Chapter 15 - Material & Capacity Requirements Planning(MRP/CRP)

Planning Objectives Satisfy customer demand Ensure availability and efficient use of resources Material Capacity KEY - Balance demand and resources

Planning and Control System Questions What are we going to make, and when? What does it take to make it? What do we already have? What must we get, and when? Successful answers result in right: goods, quantity, quality, time, cost

Types of Resource Planning Systems Material Requirements Planning (MRP) - A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate time-phased requirements for materials. Recommends release of replenishment orders and rescheduling of open orders as conditions (priorities) change. APICS Dictionary - 9th Ed.

MRP’s Objectives What to Order How Much to Order When to Order When to Schedule Delivery

MRP Overview MRP Inputs MRP Processing MRP Outputs Changes Order releases Master schedule Planned-order schedules Primary reports Exception reports Planning reports Performance- control reports Bill of materials file MRP computer programs Secondary reports Inventory records file Inventory transaction

Material Requirements Planning Inputs Master schedule: States which end items to produce, when, and in what quantities. Bill of materials: Raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product (Single vs. multiple level). Product structure tree: Visual depiction of a bill of materials, with all components listed by levels Inventory status/transactions: Location, quantity, ins, outs, picks, changes. Planning Factors: Lead time, scrap allowance, yield factors, lot sizes, safety stock/safety lead time

Material Requirements Planning A Final Point MRP focuses on materials ONLY and DOES NOT guarantee that the plan can be implemented from a capacity/resource perspective. To close the loop, it’s necessary to do capacity requirements planning (CRP)

Capacity Requirements Planning The process of determining short-range capacity requirements from MRP outputs Load reports/profiles show known and expected future capacity requirements vs. expected capacity availability

Capacity Requirements Planning MRP planned order releases Capacity requirements planning Open orders file Routing file Load profile for each machine center © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Ch 13 - 28

Capacity Requirements Planning - Initial Load Profile Hours of capacity Normal capacity 1 2 3 4 5 6 Time (weeks) © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Ch 13 - 31

Capacity Requirements Planning - Adjusted Profile Work an extra shift Hours of capacity Overtime Push back Pull ahead Push back 1 2 3 4 5 6 Time (weeks) © 1998 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Ch 13 - 32

Types of Resource Planning Systems Manufacturing Resource Planning (MRP II) A method for the effective planning of all resources of a manufacturing company. Provides simulation capability to answer “what-if” capability and is made up of a variety of planning functions, each linked together. Output from these functions is linked with other business functions and financial reports. An extension of MRP. Modified from APICS Dictionary - 9th Ed.

Types of Resource Planning Systems Enterprise Resource Planning (ERP) A method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders. Differs from typical MRP II in technical requirements such as graphical user interface, relational database, 4GL languages, client-server architecture and open-system portability (Example SAP R/3) Modified from APICS Dictionary - 9th Ed.

Trends in Resource Planning Systems More powerful/sophisticated More encompassing More integrated/flexible More options More user-friendly/robust More data-base focused More data-intense

Chapter 16 - Just-In-Time

JIT/Lean Production Just-in-time: Repetitive production system in which processing and movement of materials and goods occur just as they are needed, usually in small batches JIT is characteristic of lean production systems JIT operates with very little “fat”

Just-In-Time Concepts jit - Inventory/production control system JIT - Philosophy of continuous improvement Simplification/Execution Elimination of Waste Reduced transaction processing Multi-pronged approach High quality, Quick response, Flexibility

JIT vs. MRP/ERP Similar goals MRP II JIT Right products, right place, right time MRP II Computer-based, manages complexity JIT Manual systems, simplicity/execution The Super Bowl of Planning & Control Choice? - play to strengths MRP – Planning; JIT - execution

JIT Characteristics A Fixed, Steady Rate of Production Low Inventories Uniform flow Linear production Low Inventories Less space, investment Uncover defects Small Lot Sizes Less WIP Flexibility/Velocity Fast feedback

JIT Characteristics Quick, Low Cost Setups Layout Flexibility/Velocity Small lot sizes Layout U-shaped Cellular Preventive Maintenance & Repair Worker pride/ownership

JIT Characteristics Multifunctional/Cooperative Workers Guerilla squad Flexible capacity High Quality Levels On-going production Small/frequent deliveries Product simplification Standardization Fewer part numbers/drawings

JIT Characteristics Reliable Vendors A Pull System of Moving Goods Dock-to-stock Much smaller number Long-term relationships A Pull System of Moving Goods Request-based Kanban signal Problem Solving/Continuous Improvement