Dependent Inventory: Material Requirements Planning BA 339 Mellie Pullman

Page 2 Role of the MPS (Master Production Schedule) Master production schedule: –Specifies the number & when to produce each end item (the anticipated build schedule) –The MPS is the result of the production planning process

Page 3 Link between Total Monthly Group Plan and MPS Month:JanuaryFebruaryMarch Output: Push Mowers Self-propelled3540 Riding1213 January (weeks) Total Mowers MPS

Page 4 So Far... We have only considered  Master scheduling  But we haven’t ordered the parts or materials!

Page 5 We’ve scheduled 500 chairs to be ready five weeks from now Now what?

Page 6 Back supports (3) Side rails (2) Front legs (2) Cross bars (2) Seat Material Needed for a Chair

Page 7 Chair Structure Tree (aka “Bill of Materials”) Chair Leg Assembly Seat Back Assembly Legs (2) Cross bar Side rails (2) Cross bar Back Supports (3)

Page 8 Chair Assembly (1 week) Week 5Week 4 If final assembly takes one week, then we must start assembly at the beginning of Week 4... Lead-Time I

Page 9 Chair Assembly Back Assembly Leg Assembly (1 week) Seats (2 weeks) Week 5Week 4Week 3Week 2 Which means that the major subassemblies and seats must be done by the beginning of Week 4... Lead-Time II

Page 10 Chair Assembly Back Assembly Leg Assembly (1 week) Back Support (2 weeks) Legs (2 weeks) Side Rails (2 weeks) Cross Bar (2 weeks) Seats (2 weeks) Week 5Week 4Week 3Week 2Week 1 Lead-Time III

Page 11 Lead-Time Key Points To have finished chairs at the beginning of Week 5, we must begin production and order materials in Week 1. “Exploding” the bill of materials tells us when to order things. Not much we can do to adjust output of chairs for the next 4 weeks. Why?

Page 12 Material Requirements Planning (MRP) Requires: 1.Bill-of-Materials (BOM) 2.Inventory record 3.Master schedule to determine what should be ordered when, and how much to order.

Page 13 MRP Dependent Demand  The demand for one item is related to the demand for another item  Given a quantity for the end item, the demand for all parts and components can be calculated  In general, used whenever a schedule can be established for an item  MRP is the common technique

Page 14 Bills of Material  List of components, ingredients, and materials needed to make product  Provides product structure  Items above given level are called parents  Items below given level are called children

Page 15 BOM Example B (2) Std. 12” Speaker kit C (3) Std. 12” Speaker kit w/ amp-booster 1 E (2) F (2) Packing box and installation kit of wire, bolts, and screws Std. 12” Speaker booster assembly 2 D (2) 12” Speaker D (2) 12” Speaker G (1) Amp-booster 3 Product structure for “Awesome” (A) ALevel0

Page 16 BOM Example: 50 A needed B (2) Std. 12” Speaker kit C (3) Std. 12” Speaker kit w/ amp-booster 1 E (2) F (2) Packing box and installation kit of wire, bolts, and screws Std. 12” Speaker booster assembly 2 D (2) 12” Speaker D (2) 12” Speaker G (1) Amp-booster 3 Product structure for “Awesome” (A) ALevel0 Part B:2 x number of As =(2)(50) =100 Part C:3 x number of As =(3)(50) =150 Part D:2 x number of Bs + 2 x number of Fs =(2)(100) + (2)(300) =800 Part E:2 x number of Bs + 2 x number of Cs =(2)(100) + (2)(150) =500 Part F:2 x number of Cs =(2)(150) =300 Part G:1 x number of Fs =(1)(300) =300

Page 17 Accurate Records  Accurate inventory records are absolutely required for MRP (or any dependent demand system) to operate correctly  Generally MRP systems require 99% accuracy  Outstanding purchase orders must accurately reflect quantities and schedule receipts

Additional MRP Scheduling Terminology Gross Requirements: needed during each period. Scheduled Receipts: Existing orders that arrive at beginning of period. On-hand or available balance: –Book: Inventory balance at end of each period. Net requirements: What is need to meet requirements and safety stock. Planned order receipt: planned orders that should arrive at beginning of planned period. Planned order release: Addresses lead time.

Page 19 End items are also known as “Level 0” items The MRP Process Starts with the MPS

Page 20 Where do the gross requirements come from? Do you understand the MRP logic? The “Parent / Child” Relationship

Page 21 Going Deeper…

Page 22 Do You Understand... Why it is important to have an accurate BOM and accurate inventory information? Where gross requirements come from? The difference between planned and scheduled receipts?

Page 23 Recall... Look at the “lumpiness” of demand for legs

Page 24 If we order “lot-for-lot” Much smoother demand for legs, lower average inventory

Page 25 Elements of JIT as a Philosophy

Page 26 A “pull” production system A physical (normally visual) control system Normally composed of cards and containers (production card and withdrawal card), but can be any type of signal Number of containers Kanban System

The Kanban System The Kanban system uses simple cards or signals to strictly control production The basic idea is that no station is permitted to produce more than is immediately required by the succeeding station This simple idea prevents the buildup of inventory No computer is required! 17-27

Page 28 Kanban System

Page 29 Reducing Setup Times and Lot Sizes Reducing setup times: –increases available capacity –increases flexibility –reduces inventory Reduce setup times and run times simultaneously to reduce lot sizes and throughput times Single-digit Setup Times Small lots require short setups!

Page 30 Suppliers Very close relationship with suppliers Frequent deliveries demanded from suppliers Sole-sourcing Integrated supplier programs Deliveries to production line No inspection—high quality

Page 31 Comparison of MRP and JIT Pull versus Push production systems Situations for comparing MRP and JIT: –Pure repetitive manufacturing situation; JIT works best –A batch process; JIT works well with cellular manufacturing –A job shop; MRPII with some elements of JIT MRP assumes the present system is correct and seeks to make the best of that system. JIT seeks to change the system to make it better.

The Traditional Push System In traditional manufacturing, an item is released for production at a specified time, with an associated due date generated by MRP. The item moves through a sequence of operations When one operation is finished, the item is “pushed” to the next operation Finally, the product is pushed to inventory, to meet the demand forecast 17-32

The Pull System The pull system focuses on the output of the system rather than the input. Finished products are “pulled” from the final operation in response to firm customer orders. This leads to a chain reaction, with each station pulling material from its preceding station. JIT uses the “Kanban” system to control the flow of material with very little work-in- process inventory