Requirements are determined level by level, beginning with the end item and working down the treeThe timing and quantity of each “parent” becomes the basis for determining the timing and quantity of the children items directly below it.The “children” items then become the “parent” items for the next level, and so onSlide14
14
MRP: Updating PAB
PAB: projected available balance
SR: scheduled receiptsPR: planned order receipts
GR: gross requirements
PAB
t
=PAB
t-1
+
SR
t
+
PR
t
-
GR
tSlide15
Basic MRP Record
On hand
Period
1
2
3
4
5
Gross requirements
10
40
10
Scheduled receipts
50
Projected available balance (PAB)
4
54
44
44
4
44
Net requirements
6
Planned order receipts
50
Planned order releases
50
Lead time
= 1 period
Lot size = 50
A previously released order due in period 1
A unreleased order due in period 5
Requirements from all sourcesSlide16
Bill of Materials
The BOM shows the components and sub-assemblies required to produce
one unit
of productSlide17
Indented Bill of Materials
Finished item is not indented
Components and sub-assemblies are indented relative to their order of usage
Level 1 components
Level 1 sub-assemblies
Level 2 sub-assembliesSlide18
Indented BOM example
Sub-assemblies are represented by separate levels
Finished product is located at the top, components belowSlide19
MRP Explosion
Explosion–the process of translating product requirements into component part requirements
Considers existing inventories and scheduled receiptsCalculating the quantities of all components needed to satisfy requirements for any given part.Continued until all parts have been considered, leading to exact requirements for all purchased and/or raw material partsSlide20
Gross and Net Requirements
Gross requirements represent the total planned usage for the partNet requirements account for existing inventory and/or scheduled receipts
100
req’d – 25 inventory = 75 net req’d
75
req’d
– 22 inventory – 25
sched
. rec. = 28 net
req’d
Net
req’d
for assembly becomes gross
req’d
for componentSlide21
21
Product Structure
Tree & Low level codingSlide22
22
Low-level coding
Restructuring the bill of material so that multiple occurrences of a component all coincide with the lowest level at which the component occurs
Low-Level CodingSlide23
Low Level Coding
14127 Rivet is a common part. It belongs to Level 2, not 1.
Level 0
Level 1
Level 3
Level 2Slide24
24
Lot-for-Lot (L4L) ordering
The order or run size is set equal to the demand for that period
Minimizes investment in inventoryIt results in variable order quantitiesA new setup is required for each run
MPR Lot Sizing Rules (L4L)Slide25
25
MPR Lot Sizing Rules (EOQ)
Economic Order Quantity (EOQ)
Also called fixed order quantity (FOQ)
Can lead to minimum costs if usage of item is fairly uniform
This may be the case for some lower-level items that are common to different ‘parents’
Less appropriate for ‘lumpy demand’ items because inventory remnants often resultSlide26
26
MPR Lot Sizing Rules (POQ)
Fixed Period Ordering (POQ)
Provides coverage for some predetermined number of periods
When an order is planned (i.e., planned order receipts), it should be sufficient to cover the next
P
periods (e.g., p=3)Slide27
27
Example MRPSlide28
28
Example MRP: L-4-L orderingSlide29
29
Example MRP: EOQSlide30
Gross to net explosion shows how much of each part is required, but not when
Timing requires consideration of two factorsLead times–how long does it take to obtain the component or sub-assemblyPrecedent relationships–the order in which parts must be assembled
MRP considers both factors when developing the planLead Time OffsettingSlide31
Two common approaches to scheduling exist
Front schedule–schedule each step as early as possible. This approach is simple, but parts are scheduled (and finished) earlier than need be, thus increasing WIP inventory.Back schedule
–schedule each step as late as possible. This approach will reduce WIP, minimize storage (and time) of completed parts, reserve flexibility (postpone the commitment or raw materials to specific products), but it requires accurate BOM data and lead time estimation.Scheduling LogicSlide32
MRP combines
back scheduling and performs the gross requirements to net requirements explosion.Reduced inventoriesMinimized storage time
Scheduling Logic and MRPSlide33
Back Scheduling
Top handle assembly has the longest duration of any sub-assembly
Scoop assembly must be complete before final assembly can begin
Only when all sub-assemblies and components are available can final assembly beginSlide34
MRP Records
Planned order release for top handle assembly becomes gross requirement for top handle component and nail (note 2 nails required per assembly)
Lot-for-lot order policy exactly matches supply to net requirements
Fixed lot size order policy requires orders in multiples of lot sizeSlide35
Processing frequency–recalculating all records and requirements is called
regenerationThis is a computationally intensive process so it is often run in the background and during periods of low system demand
Net change approach only recalculates those records that have experienced changesLess frequent processing results in an out-of-date pictureMore frequent processing increases computer costs and may lead to system nervousness
MRP Technical IssuesSlide36
Theoretically, MRP systems should not require safety stock
Variability may necessitate the strategic use of safety stockA bottleneck process or one with varying scrap rates may cause shortages in downstream operations
Shortages may occur if orders are late or fabrication or assembly times are longer than expectedWhen lead times are variable, the concept of safety lead time is often usedSafety Lead Time (see Fig. 6.9)Scheduling orders for arrival or completion sufficiently ahead of their need that the probability of shortage is eliminated or significantly reduced
Safety Stock & Safety Lead TimeSlide37
Safety stock is buffer stock over and above the quantity needed to satisfy gross requirements
Used when quantity uncertainty is the issueSafety lead time changes both the release and due date of shop and/or purchase orders to provide a margin for error
Used when timing of orders is the issueSafety lead time is not just an inflated lead timeSafety Stock & Safety Lead TimeSlide38
Pegging provides a link between demand (order releases, customer orders, etc.) and the gross requirements for parts
Pegging records include the specific part numbers associated with a gross requirementPegging information can track the impact of a problem (e.g. material shortage) back to the order(s) it will affect
PeggingSlide39
Regeneration of the MRP records can lead to large numbers of planned order changes
To avoid this, a planned order can be converted to a firm planned order (FPO)
An FPO is not the same as a scheduled delivery, but can’t be changed by the MRP systemTemporarily overrides the MRP system to provide stability or to solve problems
Firm Planned OrdersSlide40
Total amount of time included in MRP calculations
Longer planning horizon increases computational requirementsShorter planning horizon may result in less-effective plans if significant future demand is not visibleAt a minimum, should cover the cumulative lead time for all finished goods items
Planning HorizonSlide41
Scheduled receipts represent an actual commitment (purchase order, production order, etc.)
Planned orders are only the current plan and can be changed more easilyScheduled receipts for production orders already have component materials assigned
Scheduled receipts do not impact gross requirementsPlanned order releases do not have component materials assignedPlanned order releases do impact gross requirements
Scheduled Receipts vs. Planned Order ReleasesSlide42
MRP Processing Example
Note: Component D is required by two parents.Slide43
MRP Processing ExampleSlide44
MRP Planner TasksSlide45
Exception CodesSlide46
Bottom-Up Replanning
Using pegging data to guide efforts to solve material shortagesPegging data allows the planner to take action only when actual customer orders are impactedSlide47
MRP System Output
Part number and description
MRP system data
MRP planning data
Exception messagesSlide48
MRP System DynamicsSlide49
An MRP is not a static document
As time goes bySome orders get completed
Other orders are near completionNew orders will have been enteredExisting orders will have been alteredQuantity changesDelays
Missed deliveriesSee Figure 6.11,6.12,6.13
System DynamicsSlide50
Effective use of an MRP system allows development of a forward-looking approach to managing material flows.
The MRP system provides a coordinated set of linked product relationships, which permits decentralized decision making for individual part numbers.All decisions made to solve problems must be implemented within the system, and transactions must be processed to reflect the resultant changes.
Effective use of exception messages allows attention to be focused on the “vital few” rather than the “trivial many.”
PrinciplesSlide51
Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
71
46
49
55
52
47
51
48
56
51
Scheduled Receipts
Proj. Available Bal.
150
Planned Order Rel.
Item A; Lot Size = 150;
LT = 1, SS = 0.
Average Inventory = ?
10. XYZ Company
Item B; Lot Size = 150;
LT = 1, SS = 0.
Average Inventory = ?
Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
77
83
90
22
10
10
16
19
27
79
Scheduled Receipts
Proj. Available Bal.
150
Planned Order Rel.Slide52
Item A; Lot Size = 3 weeks supply (
P=3
);
LT = 1, SS = 0. Average Inventory = ?
10. XYZ Company
Item B; Lot Size = 3 weeks supply (
P=3
);
LT = 1, SS = 0.
Average Inventory = ?
Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
71
46
49
55
52
47
51
48
56
51
Scheduled Receipts
Proj. Available Bal.
150
Planned Order Rel.
Period
1
2
3
4
5
6
7
8
9
10
Gross Requirements
77
83
90
22
10
10
16
19
27
79
Scheduled Receipts
Proj. Available Bal.
150
Planned Order Rel.Slide53
a. Component C (Q=40, LT=2, SS=0)
14. ABC Manufacturing Company
1
2
3
4
5
6
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Release
b.
Component C (Q=40, LT=2, SS=0)
1
2
3
4
5
6
Gross Requirements
Scheduled Receipts
Projected Available Balance
Planned Order Release