Material Requirements

Planning

Managing Inventories of Items With

Dependent Demand

1
Demand Types
• Dependent Demand: Demand for items
that are component parts to be used in the
production of finished goods
• Independent Demand: Demand generated
outside the system. Usually, demand for
end-items or items sold individually, e.g.
spare parts

2
Dependent vs Independent
Demand

12-3
Demand & MRP
• Dependent demand should be handled
differently than independent demand
• Production should be planned taking into
consideration the link between independent
demand and sub-assembly requirements
• Material Requirements Planning (MRP) is the
universally accepted tool for managing
inventories of items with dependent demand

4
MRP Functionality
• Material Requirements Planning: Calculate the
quantity of raw materials and sub-assemblies to
produce the necessary end-item quantities (as
expressed with independent demand)
• Coordination of Purchase and Production
Orders (or Jobs): Determine and coordinate the
start times of all jobs so that end-items are
completed before due dates

5
Time in MRP
• In MRP systems, time is divided in fixed
intervals or it is considered a continuous
variable

• Item requirements within a specific time

interval are usually supposed to apply from
the beginning of the interval

6
 MRP Schematic

Master
Production
Schedule

Inventory Status Product Structure, i.e.,

Delivery data Bill of Material

Material
Requirements
Plan

Purchasing Production
Requirements Requirements
7
MRP Inputs
• Master Production Schedule (MPS)
– Gross Requirements (authorized)
– Production Forecasts
• Item Master File (BOM)
• Lot Sizing Rule
– Period order quantity (POQ) or (FOP)
– Lot for lot (L4L)
– Fixed order quantity (FOQ)
8
MRP Inputs

• Planning Lead Time (Constant)

• Inventory Status (on-hand Inventory)
• Scheduled Receipts
– Identifier (Purchase Order of Job number)
– Due date and release date
– Unit of measure and quantity

9
Overview of MRP
Item Master Data
• Item master data contains:
– Item code
– Item description
– Bill of Materials
– Lot-size
– Planned lead times

11
Bill of Materials
The relation between an end-item and its sub-assemblies
is described in the Bill of Materials (BOM). For
example for end items A and B, the BOM is:

BOM example for

end items A & B

12
Assembly Diagram and
Product Structure Tree

12-13
 Master Production Schedule (MPS)

• MPS contains information about:

– Gross requirements
– Due dates
– Purchase and production orders and scheduled
receipts
– On-hand inventory

14
MPS Example

15
MPS Vs. Forecasts
Forecasting MPS

Unit Product Families Product and sub-assemblies

Time frame Month - Quarter Day, Week, Month

Horizon Years Weeks to months

Updating Month - Quarter Week

Function General Management Planning/Production

16
master production schedule

forecasts

customer Warehouse
orders orders

Quantity
 On-hand Inventory

• Inventory records contain information about:

– Storage location
– Current available quantities
– Raw material inventory status
– “Crib" inventory (pre-processed and stored inventory)
– Sub-assembly inventory status
– Allocation of reserved items to on-going processes

18
 Scheduled Receipts
• A scheduled receipt refers to:
– For purchased items: the issuance of a purchase
order and notification of the supplier
– For produced items: the production routing and the
issuance of a production order
• As soon as the purchase/production order is
issued, the scheduled order issuance is deleted
and a scheduled receipt is generated
19
 Lot-sizing
• The lot sizing rule determines the balance
between two contradicting goals:
– The decrease of on-hand inventory (small lot size)
– The decrease of order intervals (large lot size)
• Lot size rules are used to balance the costs of
high inventory levels and administration costs
induced by too many orders

20
Planning Lead Time
• Planning lead time (PLT) is used to determine
the start time of each operation
• Start time is calculated by subtracting the PLT
from the due date
• If PLTs were accurate, MRP would result in Just-
in-Time production
• Usually, PLTs cannot be known a priori and most
of the times they are purposely elongated

21
 MRP Procedure
• For each BOM level (starting from level 0),
MRP performs:
– Netting: Calculation of net requirements
• Gross requirements are subtracted from on-hand inventory
and scheduled receipts
• Gross requirements for items with LLC=0 derive from
MPS while for items with LLC>0 derive from previously
executed MRP calculations
– Lot sizing: The material requirements are divided in
lots according to the lot-sizing rule used
22
MRP Procedure

– Time phasing: Start times for each job is

calculated by subtracting lead times from due
dates
– BOM explosion: Based on start times, the lot
size and BOM, gross requirements are calculated
for the lower LLC
– Iteration: All steps are repeated until all BOM
levels are processed

23
 MRP Netting

• Netting performs mainly two functions:

– Adjust Scheduled Receipts
– Calculate net requirements
• MRP assumes that all Scheduled Receipts (SR)
will be delivered before any other is placed
• MRP assumes that gross requirements will be first
met by current inventory, then by adjusting SRs
and finally by placing new production/purchase
orders
24
 MRP Netting
• Gross requirements that cannot be met by current inventory and/or
adjusted SRs are net requirements
• If t* is the first time bucket where SRs and current inventory cannot
meet gross requirements, net requirements are calculated as follows:
– Equal to zero for t< t*,
– Equal to ‘negative inventory’ (It) for period t*
– Equal to gross requirements (Dt) after period t*
 0 for t  t *

N t = − I t for t = t *
D for t  t *
 t
• Net requirements are used in the next level of MRP calculations (lot
sizing) 25
 Netting Example
• Gross requirement of 15 units in week 1 can be met by current inventory
and so the SR of 10 units can be delayed
• In week 2, gross requirement (20) cannot be met by inventory (5) - The
SR of week1 is transferred to week1
• The first ‘negative inventory’ is observed in week 6 - Its value represents
the net requirements for this period
• For weeks 6-8, the net requirements are equal to the gross requirements

PART A 1 2 3 4 5 6 7 8
Gross requirements 15 20 50 10 30 30 30 30
Scheduled receipts 10 10 100
Adjusted SRs 20 100
Projected on-hand 20 5 5 55 45 15 -15 — —
Net requirements 15 30 2630
 Lot-sizing
• After net requirements, the production lots must be
determined
• MRP assumes that requirements are deterministic and
non-constant
• Most common lot-sizing policies:
– Lot-for-lot, production lot for a period equals net
requirements for this period
– Fixed order period (FOP) or period order quantity - This
policy aims at the reduction of the number of orders by
combining net requirements of adjacent periods
– Fixed order quantity (FOQ) - This policy aims at the
reduction of the number of orders by ordering a fixed
amount of items, independent of the net requirements
27
 Lot-sizing Example
• Suppose the lot-sizing policy for Item A is fixed order
period (for P=2 periods)
• Net requirements of period 6 and 7 are combined

PART A 1 2 3 4 5 6 7 8
Gross requirements 15 20 50 10 30 30 30 30
Scheduled receipts 10 10 100
Adjusted SRs 20 100
Projected on-hand 20 5 5 55 45 15 -15 — —
Net requirements 15 30 30
Planned order receipts 45 30
28
 Time phasing
• Almost all MRP packages assume that time to perform some
processes is strictly predetermined although some systems allow
planned lead time increase with job size
• MRP treats lead times as properties of the items and sometimes of
the jobs/operations but not of the shop floor
• For item A, assume that the lead time to assemble it is two periods
PART A 1 2 3 4 5 6 7 8
Gross requirements 15 20 50 10 30 30 30 30
Scheduled receipts 10 10 100
Adjusted SRs 20 100
Projected on-hand 20 5 5 55 45 15 -15 — —
Net requirements 15 30 30
Planned order receipts 45 30
Planned order releases 45 30 29
 BOM explosion
• Based on planned order releases for Item A, gross requirements for
items 100 and 200 can be calculated
• As a result, for item 100, 90 units for period 4 and 60 units for period
6 are required. For item 200, 45 units for period 4 and 30 for period
6 are required.
• These requirements must be added to any other requirements already
generated by other higher level items (such as A)
• The next step is to iterate this procedure for items at the lower BOM
levels
PART A 1 2 3 4 5 6 7 8
Planned order releases 45 30
30
 BOM explosion
MPS for item B is presented as well as
current inventory for items B, 100, 300 and
500.
T 1 2 3 4 5 6 7 8
Demand 10 15 10 20 20 15 15 15
PART CURRENT SRS LOT-SIZING
LEAD TIME
NUMBER ON-HAND Due Quantity RULE
B 40 0 FOP, 2 weeks 2 weeks
100 40 0 Lot-for-lot 2 weeks
300 50 2 100 Lot-for-lot 1 week
500 40 0 Lot-for-lot 4 weeks
31
 BOM explosion
• MRP results for item B

PART B 1 2 3 4 5 6 7 8
Gross requirements 10 15 10 20 20 15 15 15
Scheduled receipts
Adjusted SRs
Projected on-hand 40 30 15 5 -15 — — — —
Net requirements 15 20 15 15 15
Planned order receipts 35 30 15
Planned order releases 35 30 15
32
 BOM explosion
• For each unit of B, one unit of 500 is required. Thus,
scheduled order releases for item B are equivalent to
gross requirements for item 500.
• There is no SR
As lead time for item 500 is 4 weeks, there is not
PART 500 enough
1 time
2 to3prepare
4 25 5 units6 before
7 week4.
8 As
a result, a planned order release is generated by
Gross requirements MRP with35the warning
30 that it might
15 be late.
Scheduled receipts
Adjusted SRs
Projected on-hand 40 40 5 5 -25 — — — —
Net requirements 25 15
Planned order receipts 25 15
33
Planned order releases 25* 15
 BOM explosion
• At the lower level (LLC=2) and for item 100, there are two sources of
requirements: 2 units for each A and 1 unit for each 500
• There is no SR

PART 100 1 2 3 4 5 6
Required from A 90 60
Required from 500 25 15
Gross requirements 25 15 90 60
Projected on-hand 40 15 0 0 -90 — —
Net requirements 90 60
Planned order receipts 90 60
Planned order releases 90 60
34
 BOM explosion
• The only item with LLC=3 is item 300. Its requirements are generated by
items B and 100.
• There is a scheduled receipt of 100 units on week2. No adjusting is needed
since this SR may cover the requirements for this period.

PART 300 1 2 3 4 5 6 7 8
Required from B 35 30 15
Required from 100 90 60
Gross requirements 125 90 15
Scheduled receipts 100
Adjusted SRs 100
Projected on-hand 50 50 25 25 -65 — — — —
Net requirements 65 15
Planned order receipts 65 15
35
Planned order releases 65 15
 BOM explosion – Summary
Old Due Date or New Due
Transaction Part Number Quantity Notice
Release Date Date
Change notice A 1 2 10 Defer
Change notice Α 4 3 100 Expedite
Planned order release A 4 6 45 OK
Planned order release A 6 8 30 OK
Planned order release B 2 4 35 OK
Planned order release B 4 6 30 OK
Planned order release B 6 8 15 OK
Planned order release 100 2 4 90 OK
Planned order release 100 4 6 60 OK
Planned order release 300 3 4 65 OK
Planned order release 300 5 6 15 OK
Planned order release 500 1 4 25 Late
Planned order release 500 2 6 15 36 OK
MRP Outputs

• Planned Order Release

– Part Number
– Number of Units
– Due date
• Change Notices
– Expediting (move earlier)
– Deferring (making due date later)
37
MRP Outputs
• Exception Reports, i.e., discrepancies
between what is expected and what
will transpire:
• Job count differences
• Inventory discrepancies
• Imminently tardy jobs

38
MRP Problems
• Capacity Infeasibility
– Assumption = production line with fixed
lead time
– Lead time does not depend upon WIP
– Result = infinite capacity
– Problem when production levels near
capacity
39
MRP Problems
• Long Planned Lead Times
– Pressure to increase planned lead times
– Penalties for late jobs assumed greater
than excess inventories
– WIP with accumulate & lead times will
further increase
– Irresponsive approach by production
managers
40
MRP Problems
• Constant Lead Times
– Pessimistic values (inflation) to “secure”
due-dates
• System Nervousness
– Small change in MPS leads to large
change in Planned Releases
– Strange effects, e.g.: Decrease in demand
may result in a feasible MRP Plan to
become infeasible!!!
41
MRP Problems
• Nervousness example
– Two parts, A & B
– Part A:
• Lead Time of two weeks
• Fixed Order Period (five weeks)
– Part B (1 required for each Part A):
• Lead Time of four weeks
• Fixed Order Period (five weeks)
42
 MRP Problems
• Nervousness example (continued)
Table 1: MRP Calculations for Item A Before Change in Demand Table 3: MRP Calculations for Item A After Change in Demand

Week Week
Item A 1 2 3 4 5 6 7 8 Item A 1 2 3 4 5 6 7 8
Gross Requirements 2 24 3 5 1 3 4 50 Gross Requirements 2 23 3 5 1 3 4 50
Scheduled Receipts Scheduled Receipts
Projected On-hand Inventory 28 26 2 -1 0 0 0 0 0 Projected On-hand Inventory 28 26 3 0 -5
Net Requirements 1 5 1 3 4 50 Net Requirements 5 1 3 4 50
Planned Order Receipts 14 Planned Order Receipts 63
Planned Order Releases 14 50 Planned Order Releases 63

Table 2: MRP Calculations for Item B Before Change in Demand Table 4: MRP Calculations for Item B After Change in Demand

Week Week
Item B 1 2 3 4 5 6 7 8 Item B 1 2 3 4 5 6 7 8
Gross Requirements 14 50 Gross Requirements 63
Scheduled Receipts 14 Scheduled Receipts 14
Projected On-hand Inventory 2 2 2 2 2 2 -48 0 0 Projected On-hand Inventory 2 16 -47
Net Requirements 48 Net Requirements 47
Planned Order Receipts 48 Planned Order Receipts 47
Planned Order Releases 48 Planned Order Releases 47*
*Indicates a late start
43
MRP Problems
• Nervousness can be reduced by:
– Different lot-sizing rules for different
BOM levels
• FOQ for end items
• FOQ or L4L for intermediate BOM
levels
• FOP for the lowest levels
44
MRP Problems
• Nervousness can be reduced by:
– Proper use of lot-sizing rules
• E.g., in L4L magnitude of change no larger than MPS
– Freezing the early part of the MPS (Frozen
Zones)
– Time Fences (gradual freezing)
– Firm Planned Orders (not allowed to change
early PO)
45
 MRP Problems
• Revisit the example – nervousness
eliminated!
Table 1: MRP Calculations for Item A Before Change in Demand Table 5: MRP Calculations for Item A After Change for Firm Planned Orders

Week Week
Item A 1 2 3 4 5 6 7 8 Item A 1 2 3 4 5 6 7 8
Gross Requirements 2 24 3 5 1 3 4 50 Gross Requirements 2 23 3 5 1 3 4 50
Scheduled Receipts Scheduled Receipts 14
Projected On-hand Inventory 28 26 2 -1 0 0 0 0 0 Projected On-hand Inventory 28 26 3 14 9 8 5 1 -49
Net Requirements 1 5 1 3 4 50 Net Requirements 49
Planned Order Receipts 14 Planned Order Receipts [14] 49
Planned Order Releases 14 50 Planned Order Releases [14] 49

Table 2: MRP Calculations for Item B Before Change in Demand Table 6: MRP Calculations for Item B After Change for Firm Planned Orders

Week Week
Item B 1 2 3 4 5 6 7 8 Item B 1 2 3 4 5 6 7 8
Gross Requirements 14 50 Gross Requirements 14 49
Scheduled Receipts 14 Scheduled Receipts 14
Projected On-hand Inventory 2 2 2 2 2 2 -48 0 0 Projected On-hand Inventory 2 2 2 2 2 2 -47
Net Requirements 48 Net Requirements 47
Planned Order Receipts 48 Planned Order Receipts 47
Planned Order Releases 48 Planned Order Releases 47
46
 MRP ΙΙ
• Infeasible plans, long planned lead times, system
nervousness jeopardize the successful execution of
MRP
• In order to confront these problems, additional
functionalities have been added to the main MRP
procedure
• These functionalities were implemented in a wider
information system known as Manufacturing Resource
Planning or MRP II
47
MRP II
• Manufacturing Resource Planning
• Additional Functions:
– Demand Management
– Forecasting
– Rough-cut Capacity Planning
– Capacity Requirements Planning
– Dispatching
– Input and Output Control
48
MRP II Long-term forecast

Aggregate Long Range

Resource
production
Planning Planning
planning

Rough-cut Master Production Firm Orders Short-term forecast

Capacity Planning Scheduling
(RCCP) (MPS)

Demand
Bill-of-materials
Material Management
(BOM)
Requirements
Planning (MRP) Intermediate Range
On-hand inventory Planning
Scheduled
receipts Capacity
Job pool Requirements
Planning (CRP)

Routing data
Job Release

Short-term
Control
Job Dispatching I/O control 49
MRP ΙΙ hierarchy
Long term planning
• Long term planning includes:
– resource planning
– aggregate planning
– forecasting
• The planning horizon length for long term planning is
usually from six months to five years
• The re-planning interval usually varies from once a
month to once every six months
• Detail level is low. Usually, long term planning deals
with families of products 50
 MRP ΙΙ hierarchy
Forecasting
• The forecasting functionality aims at future demand
prediction
• Long term forecasts are very important since they
determine availability, general production planning
and staff requirements
• Short-term forecasting transforms a long term
forecast for a family of products to short-term
forecast for individual products
• Both functions belong to the demand management
module at the medium term planning level 51
 MRP ΙΙ hierarchy
Resource planning

• Resource planning is the procedure during which

capacity requirements are calculated during medium
term planning
• Decisions like infrastructure expansion or the purchase
of new facilities belong to resource planning
• Future resource availability can be forecasted through
resource planning
• This data is then entered to the aggregate planning level

52
 MRP ΙΙ hierarchy
Aggregate planning
• Aggregate planning is used to determine:
– Production levels
– Staffing level (human resources)
– Inventory levels
– Overtime
– Anything concerning medium term production planning
• Detail level is usually one month and aggregate planning
deals with families of products
• Optimization methods like linear programming are
frequently used to aid aggregate planning
53
Medium term planning

• Main functions of production planning

• Includes:
– demand management
– rough-cut capacity planning
– master production scheduling
– material requirements planning
– capacity requirements planning

54
Medium term planning
Demand management

• Demand management is about ‘translating’

aggregate long term forecasts in detailed forecasts by
also taking into account individual customer orders
• Based on this function, a set of real customer orders
and a forecast of anticipated orders are created
• As time goes by, anticipated orders must be replaced
by actual customer orders

55
 Medium term planning
Available to promise (ATP)
• Demand management is finalized with a technique known as
Available to Promise-ATP
• This function allows the planner to know which MPS orders are
already linked to customer orders and which are available for the
fulfillment of new customer needs
• If the ATP function is coupled with a feasible MPS (in terms of
resource availability) the realistic due date assignment is simplified
• If more than anticipated orders are placed so as lead times become
very large, then additional capacity (e.g. overtime) might be
required
• If incoming orders are less than anticipated, sales might want to
offer discounts or some other motivations to stimulate demand
• In each case, the forecast and most likely, the aggregate plan must
be revised 56
Medium term planning
Production planning

• Master production schedule uses forecasts

along with confirmed production orders from
the demand management module and by using
the total resource availability limits, develops a
plan at the highest level of planning detail
• Consequently, master production schedule
contains the quantities of orders for each time
bucket for each component with independent
demand, for each planning date
57
 Medium term planning
Production planning
• For most enterprises, order quantities are given in the
end-item level. However, for some cases it is more
practical to group end-items to product families.
• Such an example is automotive industries where the
exact type and specification of a vehicle are
determined in the last stage, during its final assembly.
• In these cases, a final assembly plan determines
when end-items are produced while MPS is used to
determine the models to be produced.
• A basic input for this type of planning is item’s
super-bill which is a description for the various
options of each model. 58
 Medium term planning
Rough-cut capacity planning
• Rough-cut capacity planning (RCCP) is used to
provide a fast estimation of whether critical
production resources are adequate for a given MPS
• Generally, RCCP uses a bill of resources for each
MPS item
• Bill of resources is a database of the critical resource
requirements for producing one unit of an end-item
• Apart from the end-item itself, resource requirements
include all requirements for lower level items in order
to produce one end-product
59
 RCCP Example
• For example, let item A be produced by using A1 and A2. Product A
requires 1h in resource 21 while A1 and A2 require 0.5h and 1h
respectively
• As a result, the bill of resources of item A would indicate that item A
requires 2.5h at resource 21 in order to be produced
• Also let item B that requires 2h at resource 21 in order to be produced
(with no lower level items)

PROCESS CENTRE PART A PART B

21 2.5 2.0
WEEK 1 2 3 4 5 6 7 8
Part A 10 10 10 20 20 20 20 10
Part B 5 25 5 15 10 25 15 10
60
 RCCP Run
WEEK 1 2 3 4 5 6 7 8
Part A (hour) 25 25 25 50 50 50 50 25
Part B (hour) 10 50 10 30 20 50 30 10
Total (hour) 35 75 35 80 70 100 8O 35
Available 65 65 65 65 65 65 65 65
Over(+)/under(-) 30 -10 30 -15 -5 -35 -15 30

• After running RCCP, it is obvious that in some periods, resource

availability is inadequate while in others it is more than enough
• It depends on the production manager to act accordingly aiming at
the reduction of this fluctuation; the choices are:
– Adjust MPS by changing due dates
– Adjust resource availability by adding resources or by using overtime or
some sort of outsourcing for various stages of the production process 61
 Medium term planning
RCCP
• RCCP does not perform offsetting. As a result, periods
used must be long enough so as end-items can be
produced (from raw materials to end product) in one
single period.
• Moreover, RCCP supposes that requirements can be
performed without taking into account actual shop floor
status. Hence, what can be really produced is frequently
overestimated.
• RCCP does not perform netting. While this is acceptable
for end items, it creates many problems when there are
many common items among end products and work-in-
progress level is high. 62
 Medium term planning
CRP
• Capacity Requirements Planning (CRP) is a more detailed (in comparison to
RCCP) check of whether resources are adequate for a given production
schedule.
• Necessary CRP inputs include:
– All planned order releases
– Current work-in-progress
– Routing information
– Lead times and capacity for all resources
• CRP does not optimize resource allocation but performs a process also known
as infinite forward loading:
– It forecasts finish times of each job for all resources by using predetermined
constant lead times.
– It then calculates the forecasted load of each resource for all periods
– All loads are then compared to actual resource availability
– Overloads are not confronted. The system just informs the production manager for
the potential overload.
63
 CRP Example
• Suppose a resource with a lead time of three days and
capacity of 400 units per day.
• At the beginning of the current day, 400 units were
just released, 500 units had been released for one day
and 300 units had been released for two days.
• The planned order releases for the next five days are:

DAY 1 2 3 4 5
Planned order releases 300 350 400 350 300

64
 CRP Example

• By using the three day lead time, we can calculate when items
will leave this specific resource
• If more than 400 units are calculated to leave the resource, then
the resource will be considered overloaded for this specific
period.
• In the resource utilization graph:
– During the first day, total load is 300 (300 units already entered into the
resource)
– During the second day, the load is 500 indicating an overload. This load
comes from orders already entered into the system
65
 CRP Drawbacks
• CRP assumes that processing time is irrelevant to the
resource load even if the latter one is above capacity. As a
result, calculating load after an overloaded period might not
be accurate.
• Typically, CRP does not forecast accurately the load in
periods close to the current date.
• Another CRP drawback is that it just indicates overloads
without proposing a solution to this problem
• A major inconsistency of CRP is that, just like MRP,
supposes infinite resource availability. This assumption
stems from the ‘constant lead time’ assumption which is not
linked to resource load.
66
 Medium term planning
Material Requirements Planning

• Material requirements planning (MRP)

functionality is exactly the same with the typical
MRP.
• As already mentioned, MRP creates a job pool which
is consists of planned order releases.
• Finally, these requirements are released to the shop
floor through a process called job release.

67
 Short term planning

• Plans that were processed during the long and

medium term planning functions, are then executed
by short term control functions.
• These function are:
– Job release
– job dispatching
– input/output production control

68
Short term planning
Job Release

• The job release function converts the planned order

release to schedule receipts
• One of job release’s most important functions is
allocation
• When some products are composed of common
materials, there might be a conflict in case of
inadequate material supply
• Job release might rationally organize such conflicts

69
Short term planning
Job Release
• For example, suppose there are two planned order
releases (POR) that both require item A and there is not
enough inventory of item A for both of them
• Moreover, the first POR requires item B of which there
is enough inventory while the other POR requires item C
the inventory of which is inadequate
• The Job release function will proceed with the release of
the first POR since there is enough inventory for all of
its stages
• A shortage notification would be created for the second
POR which would remain in the job pool until sufficient
inventory existed for all production stages
70
Short term planning
• As soon as a production or purchase order is released,
the prompt completion must be monitored. Moreover,
the final quantity and quality must comply with initial
specifications.
• Purchase orders can be tracked. Production orders are
controlled through two functions:
– shop floor control (SFC) with two sub-functions:
• job dispatching
• input/output control
– production activity control (PAC)
71
Short term planning
Job Dispatching

• Job Dispatching deals with the rules that

determine the operation sequence in a
resource. These rules should:
– Respect due dates
– Keep resource utilization high
– Reduce production times

72
 Job Dispatching Rules
• One of the simplest rules is also known as the shortest
process time (SPT) rule. Based on SPT, operations are
ordered in such a way that orders with shortest processing
are executed first.
– SPT use decreases mean production times and increases
resource utilization - Mean due date is also very good
– SPT does not perform very well when there are operations
with long processing times
• An alternative to SPT is SPTx where the next operation to be
performed is the one with the shortest processing time unless
an operation has been queued for more than x time units.
73
 Job Dispatching Rules

• If all jobs have almost the same size and routings are
consistent, a good dispatching rule is the earliest due
date (EDD) rule. According to this rule, the operation
which is closer to its due date is performed first.
• EDD performs well under the assumptions mentioned
above but generally it does not perform better than SPT.
• The least slack rule: The slack of an operation is
defined as its due date minus the remaining processing
time (including setups). The highest priority operation is
the one with the least slack.

74
 Job Dispatching Rules
• The Least slack per remaining operation rule:
This rule is similar to the least slack rule but the
slack is divided with the number of jobs that are not
scheduled yet. The smaller this ratio is, the higher
the priority of the job.
• The Critical ratio (Cr) rule: According to this rule,
operations are scheduled based on the ratio (due
date – current date)/processing time remaining. If:
– Cr >1, the job will most likely finish early.
– If Cr <1, the job might finish late
– If Cr <0, the job is already late
75
 Short term planning
Input/Output Control
• Input/Output production control was introduced at first as a
method to keep lead times under control. I/O control
functions in the following way:
– WIP level is checked at all resources
– If WIP is above a predefined level, the amount of released
orders is too high and must be reduced
– If WIP is below a predefined level, the amount of released
orders is too low and must be increased
– If WIP is in between the low and high level thresholds, the
amount of released orders is acceptable
• Reductions and increases of released orders must be
76
performed by altering the MPS
 Short term planning
Input/Output Control
• I/O control is an efficient way to control job release in
respect to capacity. However, after WIP levels have
increased, the system is most likely out of control.
• This is why pull systems often perform better than push
systems like MRP, MRP II and ERP.
– While push systems control releases (through MPS) by
measuring WIP levels, pull systems measure WIP and
production activity on a more frequent basis.
– As a result, pull systems do not allow WIP levels to
become exceedingly high and indicate potential problems
fairly quick 77