Operations Management Material Requirements Planning Material Requirements Planning (MRP) MRP Logic and Product Structure Trees Time Fences MRP Example MRP II Lot Sizing in MRP Programs Benefits of MRP Programs MBA.782.Mat'l.Reqm'ts.Planning 2 2

M. R. P. The Planning Hierarchy Aggregate Production Planning Forecast & Firm Orders Master Production Scheduling Capacity Requirements Planning Material Requirements Planning Purchase Orders & Shop Floor Schedules MBA.782.Mat'l.Reqm'ts.Planning 22

_____________ demand drives MRP. MRP is a ______________ system. M. R. P. M.R.P. - Defined Materials requirements planning (MRP) is the _________ for determining the number of parts, components, and materials needed to produce a product. MRP provides time ________________ information specifying when each of the materials, parts, and components should be ordered or produced. _____________ demand drives MRP. MRP is a ______________ system. MBA.782.Mat'l.Reqm'ts.Planning 3 3

__________ on demand of a finished good M. R. P. Types of Demand Independent Demand Requirements that are ____ related to the demands for any other product Products that face the demand of the _____________ Demand must be ___________ Dependent Demand __________ on demand of a finished good Demands can be ____________ ordering in lots or batches, thus “ _______ ” MBA.782.Mat'l.Reqm'ts.Planning

not replenished when inventory level is low M. R. P. Demand Patterns What is “Lumpy” demand results from need to have all components available ________ a production run begins Lumpy demand items are manufactured / ordered in a ____ - ________ manner “time phasing” not replenished when inventory level is low is replenished when ___________ MBA.782.Mat'l.Reqm'ts.Planning

Determines ________ unit numbers needed. M. R. P. M. R. P. System Structure The goal of MRP is getting “the right materials to the right place at the right time.” Based on a master production schedule, a material requirements planning system: Creates schedules identifying the _____________ parts and materials required to produce end items. Determines ________ unit numbers needed. Determines the _________ when orders for those materials should be released, based on lead times. MBA.782.Mat'l.Reqm'ts.Planning 11 11

M. R. P. System Structure The theme of MRP is "getting the right materials to the right place at the right time." The objectives of inventory management under an MRP system are the same as under any inventory management system: to improve customer service, minimize inventory investment, and maximize production operating efficiency. The philosophy of material requirements planning is that materials should be expedited (hurried) when their lack would delay the overall production schedule and de-expedited (delayed) when the schedule falls behind and postpones their need. Traditionally, and perhaps still typically, when an order is behind schedule, significant effort is spent trying to get it back on schedule. However, the opposite is not always true; when an order, for whatever reason, has its completion date delayed, the appropriate adjustments are not made in the schedule. This results in a one-sided effort—later orders are hurried, but early orders are not rescheduled for later. Aside from perhaps using scarce capacity, it is preferable not to have raw materials and work in process before the actual need since inventories tie up finances, clutter up stockrooms, prohibit design changes, and prevent the cancellation or delay of orders. MBA.782.Mat'l.Reqm'ts.Planning 12

Aggregate Plan (Product Groups) MPS (Specific End Items) Inputs to M.R.P. Master Production Schedule (MPS) Time-phased plan specifying ____ ______ and ______ the firm plans to build each end item Aggregate Plan (Product Groups) Master Production Schedule  Decide which items to produce when - so as to minimize the total costs  Determine the feasibility of the Schedule - does it meet demand - are there capacity issues - other constraints - availability of supplies - lead times - policies / rules - flexibility / contingencies  Primary Objective of M.P.S. - Sales - schedule to meet delivery needs - on-time ! - Operations - efficient utilization - avoid over / under loading MPS (Specific End Items) MBA.782.Mat'l.Reqm'ts.Planning 8 8

Inputs to M.R.P. Master Production Schedule MBA.782.Mat'l.Reqm'ts.Planning

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Stock-Keeping-Unit ( _____ ) Inputs to M.R.P. Inventory Record Part number Stock-Keeping-Unit ( _____ ) refers to a given part number at a given _________. Captures ______ data about each SKU, including: Quantity on hand Quantity on order and when delivery is expected Lead time Ordering Policies Other management data, e.g. part name, description, cost MBA.782.Mat'l.Reqm'ts.Planning

A list of components and quantities needed to make _____ assembly Inputs to M. R. P. Bill of Materials A list of components and quantities needed to make _____ assembly each component has a unique part number Provides product structure (tree) Parents: Items _______ given level Children: Items _______ given level A purchased item has ___ children Shows low-level coding Lowest level in structure item occurs Top level is 0; next level is 1 etc. MBA.782.Mat'l.Reqm'ts.Planning 14

Bill of Materials Lead Times, Exploding, and Offsetting Lead time: The time from when an order is placed until the part is _______ for use Offsetting: Placing the requirements in their _________ time periods based on lead time Exploding: Multiplying the parent requirements by the usage ___________ through the product tree MBA.782.Mat'l.Reqm'ts.Planning

Bill of Materials Backward Scheduling R = WK 10 Order for final assembly, item #A, due in week 20: R = Release F = Finish Component part #P F = WK 17 R = WK 17 Final assembly item #A F = WK 20 R = WK 5 Component part #C F = WK 13 R = WK 13 Subassembly part #I F = WK 17 R = WK 7 Component part #S F = WK 13 5 10 15 20 Time Weeks MBA.782.Mat'l.Reqm'ts.Planning 2

Problem 4.1 Number of Gs needed? Purchased components? MBA.782.Mat'l.Reqm'ts.Planning

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total units that are on order, but _____ yet received. M.R.P. Worksheet Elements of Worksheet Gross Requirements the ________ demand derived from all parents at the MPS level and lower levels Scheduled Receipts total units that are on order, but _____ yet received. Projected on-hand inventory (for a planning period) (aka. _________ __________ _____) = On-hand Amount (from the previous period) + Scheduled Receipts + Planned Order Receipts - Gross Requirements MBA.782.Mat'l.Reqm'ts.Planning

Net Requirement = Safety Stock - PAB, otherwise Net Requirement = 0 M.R.P. Worksheet Elements of Worksheet Net requirements If the Projected on-hand inventory (PAB) is ______ than the Safety Stock, then..... Net Requirement = Safety Stock - PAB, otherwise Net Requirement = 0 MBA.782.Mat'l.Reqm'ts.Planning

when we need to ________ the order considering the delay of lead time M.R.P. Worksheet Elements of Worksheet Planned Order Receipt how much we need to put on order to _______ at the beginning of this planning period Planned Order Release when we need to ________ the order considering the delay of lead time MBA.782.Mat'l.Reqm'ts.Planning

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Problem 4.2 Given the following product tree, explode, offset, and calculate the gross and net requirements. All lead times and the quantities required are shown in parenthesis. The master production schedule calls for 70 J’s in week 7. There is a scheduled receipt of 50 K’s in week 3. There are 20 J’s, 100 L’s, and 200 N’s on hand. MBA.782.Mat'l.Reqm'ts.Planning

Problem 4. 2 {Insert mba782mrpworksheetho. xls”APICS BSCM Prob. 4 Problem 4.2 {Insert mba782mrpworksheetho.xls”APICS BSCM Prob. 4.2(c)” here} MBA.782.Mat'l.Reqm'ts.Planning

Problem 4.2 An item is available at the __________ of the period Proj. Avail. Balance is at the _____ of the period Planned order release becomes the gross requirement at the _____ ________ level MBA.782.Mat'l.Reqm'ts.Planning

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_____________ lot size M.R.P. Planning Factors Lot Sizing Rules Lot-for-Lot (L4L) Order just __________ to meet net requirement Fixed Order Quantity (FOQ) _____________ lot size Least Total Cost finds the order quantity that comes closest to _____________ ordering costs with holding costs Least Unit Cost selects the lot size with the _________ cost per unit MBA.782.Mat'l.Reqm'ts.Planning

_______ planned orders, and keep priorities current M.R.P. M.R.P. Outputs The MRP logic will Gross, net, offset, and explode requirements _______ planned orders, and keep priorities current Inventory status data Action Notes __________ new orders adjust the due dates of scheduled receipts Cancellations or suspensions of open orders Capacity Reports __________ time-phased labor requirements MBA.782.Mat'l.Reqm'ts.Planning

MRP Benefits ____________ customer satisfaction due to meeting delivery schedules ____________ inventory levels without reduced customer service Faster response to market changes Improved labor & equipment utilization Better inventory planning & scheduling MBA.782.Mat'l.Reqm'ts.Planning 20

Distribution Resources Planning (DRP) M.R.P. Resource Planning Distribution Resources Planning (DRP) application of M.R.P. concepts to ___________ Manufacturing Resources Planning (MRP II) ties M.R.P. to financial system used by managers in _____ functional areas Enterprise Resource Planning (ERP) encompasses the customer and supplier firms operate as if suppliers are ______ of the firm’s own processes MBA.782.Mat'l.Reqm'ts.Planning

MRP in Services Can be used when demand for service items is directly _________ __ or __________ from demand for other services restaurant - rolls required for each meal hospitals - implements for surgery and availability of personnel MBA.782.Mat'l.Reqm'ts.Planning 33

_____ Knowledge and Acceptance M.R.P. Implementation Issues Successful Implementation Requires Management ___________ Computer Support ___________ and Realistic Input B.O.M.s, M.P.S., Inventory status Job Routings and Time Requirements Machine Capacity _____ Knowledge and Acceptance MBA.782.Mat'l.Reqm'ts.Planning

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Concepts / Terminology Review Lecture notes Recommended Problems M.R.P. Chapter Wrap-Up Read Chapter 14 Concepts / Terminology Review Lecture notes Recommended Problems MBA.782.Mat'l.Reqm'ts.Planning