1. 4. Production and Material Planning

2. Planning Process Aggregate production plan Master production schedule
Material requirements plan
Capacity plan
Realistic No
Yes
Execute capacity plans
Execute material plans

3. Master Production Schedule
A time-phased production plan that specifies how many of, and when to build, each end item
Must be in accordance with the aggregate production plan, which sets the overall level of output in broad terms

4. MPS Example 1 Months January February
Aggregate Production Plan 1,500 1,200 (shows the total quantity of amplifiers)
Weeks
Master Production Schedule (shows the specific type and quantity of amplifier to be produced
240 watt amplifier
150 watt amplifier
75 watt amplifier

5. MPS Planning Lot-for-lot or batch production policies
Ft = forecast for period t
Ot = (confirmed) customer orders for period t
It = end-item inventory in period t
Qt = MPS, manufacturing quantity in period t

6. MPS Example 2 Io = 1600, lot for lot or batch = 2500W1 W2 W3 W4 W5 W6 W7 W8 Ft
1000
2000 Ot
1200
800
300
200
100 It Qt W1 W2 W3 W4 W5 W6 W7 W8 Ft
1000
2000 Ot
1200
800
300
200
100 It Qt

7. Material Requirements Planning (MRP)
Determines quantity & timing of dependent demand items
Creates requirements and schedules identifying the parts, components, and materials necessary to produce the end products specified in the MPS

8. Objectives of MRP Minimize inventory level
Maximize operating efficiency
Improve customer service

9. Inputs of MRP Master production schedule
Specifications or bills-of-material
Inventory availability
Purchase orders outstanding
Lead times

10. Structure of the MRP System
Data Files
Purchasing data
BOM
Lead times
(Item master file)
Inventory data
Output Reports
MRP by period report
MRP by date report
Planned order report
Purchase advice
Exception reports
Order early or late or not needed
Order quantity too small or too large
Master
production schedule
Material requirement planning programs (computer and software)

11. Bill of Material (BOM)
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

12. Product Structure Diagram
Product structure for “Awesome” (A) A
Level
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
G(1)
Amp-booster 3

13. BOM
May add other factors such as lot size, weight, etc.

14. BOM Explosion To produce 50 part A:
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

15. Gross Requirements Week 1 2 3 4 5 6 7 8 Lead Time
Required date Order release date week
Required date Order release date weeks
Required date Order release date week
Required date Order release date weeks
Required date Order release date weeks
Required date Order release date week
Required date Order release date weeks

16. MRP Level 0, Part A 1 2 3 4 5 6 7 8 9 10 Gross Requirements 50 1001 2 3 4 5 6 7 8 9 10
Gross
Requirements 50
100
Scheduled
Receipts
Inventory
Balance
Net
Planned
Planned Order
Release

17. Level 1, Part B 1 2 3 4 5 6 7 8 9 10
Gross Req.
Sch. Receipts 50
Inv. Balance
Net Req.
Plan. Receipts
Plan. Order
Level 1, Part C

18. Level 2, Part E 1 2 3 4 5 6 7 8 9 10
Gross Req.
Sch. Receipts
100
Inv. Balance
300
Net Req.
Plan. Receipts
Plan. Order
Level 2, Part F
200

19. Level 3, Part D 1 2 3 4 5 6 7 8 9 10
Gross Req.
Sch. Receipts
Inv. Balance
500
Net Req.
Plan. Receipts
Plan. Order
Level 3, Part G
100

20. Capacity Plan
MRP systems do not consider capacity during normal planning cycles
Finite capacity scheduling (FCS) recognizes actual capacity limits
By merging MRP and FCS, a finite schedule is created with feasible capacities which facilitates rapid material movement

21. Capacity required (hr)
Example
MPS/MRP
Bill of capacity (min)
W 1
W 2
W 3
W 4
Assembly
Inspection
Item A
1000 20
2.0
Item B
500 24
2.5
Item C
1500 22
Item D
600 25
2.4
Capacity required (hr)
Given
Week 1
Week 2
Week 3
Week 4
capacity
Assm.
1200
Insp.
110

22. Enterprise Resource Planning (ERP)
An extension of the MRP system to tie in customers and suppliers
Allows automation and integration of many business processes
Shares common data bases and business practices
Produces information in real time levels
Coordinates business from supplier evaluation to customer invoicing
Has potential to reduce transaction costs and to increase the speed and accuracy of information

23. ERP Modules Basic MRP Finance Human resources
Supply chain management (SCM)
Customer relationship management (CRM)

24. ERP Structure

25. Advantages of ERP Systems
Provides integration of the supply-chain, production, and administration
Creates commonality of databases
Can incorporate improved best processes
Increases communication and collaboration between business units and sites
Has an off-the-shelf software database
May provide a strategic advantage

26. Disadvantages of ERP Systems
Is very expensive to purchase and even more so to customize
Implementation may require major changes in the company and its processes
Is so complex that many companies cannot adjust to it
Involves an ongoing, possibly never ending, process for implementation
Expertise is limited with ongoing staffing problems

27. Video Case Study
Why is accurate inventory such an important issue at Wheeled Coach?
What kind of plan would you suggest for dealing with excess inventory at Wheeled Coach?