materials requirements planning chapter 14 william j. stevenson, 9th ed
TRANSCRIPT
Materials Requirements PlanningMaterials Requirements PlanningChapter 14Chapter 14
William J. Stevenson, 9th ed.
Independent and Dependent DemandIndependent and Dependent DemandIndependent Demand
A
B(4) C(2)
D(2) E(1) D(3) F(2)
Dependent Demand
Independent demand is uncertain. Dependent demand is certain.
Dependent demand: Demand for items that are subassemblies or component parts to be used in production of finished goods.
Once the independent demand is known, the dependent demand can be determined.
DependDependeent Demandnt Demand
Dependent vs Independent DemandDependent vs Independent Demand
Time
Time Time
Time
Dem
and
Dem
and
Stable demand“Lumpy” demand
Am
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d
Am
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Safety stock
Material Requirements PlanningMaterial Requirements PlanningDefinedDefined
Materials requirements planning (MRP)) is a computerized inventory planning and control system for determining when (no earlier and no later) and how many of each of the parts, components, and materials should be ordered or produced.
It translates master schedule requirements for end items into time-phased requirements for subassemblies, components and raw materials.
Dependent demand drives MRP
MRP is a software system
When to Use MRPWhen to Use MRP
Dependent and discrete itemsComplex productsJob shop productionAssemble-to-order environments
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©The McGraw-Hill Companies, Inc., 2004
Firm orders from knowncustomers
Forecastsof demand
from randomcustomers
Aggregateproduction
plan
Bill ofmaterial
file
Engineeringdesign
changes
Inventoryrecord file
Inventorytransactions
Master productionSchedule (MPS)
Primary reportsSecondary reports
Planned order schedule for inventory and production control (work orders, purchase orders), rescheduling notices
Exception reportsPlanning reportsReports for performance control
Materialplanning(MRP
computer program)
MRP Inputs MRP Processing MRP Outputs
Masterschedule
Bill ofmaterials
Inventoryrecords
MRP computerprograms
Changes
Order releases
Planned-orderschedules
Exception reports
Planning reports
Performance-controlreports
Inventorytransaction
Primaryreports
Secondaryreports
MRP SystemMRP System
MRP Inputs 1: MRP Inputs 1: Master Production ScheduleMaster Production Schedule
Drives MRP process with a schedule of finished products; states which end items are to be produced, when these are needed, and in what quantities
Quantities may consist of a combination of customer orders & demand forecasts
Quantities represent what needs to be produced, not what can be produced
Master Production Schedule (MPS)Master Production Schedule (MPS)
Time-phased plan specifying how many and when the firm plans to build each end item
Aggregate PlanAggregate Plan(Product Groups)(Product Groups)Aggregate PlanAggregate Plan
(Product Groups)(Product Groups)
MPSMPS(Specific End Items)(Specific End Items)
Master Production ScheduleMaster Production Schedule
Item / Week Oct 3 Oct. 10 Oct. 17 Oct.24 Oct. 31Clipboard 85 95 120 100 100Lapdesk 0 50 0 50 0Lapboard 75 120 47 20 17Pencil Case 125 125 125 125 125
Shows items to be producedDerived from aggregate plan
Example:
MRP Inputs 2: MRP Inputs 2: Bill-of-MaterialsBill-of-Materials
Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of a product.
Product structure tree: Visual depiction of the requirements in a bill of materials, where all components are listed by levels.
Product Structure TreeProduct Structure Tree: Example 1: Example 1Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
3
MRP Inputs 3: MRP Inputs 3: Inventory RecordsInventory Records File File
One of the three primary inputs of MRPIncludes information on the inventory status of
each item by time periodGross requirementsScheduled receiptsAmount on handLead timesLot sizesAnd more....
MRP MRP Terminology (1 of 3)Terminology (1 of 3)
Gross requirementsScheduled receiptsProjected on handNet requirementsPlanned-order receiptsPlanned-order releases
MPR MPR Terminology (2 of 3)Terminology (2 of 3)
Gross requirements
Total expected demand
Scheduled receipts
Open orders scheduled to arrive
Projected on hand
Expected inventory on hand at the beginning of each time period
MRMRPP Processing Processing Terminology (3 of 3) Terminology (3 of 3)Net requirements
Actual amount needed in each time period
Gross requirements – available inventory
Planned-order receipts
Quantity expected to be received at the beginning of the period
Offset by lead time
Planned-order releases
Planned amount to be ordered in each time period
MRP Processing Logic: MRP Processing Logic: Assembly Time ChartAssembly Time Chart
1 2 3 4 5 6 7 8 9 10 11
Procurement ofraw material D
Procurement ofraw material F
Procurement ofpart C
Procurement ofpart H
Procurement ofraw material I
Fabricationof part G
Fabricationof part E
Subassembly A
Subassembly B
Final assemblyand inspection
WeeksWeeks
Calculation of Gross RequirementsCalculation of Gross Requirements
Therefore, these are the gross
requirements for B
Periods
10 101 2 3
Master schedule for S sold directly
40 50 15
A
CB
5 6 7 8 9 10 11
Lead time = 4 for AMaster schedule for A
40 20 30
S
B C
8 9 10 1211 13
Lead time = 6 for SMaster schedule for S
10 40+10 = 50 40 50 20 15+30
= 45
1 2 3 4 5 6 7 8Periods
Gross requirements: B
Basic MRP ProcessesBasic MRP Processes
1. Exploding the bill of material2. Netting out inventory3. Lot sizing4. Time-phasing requirements
The MRP MatrixThe MRP Matrix
Gross Requirements Derived from MPS or planned order releases of the
parentScheduled Receipts On order and scheduled to
be receivedProjected on Hand Beg Inv Anticipated quantity on hand
at the end of the periodNet Requirements Gross requirements net of
inventory and scheduled receipts
Planned Order Receipts
When orders need to be received
Planned Order Releases
When orders need to be placed to be received on time
ITEM NAME OR NO. LLC - LOW LEVEL CODE PERIODLOT SIZE QTY MADE IN LY - LEAD TIME 1 2 3 4 5
MRP Processing:MRP Processing:Example 1-Example 1-School Mate ProductsSchool Mate Products
Master Production Schedule
1 2 3 4 5
Clipboard 85 95 120 100 100Lapdesk 0 60 0 60 0
Item Master File (ınventory record file
CLIPBOARD LAPDESK PRESSBOARDOn hand 25 20 150On order 175 (Period 1) 0 0 (sch receipt)LLC 0 0 1Lot size L4L Mult 50 Min 100Lead time 1 1 1
School Mate ProductsSchool Mate ProductsProduct Structure RecordProduct Structure Record
Clipboard
Lapdesk
Pressboard(2)
Trim(3’)
Beanbag(1)
Glue(4 oz)
Level 0Level 0
Level 0Level 0
Pressboard(1)
Clip Ass’y(1)
Rivets(2) Level 1Level 1
Level 1Level 1
School Mate ProductsSchool Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25
Net Requirements
Planned Order Receipts
Planned Order Releases
School Mate ProductsSchool Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25 115
Net Requirements 0
Planned Order Receipts
Planned Order Releases
(25 + 175) = 200 units available(200 - 85) = 115 on hand at the end of Period 1
School Mate ProductsSchool Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25 115 20
Net Requirements 0 0
Planned Order Receipts
Planned Order Releases
115 units available(115 - 85) = 20 on hand at the end of Period 2
School Mate ProductsSchool Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25 115 20 0
Net Requirements 0 0 100
Planned Order Receipts 100
Planned Order Releases 100
20 units available(20 - 120) = -100 — 100 additional Clipboards are requiredOrder must be placed in Period 2 to be received in Period 3
School Mate ProductsSchool Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 85 95 120 100 100
Scheduled Receipts 175
Projected on Hand 25 115 20 0 0 0
Net Requirements 0 0 100 100 100
Planned Order Receipts 100 100 100
Planned Order Releases 100 100 100
Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases
School Mate ProductsSchool Mate Products
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases
School Mate ProductsSchool Mate Products
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20 20 10 10 0 0
Net Requirements 0 40 50
Planned Order Receipts 50 50
Planned Order Releases 50 50
Following the same logic, the Lapdesk MRP matrix is completed as shown
School Mate ProductsSchool Mate Products
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5Gross RequirementsScheduled ReceiptsProjected on Hand 150Net RequirementsPlanned Order ReceiptsPlanned Order Releases
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Planned Order Releases 100 100 100
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Planned Order Releases 50 50
School Mate ProductsSchool Mate Products
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5Gross Requirements 100 100 200 100 0Scheduled ReceiptsProjected on Hand 150Net RequirementsPlanned Order ReceiptsPlanned Order Releases
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Planned Order Releases 100 100 100
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Planned Order Releases 50 50
x2x2 x2x2
x1x1 x1x1x1x1
School Mate ProductsSchool Mate Products
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5Gross Requirements 100 100 200 100 0Scheduled ReceiptsProjected on Hand 150 50 50 0 0 0Net Requirements 50 150 100Planned Order Receipts 100 150 100Planned Order Releases 100 150 100
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Planned Order Releases 100 100 100
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Planned Order Releases 50 50
School Mate ProductsSchool Mate Products
Planned Order Report
PERIOD
ITEM 1 2 3 4 5
Clipboard 100 100 100
Lapdesk 50 50
Pressboard 100 150 100
MRP MRP Processing:Processing: ExampleExample 2 2
A(2) B(1)
D(5)C(2)
X
C(3)
Item On-Hand Lead Time (Weeks)X 50 2A 75 3B 25 1C 10 2D 20 2
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
Requirements include 95 units (80 firm orders and 15 forecast) of X in week 10
A(2)
X
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 A’s for each X
It takes 2 A’s for each X
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
B(1)A(2)
X
It takes 1 B for each X
It takes 1 B for each X
A(2) B(1)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 3 C’s for each A
It takes 3 C’s for each A
A(2) B(1)
C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 2 C’s for each B
It takes 2 C’s for each B
A(2) B(1)
D(5)C(2)
X
C(3)
Day: 1 2 3 4 5 6 7 8 9 10X Gross requirements 95
LT=2 Scheduled receipts Proj. avail. balance 50 50 50 50 50 50 50 50 50 50
On- Net requirements 45hand Planned order receipt 4550 Planner order release 45A Gross requirements 90
LT=3 Scheduled receipts Proj. avail. balance 75 75 75 75 75 75 75 75
On- Net requirements 15 hand Planned order receipt 15 75 Planner order release 15 B Gross requirements 45
LT=1 Scheduled receipts Proj. avail. balance 25 25 25 25 25 25 25 25
On- Net requirements 20 hand Planned order receipt 20 25 Planner order release 20 C Gross requirements 45 40
LT=2 Scheduled receipts Proj. avail. balance 10 10 10 10 10
On- Net requirements 35 40 hand Planned order receipt 35 40 10 Planner order release 35 40 D Gross requirements 100
LT=2 Scheduled receipts Proj. avail. balance 20 20 20 20 20 20 20
On- Net requirements 80 hand Planned order receipt 80 20 Planner order release 80
It takes 5 D’s for each B
It takes 5 D’s for each B
MRP OutputsMRP Outputs Planned orders (schedule indicating the amount and
timing of orders)Work ordersPurchase orders
Order releases (authorization for the execution of planned orders)
Changes to previous plans or existing schedules (revision of due dates or order quantities, or cancellations of orders)
Action noticesRescheduling notices
Updating the Updating the MRP MRP SystemSystem
Regenerative system
Updates MRP records periodically
Net-change system
Updates MPR records continuously
MRP Secondary ReportsMRP Secondary Reports
Performance-control reports
Planning reports
Exception reports
Other ConsiderationsOther ConsiderationsSafety StockLot sizing
Lot-for-lot ordering (L4L)Economic order quantityPart Period BalancingWagner-Whitin algorithm& others
Which one to use? The one that is least costlyWhich one to use? The one that is least costly!
Can be used when demand for service or service items is directly related to or derived from demand for other services
Food catering service
End item => catered food
Dependent demand => ingredients for each recipe, i.e. bill of materials
Hotel renovation
Activities and materials “exploded” into component parts for cost estimation and scheduling
MRP in ServicesMRP in Services
Benefits of MRPBenefits of MRPReduced inventories without reduced customer service
Ability to track material requirements
Ability to evaluate capacity requirements
Means of allocating production time
Increased customer satisfaction due to meeting delivery schedules
Faster response to market changes
Improved labor and equipment utilization.
Better inventory planning and scheduling
Requirements of MRPRequirements of MRP
Computer system and necessary softwareMainly discrete productsStable lead timesAccurate and up-to-date
Master schedulesBills of materialsInventory status records
Integrity of data
Extensions of MRP Extensions of MRP
Extensions of MRPExtensions of MRP
Closed loop MRPCapacity planning - load reportsMRP II - Manufacturing Resources PlanningEnterprise Resources Planning
Forecast &Firm Orders
MaterialRequirements
Planning
AggregateProductionPlanning
ResourceAvailability
MasterProductionScheduling
ShopFloor
Schedules
CapacityRequirements
PlanningRealistic?
No, modify MPS
Yes
MRP and The Production Planning MRP and The Production Planning ProcessProcess
Closed Loop MRPClosed Loop MRP
Expanded MRP with emphasis placed on integration of:Financial planningMarketingEngineeringPurchasingManufacturingHuman resources
Manufacturing Resources Planning- Manufacturing Resources Planning- MRP MRP IIII
Manufacturing ResourceManufacturing Resourcess Planning Planning (MRP II)(MRP II)
Goal: Plan and monitor all resources of a manufacturing firm (closed loop):manufacturingmarketingfinanceengineering
Simulate the manufacturing system
MarketMarketDemandDemand
ProductionProductionplanplan
Problems?Problems?
Rough-cutRough-cutcapacity planningcapacity planning
YesYes NoNo YesYesNoNo
FinanceFinance
MarketingMarketing
ManufacturingManufacturing
AdjustAdjustproduction planproduction plan
MasterMasterproduction scheduleproduction schedule
MRPMRP
CapacityCapacity req. req.planningplanning
Problems?Problems?RequirementsRequirements
schedulesschedules
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MRP IIMRP II
Enterprise Resource Planning (ERP)Enterprise Resource Planning (ERP)The next step in the evolution that began with MRP
and evolved into MRP II
ERP system is a computer system that integrates application programs in accounting, sales, manufacturing, human resources and other functions in the firm.
ERP provides a system to capture and make data available in real time do decision makers and other users in the organization
MRP II with ties to customers and suppliers (connects with supply-chain and customer management applications)
Integrates financial, manufacturing and human resources on a single computer system.
Provides tools for planning and monitoring various business processes
ERPERP
Enterprise Resource Planning (ERP)Enterprise Resource Planning (ERP)
Attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments’ particular needs
Organizes and manages a company’s business processes by sharing information across functional areas
Standardized record-keeping permit information sharing and communication throughout the organization
Enterprise Resource PlanningEnterprise Resource Planning - ERP - ERP
Such an integration is accomplished through a database shared by all the application programs
ERPERP
ERP allows companies to:1. Automate and integrate many of their business
processes2. Share a common database and business
practices throughout the enterprise3. Produce information in real time
ERP systems also include:1. Supply Chain Management software and2. Customer Relationship Management software
ERP ModulesERP Modules
ERP’s Central DatabaseERP’s Central Database
Finance & Accounting
Sales &
Marketing
Human Resources
Production & Materials
ManagementERP Data
Repository
ERP Strategy ConsiderationsERP Strategy Considerations
High initial costHigh cost to maintainFuture upgradesTraining