managing production across the supply chain. © 2008 pearson prentice hall --- introduction to...
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© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 2
Chapter ObjectivesBe able to: Explain the activities that make up planning and control in a
typical manufacturing environment. Explain the linkage between sales and operations planning
(S&OP) and master scheduling. Complete the calculations for the master schedule record and
interpret the results. Explain the linkage between master scheduling and material
requirements planning (MRP). Complete the calculations for the MRP record and interpret the
results. Discuss the role of production activity control and vendor order
management and how these functions differ from the higher-level planning activities.
Explain how distribution requirements planning (DRP) helps synchronize the supply chain, and complete the calculations for a simple example.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 3
Outline
• Master scheduling defined• Basic MPS record• Planning horizon• MRP defined• Basic MRP record• MRP special considerations• Special topics:
– Job Sequencing– DRP
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 4
Alphabet Soup
TLA (Three Letter Acronym) Definitions
ATP: Available to PromiseBOM: Bill of MaterialsDRP: Distribution Requirements PlanningMPS: Master Production ScheduleMRP: Materials Requirements PlanningPAC: Production Activity ControlS&OP: Sales and Operations Planning
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 5
The Big Picture
S&OP
MPS
MRP
Vendor OrderManagmentPAC
Tactical Capacity Planning
Production, Order Fulfillment, Cushions
Material Quantities and Timing
Supply Chain Management and PDCA
Production Management and PDCA
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 6
Master Scheduling I
• Controls the timing and quantity of production for products or product families
• Primary interface point for actual customer orders
• Coordinates forecasted demand and actual orders with production activity
• Serves as tool for agreement between marketing and operations (but at a different level than S&OP)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 7
Master Scheduling II
• Feeds data to more detailed material planning
• Indicates the quantity and timing (i.e., delivery times) for a product or group of products
• More detailed than S&OP
weekly versus monthly
specific products versus “average”
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 8
Link between S&OP and MPS
Month: January February MarchOutput: 200 300 400
Push Mowers 25 25 25 25Self-propelled 35 40Riding 12 13
January (weeks) 1 2 3 4
S&OP
MPS
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 9
Master Scheduling Criteria
The Master Production Schedule must:
Satisfy the needs of marketing
Be feasible for operations
Match with supply chain capability
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 10
MPS Formulas: Definitions
• ATPt = Available to promise in period t
• EIt = Ending Inventory for period t (same as projected on-hand inventory for next period)
• Ft = Forecasted demand for period t
• MPSt = MPS quantity available in period t
• OBt = orders booked for period t
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 11
MPS Formulas:
dueisMPSpositivenextwhenperiodzwhere
OBMPSEIATP
OBFMPSEIEI
t
z
tiittt
ttttt
1
1
1 ),max(
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 12
Detailed MPS for a Product
Notes: Planning time fence cumulative lead time for product What seems to be the lot-sizing rule here?
On-hand inventory at end of October = 100
Month November December
Week 45 46 47 48 49 50 51 52
Forecast Demand 150 150 150 150 125 125 125 125
Orders Booked 170 165 140 120 85 45 20 0
Master Schedule 300 0 300 0 250 0 250 0
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 13
Projected On-Hand Inventory
On-hand inventory at end of October = 100
Month November December
Week 45 46 47 48 49 50 51 52
Forecast Demand 150 150 150 150 125 125 125 125
Orders Booked 170 165 140 120 85 45 20 0
Projected On-Hand Inventory 230 65 215 65 190 65 190 65
Master Schedule 300 0 300 0 250 0 250 0
e.g., Projected on-hand inventory for week 47: = 65 + 300 – 150 = 215
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 14
Available-to-Promise
ATP (Week 45) = 100 + 300 – (170 + 165) = 65ATP (Week 47) = 300 – (140+120) = 40ATP (Week 49) = 250 – (85 + 45) = 120
On-hand inventory at end of October = 100
Month November December
Week 45 46 47 48 49 50 51 52
Forecast Demand 150 150 150 150 125 125 125 125
Orders Booked 170 165 140 120 85 45 20 0
Projected On-Hand Inventory 230 65 215 65 190 65 190 65
Master schedule 300 0 300 0 250 0 250 0
Available-to-Promise 65 40 120 230
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 15
Change in Forecast Demand
Are we in trouble yet?
On-hand inventory at end of October = 100
Month November December
Week 45 46 47 48 49 50 51 52
Forecast Demand 150 150 150 150 150 150 150 150
Orders Booked 170 165 140 120 85 45 20 0
Projected On-Hand Inventory 230 65 215 65 190 65 190 65
Master schedule 300 0 300 0 250 0 250 0
Available-to-Promise 65 40 120 230
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 16
Change in Orders Booked
Note impact on ATP ( Week 45) and on-hand inventory projections
On-hand inventory at end of October = 100
Month November December
Week 45 46 47 48 49 50 51 52
Forecast Demand 150 150 150 150 125 125 125 125
Orders Booked 170 230 140 120 85 45 20 0
Projected On-Hand Inventory 230 0 0 0 125 0 125 0
Master schedule 300 0 300 0 250 0 250 0
Available-to-Promise 0 40 70 230
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 17
Planning Horizon
How far an MPS looks into the future depends on
• Variability in demand and market conditions
• Variability in supplier deliveries and lead times
• Length of the production process.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 18
Key Points about MPS
• Provides more detail than S&OP
• Tracks the following information:
– Actual versus forecasted demand– Available-to-Promise
• This gives sales information for accepting or not accepting new orders for delivery in a given week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 19
A Final View of Master Scheduling
S&OP
MPS
MarketingOperations & Supply Chain
Rough-Cut Capacity Plan
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 20
Material Requirements Planning
• MRP in the planning cycle
• The logic of MRP
– an extended example
• Considerations of MRP
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 21
So Far ...
We have only considered labor, overall inventory levels, and equipment:
S&OP Master scheduling Rough-Cut Capacity
Planning
But we haven’t ordered the materials!
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 22
We’ve scheduled 500 chairs to be ready five weeks from now . . .
. . . Now what?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 23
Back supports (3)
Side rails (2)
Front legs (2)
Cross bars (2)
Seat
Material Needed for a Chair
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 24
Chair Structure Tree(aka “Bill of Materials” or BOM)
Chair
LegAssembly
Seat Back Assembly
Legs (2) Crossbar
Siderails (2)
Crossbar
BackSupports
(3)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 25
ChairAssembly
(1 week)
Week 5Week 4
If final assembly takes one week, then we must startthe assembly at the beginningof Week 4 . . .
Lead-Time I
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 26
ChairAssembly
BackAssembly
LegAssembly
(1 week)
(1 week)
(1 week)
Seats (2 weeks)
Week 5Week 4Week 3Week 2Whichmeans thatthe majorsubassembliesand seats must bedone by thebeginningof Week 4 ...
Lead-Time II
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 27
ChairAssembly
BackAssembly
LegAssembly
(1 week)
(1 week)
(1 week)
Back Support (2 weeks)
Legs (2 weeks)
Side Rails (2 weeks)
Cross Bar (2 weeks)
Cross Bar (2 weeks)
Seats (2 weeks)
Week 5Week 4Week 3Week 2Week 1
Lead-Time III
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 28
Lead-Time Key Points
• To have finished chairs at the beginning of Week 5 with no work in progress or finished inventory, 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?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 29
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.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 30
End items are also known as “Level 0” items
The MRP Process Starts with the MPS
Chairs Lead Time = 1 week
1 2 3 4 5 6 7MPS Due Date 0 0 0 0 500 400 400Start Assembly 0 0 0 500 400 400 0
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 31
Where do the gross requirements come from?Do you understand the MRP logic?
The “Parent / Child” Relationship
ChairsLT = 1 week
1 2 3 4 5 6 7MPS Due Date 0 0 0 0 500 400 400Start Assembly 0 0 0 500 400 400 0
SeatLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 500 400 400Planned Receipts 500 400 400Planned Order 500 400 400
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 32
Going Deeper…
ChairsLT = 1 week
1 2 3 4 5 6 7MPS Due Date 0 0 0 0 500 400 400Start Assembly 0 0 0 500 400 400 0
SeatLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 500 400 400Planned Receipts 500 400 400Planned Order 500 400 400
Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
Back AssemblyLT = 1 weekMinimum Order = 250 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled Receipts 250
Week
Week
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 33
Where do the gross requirements for LEGS come from?
Moving from “Level 1” itemsto “Level 2” items . . . Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
LegsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 2000 0 2000 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 2000 2000Planned Receipts 2000 2000Planned Order 2000 2000
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 34
Combining Requirements: “Cross Bars”
Note effect of differences in lead times and order sizes on
the gross requirements
for each component
Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
Back AssemblyLT = 1 weekMinimum Order = 250 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled Receipts 250Projected On Hand 0 0 250 250 0 100 200 200Net Requirements 250 400 300Planned Receipts 250 500 500Planned Order 250 500 500
CrossbarsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 1250 500 1500 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 1250 500 1500Planned Receipts 1250 500 1500Planned Order 1250 500 1500
Week
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 35
Impact of Longer Lead Times
We cannot do this since the planned order would be in the past…. Thus the 250 crossbars will be delivered late one week to back assembly. What does this do to our chair schedule?
Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
Back AssemblyLT = 2 weeksMinimum Order = 250 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled Receipts 250Projected On Hand 0 0 250 250 0 100 200 200Net Requirements 250 400 300Planned Receipts 250 500 500Planned Order 250 500 500
CrossbarsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 250 1500 500 1000 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 250 1500 500 1500Planned Receipts 250 1500 500 1500Planned Order 250 1500 500 1000
Week
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 36
Do You Understand ...
• Why it is important to have an accurate BOM and accurate inventory information?
• Why we need to “freeze” production schedules?
• Where gross requirements come from?
• The difference between planned and scheduled receipts?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 37
Other Considerations I
Planned Orders
Feedback Feedback
Production Suppliers
MRP
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 38
Other Considerations II
• When do we update the system?
• Capacity requirements planning using MRP output
• MRP ‘nervousness’
– Increasing order chaos, the lower in the BOM structure of materials
– Lot sizing issues
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 39
Recall ...
Look at the “lumpiness” of demand for legs
Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 0 0 0 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000
LegsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 2000 0 2000 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 2000 2000Planned Receipts 2000 2000Planned Order 2000 2000
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 40
If we order “lot-for-lot”
Much smoother demand for legs, lower average inventory
Leg AssemblyLT = 1 weekMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 0 0 0 0 0 0 0Net Requirements 475 400 400Planned Receipts 475 400 400Planned Order 475 400 400
LegsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 950 800 800 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 950 800 800Planned Receipts 950 800 800Planned Order 950 800 800
Week
Week
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 41
Job Sequencing
• Rules:FCFS — first come, first servedEDD — earliest due dateCritical ratio — work time remaining divided
by days left before due date
• Performance measure:Average lateness — sum of days late for each
job divided by total number of jobs
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 42
Example Data
JobEstimated
TimeDays Until
DueCritical Ratio
Weldco 8 32 0.250
MetroArt 10 20 0.500
MMCC 9 9 1.000
Jones 6 15 0.400
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 43
Example FCFS
JobEstimated
Time
Days Until Due
Start EndDays Late
Weldco 8 32 0 8 0
MetroArt 10 20 8 18 0
MMCC 9 9 18 27 18
Jones 6 15 27 33 18
Average lateness = 36/4 = 9 days
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 44
Example EDD
JobEstimated
Time
Days Until Due
Start EndDays Late
MMCC 9 9 0 9 0
Jones 6 15 9 15 0
MetroArt 10 20 15 25 5
Weldco 8 32 25 33 1
Average lateness = 6/4 = 1.5 days
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 45
Example Critical Ratio(largest ratio first)
JobEstimated
Time
Days Until Due
Start EndDays Late
MMCC 9 9 0 9 0
MetroArt 10 20 9 19 0
Jones 6 15 19 25 10
Weldco 8 32 25 33 1
Average lateness = 11/4 = 2.75 days
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 46
Interpretation
• Here the EDD rule gives better average lateness. Compare with FCFS results.
• Note that the critical ratio does not do as well as EDD compared to the text example for Carlos Restoration. Why?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 47
Distribution Requirements Planning (DRP)
• Anticipates downstream demand– Uses this information, not predetermined
reorder points or periodic reviews, to determine when to order
• Computer-based software systems needed to deal with the added complexity
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 48
Suppose we forecast demand for Wholesaler A for the next 8 days (the best time horizon to use will depend on many factors)
Based on this, we anticipate that Wholesaler A will order on Day 3
DRP Example I
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 49
We extend the analysis to include Wholesaler B Combined, we expect to see orders on Days 3 and 4
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
Wholesaler B
ROP = 75, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 14 14 14 14 14 14 14 14Ending Inventory 108 94 80 66 252 238 224 210 196Expected Order 200
Total Orders 200 200
DRP Example II
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 50
The distributor then uses this information to plan its own orders. In this case, suppose it takes two days for the supplier to replenish; based on the information, the distributor would order on Day 1
Wholesaler A
ROP = 50, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 20 20 20 20 20 20 20 20Ending Inventory 85 65 45 225 205 185 165 145 125Expected Order 200
Wholesaler B
ROP = 75, Q = 200 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Forecast Demand 14 14 14 14 14 14 14 14Ending Inventory 108 94 80 66 252 238 224 210 196Expected Order 200
Distributor
Q = 400 Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8Total Expected Orders 200 200Ending Inventory 50 50 50 250 50 50 50 50 50Planned Receipts 400Planned Orders 400
DRP Example III
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 51
DRP Benefits
Helps improve customer service Provides a better and faster understanding of
the impact of shortages and/or promotions
Helps reduce costs InventoryFreightProduction
Provides integration between the stages in the supply chain
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 15, Slide 52
DRP Constraints
• Accurate forecasts and inventory levels– Necessary to anticipate correctly when orders will be
placed• Consistent and reliable lead times
– To ensure that orders can be placed and arrive by the time they are needed
• “Nervousness”– Even light changes in demand for downstream partners
can have a significant impact on order volumes, especially when order sizes are relatively high