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Heizer om10 ch14-mrp

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Rozaimi Mohd Saad
Rozaimi Mohd Saad

The document outlines key concepts related to material requirements planning (MRP) and enterprise resource planning (ERP). It discusses dependent demand and inventory models, the importance of accurate records and bills of materials in MRP. The summary also explains how MRP determines gross requirements by working through a bill of materials level-by-level using lead times to calculate order releases for components. The goal of MRP and ERP systems is to meet production schedules in a cost-effective manner through integrated planning.

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10/16/2010 Material Requirements Outline 14 Planning (MRP) and ERP Global Company Profile: Wheeled Coach Dependent Demand Dependent Inventory Model PowerPoint presentation to accompany Requirements Heizer and Render Operations Management, 10e Master Production Schedule Principles of Operations Management, 8e Bills of Material PowerPoint slides by Jeff Heyl Accurate Inventory Records Purchase Orders Outstanding Lead Times for Components © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 2 Outline – Continued Outline – Continued MRP Structure Extensions of MRP Material Requirements Planning II MRP Management (MRP II) MRP Dynamics Closed-Loop Closed Loop MRP MRP and JIT Capacity Planning Lot-Sizing Techniques MRP In Services Distribution Resource Planning (DRP) © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 4 Outline – Continued Learning Objectives When you complete this chapter you Enterprise Resource Planning (ERP) should be able to: Advantages and Disadvantages of ERP Systems 1. Develop a product structure ERP in the Service Sector 2. Build a gross requirements plan 3. Build a net requirements plan 4. Determine lot sizes for lot-for-lot, EOQ, and PPB © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 6 1
10/16/2010 Learning Objectives Wheeled Coach When you complete this chapter you should be able to: Largest manufacturer of ambulances in the world 5. Describe MRP II p International competitor 6. Describe closed-loop MRP 12 major ambulance designs 7. Describe ERP 18,000 different inventory items 6,000 manufactured parts 12,000 purchased parts © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 7 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 8 Wheeled Coach Dependent Demand Four Key Tasks For any product for which a schedule Material plan must meet both the can be established, dependent requirements of the master schedule q demand techniques should be used and the capabilities of the production facility Plan must be executed as designed Minimize inventory investment Maintain excellent record integrity © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 9 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 10 Dependent Demand Dependent Demand The demand for one item is related Benefits of MRP to the demand for another item 1. Better response to customer Given a quantity for the end item, orders the demand for all parts and 2. Faster response to market changes components can be calculated 3. Improved utilization of facilities In general, used whenever a and labor schedule can be established for an 4. Reduced inventory levels item MRP is the common technique © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 11 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 12 2
10/16/2010 Dependent Demand Master Production Schedule (MPS) Effective use of dependent demand Specifies what is to be made and when inventory models requires the Must be in accordance with the aggregate following production plan 1. Master 1 M t production schedule d ti h d l Inputs from financial plans customer plans, demand, engineering, supplier performance 2. Specifications or bill of material As the process moves from planning to 3. Inventory availability execution, each step must be tested for 4. Purchase orders outstanding feasibility 5. Lead times The MPS is the result of the production planning process © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 13 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 14 Master Production Schedule The Planning Process (MPS) Production Marketing Finance Capacity Customer Cash flow MPS is established in terms of specific Inventory demand products Procurement Human resources Schedule must be followed for a Supplier performance Manpower planning reasonable length of time The MPS is quite often fixed or frozen in Management Aggregate Engineering Return on Design the near term part of the plan investment Capital production plan completion The MPS is a rolling schedule Change production The MPS is a statement of what is to be Master production schedule plan? produced, not a forecast of demand Figure 14.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 15 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 16 The Planning Process Aggregate Master production Production Plan schedule Change master Change production Months January February requirements? Material schedule? requirements plan Aggregate Production Plan 1,500 1,200 (Shows the total Change quantity of amplifiers) capacity? Capacity p y requirements plan Weeks 1 2 3 4 5 6 7 8 Master Production Schedule No Is capacity Is execution (Shows the specific type and Realistic? plan being meeting the quantity of amplifier to be met? plan? Yes produced Execute capacity 240-watt amplifier 100 100 100 100 plans 150-watt amplifier 500 500 450 450 75-watt amplifier 300 100 Execute material plans Figure 14.2 Figure 14.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 17 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 18 3
10/16/2010 Master Production Schedule Focus for Different (MPS) Process Strategies Make to Order Assemble to Order Stock to Forecast or Forecast Can be expressed in any of the (Process Focus) (Repetitive) (Product Focus) Number of following terms: inputs Schedule orders 1. 1 A customer order in a job shop (make- Typical focus of the to-order) company master production Schedule modules schedule 2. Modules in a repetitive (assemble-to- order or forecast) company Number of end items Schedule finished product 3. An end item in a continuous (stock-to- Examples: Print shop Motorcycles Steel, Beer, Bread forecast) company Machine shop Autos, TVs Lightbulbs Fine-dining restaurant Fast-food restaurant Paper Figure 14.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 19 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 20 MPS Examples Bills of Material For Nancy’s Specialty Foods List of components, ingredients, and materials needed to make Gross Requirements for Crabmeat Quiche product Day 6 7 8 9 10 11 12 13 14 and so on Amount 50 100 47 60 110 75 Provides product structure P id d t t t Gross Requirements for Spinach Quiche Items above given level are called Day 7 8 9 10 11 12 13 14 15 16 and so on parents Amount 100 200 150 60 75 100 Items below given level are called Table 14.1 children © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 21 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 22 BOM Example BOM Example Level Product structure for “Awesome” (A) Level Product structure for “Awesome” (A) 0 A 0 A Part B: 2 x number of As = (2)(50) =Std. 12” Speaker kit w/ 100 1 B(2) Std. 12” Speaker kit C(3) Std. 12” Speaker kit w/ amp-booster 1 B(2) Std. 12” 3 x number of As = Part C: Speaker kit C(3) (3)(50) =amp-booster 150 Part D: 2 x number of Bs + 2 x number of Fs = (2)(100) + (2)(300) = 800 2 E(2) E(2) F(2) Std. 12” Speaker 2 E Part E:(2) 2 x number of Bs E(2) F(2) Std. 12” Speaker booster assembly booster assembly + 2 x number of Cs = (2)(100) + (2)(150) = 500 Packing box and Part F: 2 x Packing box and = number of Cs (2)(150) = 300 3 D(2) installation kit of wire, G(1) D(2) 3 D(2) G(1) D(2) bolts, and screws Part G: 1installation kit ofFs = number of wire, xbolts, and screws (1)(300) = 300 Amp-booster Amp-booster 12” Speaker 12” Speaker 12” Speaker 12” Speaker © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 23 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 24 4
10/16/2010 Bills of Material Bills of Material Planning Bills Modular Bills Also called “pseudo” or super bills Modules are not final products but components that can be assembled Created to assign an artificial into i t multiple end items lti l d it parent to the BOM Can significantly simplify planning Used to group subassemblies to and scheduling reduce the number of items planned and scheduled Used to create standard “kits” for production © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 25 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 26 Bills of Material Accurate Records Phantom Bills Accurate inventory records are Describe subassemblies that exist absolutely required for MRP (or only temporarily any dependent demand system) to Are part of another assembly and operate correctly p y never go into inventory Generally MRP systems require Low-Level Coding more than 99% accuracy Item is coded at the lowest level at Outstanding purchase orders must which it occurs accurately reflect quantities and BOMs are processed one level at a time scheduled receipts © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 27 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 28 Time- Time-Phased Product Lead Times Structure Must have D and E Start production of D completed here so The time required to purchase, production can begin on B produce, or assemble an item 1 week 2 weeks to D produce For production – the sum of the B 2 weeks order, wait, move, setup, store, order wait move setup store E and run times A 2 weeks 1 week For purchased items – the time 2 weeks E 1 week between the recognition of a need G C 3 weeks and the availability of the item for F 1 week production D | | | | | | | | 1 2 3 4 5 6 7 8 Figure 14.4 Time in weeks © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 29 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 30 5
10/16/2010 MRP Structure Determining Gross Data Files Output Reports Requirements MRP by BOM Master period report production schedule Starts with a production schedule for the MRP by date report end item – 50 units of Item A in week 8 Lead times Using the lead time for the item, g , (Item master file) Planned order report determine the week in which the order Inventory data should be released – a 1 week lead time Purchase advice Material requirement means the order for 50 units should be planning programs released in week 7 (computer and Exception reports Purchasing data software) Order early or late or not needed This step is often called “lead time Order quantity too offset” or “time phasing” small or too large Figure 14.5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 31 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 32 Determining Gross Determining Gross Requirements Requirements From the BOM, every Item A requires 2 The process continues through the entire Item Bs – 100 Item Bs are required in BOM one level at a time – often called week 7 to satisfy the order release for “explosion” Item A By processing the BOM by level, items The lead time for the Item B is 2 weeks – with multiple parents are only processed release an order for 100 units of Item B in once, saving time and resources and week 5 reducing confusion The timing and quantity for component Low-level coding ensures that each item requirements are determined by the order appears at only one level in the BOM release of the parent(s) © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 33 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 34 Gross Requirements Plan Net Requirements Plan Week 1 2 3 4 5 6 7 8 Lead Time A. Required date 50 Order release date 50 1 week B. Required date 100 Order release date 100 2 weeks C. Required date 150 Order release date 150 1 week E. Required date 200 300 Order release date 200 300 2 weeks F. Required date 300 Order release date 300 3 weeks D. Required date 600 200 Order release date 600 200 1 week G. Required date 300 Order release date 300 2 weeks Table 14.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 35 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 36 6
10/16/2010 Net Requirements Plan Determining Net Requirements Starts with a production schedule for the end item – 50 units of Item A in week 8 Because there are 10 Item As on hand, only 40 are actually required – (net requirement) = (gross requirement - on- hand inventory) The planned order receipt for Item A in week 8 is 40 units – 40 = 50 - 10 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 37 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 38 Determining Net Determining Net Requirements Requirements Following the lead time offset procedure, A planned order receipt of 65 units in the planned order release for Item A is week 7 generates a planned order release now 40 units in week 7 of 65 units in week 5 The gross requirement for Item B is now The on-hand inventory record for Item B on hand 80 units in week 7 is updated to reflect the use of the 15 There are 15 units of Item B on hand, so items in inventory and shows no on-hand the net requirement is 65 units in week 7 inventory in week 8 A planned order receipt of 65 units in This is referred to as the Gross-to-Net week 7 generates a planned order release calculation and is the third basic function of 65 units in week 5 of the MRP process © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 39 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 40 Gross Requirements Net Requirements Plan Schedule Figure 14.6 A S The logic of net requirements B C B C Master schedule Gross Allocations requirements + Lead time = 4 for A Lead time = 6 for S for B Master schedule for A Master schedule for S sold directly Periods 5 6 7 8 9 10 11 8 9 10 11 12 13 1 2 3 40 50 15 40 20 30 10 10 Total requirements On Scheduled Net – hand + receipts = requirements Periods 1 2 3 4 5 6 7 8 Therefore, these Gross requirements: B 10 40+10 =50 40 50 20 15+30 =45 are the gross Available inventory requirements for B © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 41 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 42 7
10/16/2010 MRP Planning Sheet Safety Stock BOMs, inventory records, purchase and production quantities may not be perfect Consideration of safety stock may be p prudent Should be minimized and ultimately eliminated Typically built into projected on-hand inventory Figure 14.7 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 43 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 44 MRP Management MRP and JIT MRP is a dynamic system MRP is a planning system that Facilitates replanning when changes occur does not do detailed scheduling Regenerating Net change MRP requires fixed lead times which might actually vary with System nervousness can result from too many changes batch size Time fences put limits on replanning JIT excels at rapidly moving small batches of material through the Pegging links each item to its parent allowing effective analysis of changes system © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 45 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 46 Finite Capacity Scheduling Small Bucket Approach 1. MRP “buckets” are reduced to daily or hourly MRP systems do not consider capacity during normal planning 2. Planned receipts are used internally to sequence production cycles 3. Inventory is moved through the plant on a JIT Finite capacity scheduling (FCS) basis recognizes actual capacity limits 4. Completed products are moved to finished goods inventory which reduces required By merging MRP and FCS, a finite quantities for subsequent planned orders schedule is created with feasible 5. Back flushing based on the BOM is used to capacities which facilitates rapid deduct inventory that was used in production material movement © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 47 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 48 8
10/16/2010 Balanced Flow Supermarket Used in repetitive operations Items used by many products are MRP plans are held in a common area often called executed using a supermarket JIT techniques Items are withdrawn as needed based on “pull” principles Inventory is maintained using JIT systems and procedures Flows are carefully balanced with Common items are not planned by small lot sizes the MRP system © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 49 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 50 Lot- Lot-Sizing Techniques Lot- Lot-Sizing Techniques Lot-for-lot techniques order just what Part Period Balancing (PPB) looks at is required for production based on future orders to determine most net requirements economic lot size May not always be feasible The Wagner-Whitin algorithm is a If setup costs are high, lot-for-lot can complex dynamic programming be expensive technique Economic order quantity (EOQ) Assumes a finite time horizon EOQ expects a known constant Effective, but computationally demand and MRP systems often deal burdensome with unknown and variable demand © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 51 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 52 Lot-for- Lot-for-Lot Example Lot-for- Lot-for-Lot Example No on-hand inventory is carried through the system 1 2 3 4 5 6 7 8 9 10 Total holding cost = $0 3 4 5 6 7 8 9 10 1 2 Gross Gross requirements 35 30 40 0 10 40 30 0 30 55 There are seven 35 30 for this 10 40 this plan requirements setups 40 0 item in 30 0 30 55 Scheduled Total ordering cost = 7 x $100 = $700 Scheduled receipts receipts Projected on Projected on 35 35 0 0 0 0 0 0 0 0 0 35 35 0 0 0 0 0 0 0 0 0 hand hand Net Net 0 30 40 0 10 40 30 0 30 55 0 30 40 0 10 40 30 0 30 55 requirements requirements Planned order Planned order 30 40 10 40 30 30 55 30 40 10 40 30 30 55 receipts receipts Planned order Planned order 30 40 10 40 30 30 55 30 40 10 40 30 30 55 releases releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 53 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 54 9
10/16/2010 EOQ Lot Size Example EOQ Lot Size Example Annual demand = 1,404 Total cost = setup cost + holding cost 1 2 3 4 5 6 7 8 9 10 Total cost = (1,404/73) x $1004 + (73/2) x ($1 x852 weeks) 1 2 3 5 6 7 9 10 Gross requirements 35 30 40 0 10 40 30 0 30 55 Total cost = $3,798 30 40 0 10 40 30 0 30 55 Gross requirements 35 Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) = Scheduled Scheduled receipts $730 receipts Projected on Projected on 35 35 0 43 3 3 66 26 69 69 39 35 35 0 0 0 0 0 0 0 0 0 hand hand Net Net 0 30 0 0 7 0 4 0 0 16 0 30 0 0 7 0 4 0 0 16 requirements requirements Planned order Planned order 73 73 73 73 73 73 73 73 receipts receipts Planned order Planned order 73 73 73 73 73 73 73 73 releases releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Average weekly gross requirements = 27; EOQ = 73 units Average weekly gross requirements = 27; EOQ = 73 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 55 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 56 PPB Example Periods PPB Example Trial Lot Size (cumulative net Costs Combined requirements) Part Periods Setup Holding Total 2 30 0 1 2 3 4 5 6 7 8 9 10 2, 3 70 1 2 40 = 40 x41 5 3 6 7 8 9 10 Gross 2, 3, 4 Gross 70 40 35 30 40 0 10 40 30 0 30 55 35 30 40 0 10 40 30 0 30 55 requirements requirements 2, 3, 4, 5 80 70 = 40 x 1 + 10 x 3 100 + 70 = 170 Scheduled Scheduled 6 2, 3, 4, 5, 120 230 = 40 x 1 + 10 x 3 receipts receipts + 40 x 4 Projected on Projected on e periods Co b Combine pe ods 2 - 5 as t s results in t e Part Period this esu ts the a t e od 35 35 hand hand closest to the EPP Net 6 Net 40 0 requirements requirements 6, 7 70 30 = 30 x 1 Planned order 6, 7, 8 Planned order 70 30 = 30 x 1 + 0 x 2 receipts receipts 9 6, 7, 8, 100 120 = 30 x 1 + 30 x 3 100 + 120 = 220 Planned order Planned order Combine periods 6 - 9 as this results in the Part Period releases releases closest to the EPP 10 55 0 100 + 0 = 100 Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = 300 + 190 = 490 Total cost $100; EPP = 100 units EPP = 100 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 57 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 58 PPB Example Lot- Lot-Sizing Summary 1 2 3 4 5 6 7 8 9 10 For these three examples Gross 35 30 40 0 10 40 30 0 30 55 requirements Scheduled receipts Lot-for-lot $700 Projected on hand 35 35 0 50 10 10 0 60 30 30 0 EOQ $730 Net requirements 0 30 0 0 0 40 0 0 0 55 PPB $490 Planned order 80 100 55 receipts Planned order 80 100 55 releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 59 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 60 10
10/16/2010 Lot- Lot-Sizing Summary Lot- Lot-Sizing Summary In theory, lot sizes should be recomputed Lot sizes can be modified to allow for whenever there is a lot size or order scrap, process constraints, and quantity change purchase lots In practice, this results in system Use lot-sizing with care as it can cause nervousness and instability considerable distortion of requirements Lot-for-lot should at lower levels of the BOM be used when When setup costs are significant and low-cost JIT can demand is reasonably smooth, PPB, be achieved Wagner-Whitin, or EOQ should give reasonable results © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 61 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 62 Extensions of MRP Material Requirements Planning II MRP II Requirement data can be enriched by Closed-Loop MRP other resources MRP system provides input to the capacity Generally called MRP II or Material plan, MPS, and production planning process Resource Planning Capacity Planning Outputs include MRP system generates a load report which Scrap details capacity requirements Packaging waste This is used to drive the capacity planning process Carbon emissions Changes pass back through the MRP system Data used by purchasing, production for rescheduling scheduling, capacity planning, inventory © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 63 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 64 Material Resource Planning Closed- Closed-Loop MRP System Weeks LT 5 6 7 8 Computer 1 100 Aggregate Production Plan Labor Hrs: .2 each 20 OK? Machine Hrs: .2 each 20 NO Priority Management Capacity Management Scrap: 1 ounce fiberglass each 6.25 lbs Payables: $0 each $0 Develop Master Production Evaluate Resource Availability Schedule (Rough Cut) PC Board (1 each) 2 100 OK? NO OK? YES Planning Labor Hrs: .15 each 15 Machine Hrs: .1 each 10 Prepare Materials Determine Capacity Availability Requirements Pan Scrap: .5 ounces copper each 3.125 lb OK? YES Payables: raw material at $5 each $500 Execution Processor (5 each) 4 500 Detailed Production Implement Input/Output Control (in repetitive Activity Control systems JIT Labor Hrs: .2 each 100 (Shop Scheduling/Dispatching) techniques Machine Hrs: .2 each 100 are used) Scrap: .01 ounces of acid waste each 0.3125 lb Payables: processors at $10 each $5,000 Figure 14.8 Table 14.4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 65 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 66 11
Heizer om10 ch14-mrp
Heizer om10 ch14-mrp
Heizer om10 ch14-mrp
Heizer om10 ch14-mrp

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Heizer om10 ch14-mrp

  • 1. 10/16/2010 Material Requirements Outline 14 Planning (MRP) and ERP Global Company Profile: Wheeled Coach Dependent Demand Dependent Inventory Model PowerPoint presentation to accompany Requirements Heizer and Render Operations Management, 10e Master Production Schedule Principles of Operations Management, 8e Bills of Material PowerPoint slides by Jeff Heyl Accurate Inventory Records Purchase Orders Outstanding Lead Times for Components © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 2 Outline – Continued Outline – Continued MRP Structure Extensions of MRP Material Requirements Planning II MRP Management (MRP II) MRP Dynamics Closed-Loop Closed Loop MRP MRP and JIT Capacity Planning Lot-Sizing Techniques MRP In Services Distribution Resource Planning (DRP) © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 4 Outline – Continued Learning Objectives When you complete this chapter you Enterprise Resource Planning (ERP) should be able to: Advantages and Disadvantages of ERP Systems 1. Develop a product structure ERP in the Service Sector 2. Build a gross requirements plan 3. Build a net requirements plan 4. Determine lot sizes for lot-for-lot, EOQ, and PPB © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 6 1
  • 2. 10/16/2010 Learning Objectives Wheeled Coach When you complete this chapter you should be able to: Largest manufacturer of ambulances in the world 5. Describe MRP II p International competitor 6. Describe closed-loop MRP 12 major ambulance designs 7. Describe ERP 18,000 different inventory items 6,000 manufactured parts 12,000 purchased parts © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 7 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 8 Wheeled Coach Dependent Demand Four Key Tasks For any product for which a schedule Material plan must meet both the can be established, dependent requirements of the master schedule q demand techniques should be used and the capabilities of the production facility Plan must be executed as designed Minimize inventory investment Maintain excellent record integrity © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 9 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 10 Dependent Demand Dependent Demand The demand for one item is related Benefits of MRP to the demand for another item 1. Better response to customer Given a quantity for the end item, orders the demand for all parts and 2. Faster response to market changes components can be calculated 3. Improved utilization of facilities In general, used whenever a and labor schedule can be established for an 4. Reduced inventory levels item MRP is the common technique © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 11 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 12 2
  • 3. 10/16/2010 Dependent Demand Master Production Schedule (MPS) Effective use of dependent demand Specifies what is to be made and when inventory models requires the Must be in accordance with the aggregate following production plan 1. Master 1 M t production schedule d ti h d l Inputs from financial plans customer plans, demand, engineering, supplier performance 2. Specifications or bill of material As the process moves from planning to 3. Inventory availability execution, each step must be tested for 4. Purchase orders outstanding feasibility 5. Lead times The MPS is the result of the production planning process © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 13 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 14 Master Production Schedule The Planning Process (MPS) Production Marketing Finance Capacity Customer Cash flow MPS is established in terms of specific Inventory demand products Procurement Human resources Schedule must be followed for a Supplier performance Manpower planning reasonable length of time The MPS is quite often fixed or frozen in Management Aggregate Engineering Return on Design the near term part of the plan investment Capital production plan completion The MPS is a rolling schedule Change production The MPS is a statement of what is to be Master production schedule plan? produced, not a forecast of demand Figure 14.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 15 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 16 The Planning Process Aggregate Master production Production Plan schedule Change master Change production Months January February requirements? Material schedule? requirements plan Aggregate Production Plan 1,500 1,200 (Shows the total Change quantity of amplifiers) capacity? Capacity p y requirements plan Weeks 1 2 3 4 5 6 7 8 Master Production Schedule No Is capacity Is execution (Shows the specific type and Realistic? plan being meeting the quantity of amplifier to be met? plan? Yes produced Execute capacity 240-watt amplifier 100 100 100 100 plans 150-watt amplifier 500 500 450 450 75-watt amplifier 300 100 Execute material plans Figure 14.2 Figure 14.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 17 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 18 3
  • 4. 10/16/2010 Master Production Schedule Focus for Different (MPS) Process Strategies Make to Order Assemble to Order Stock to Forecast or Forecast Can be expressed in any of the (Process Focus) (Repetitive) (Product Focus) Number of following terms: inputs Schedule orders 1. 1 A customer order in a job shop (make- Typical focus of the to-order) company master production Schedule modules schedule 2. Modules in a repetitive (assemble-to- order or forecast) company Number of end items Schedule finished product 3. An end item in a continuous (stock-to- Examples: Print shop Motorcycles Steel, Beer, Bread forecast) company Machine shop Autos, TVs Lightbulbs Fine-dining restaurant Fast-food restaurant Paper Figure 14.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 19 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 20 MPS Examples Bills of Material For Nancy’s Specialty Foods List of components, ingredients, and materials needed to make Gross Requirements for Crabmeat Quiche product Day 6 7 8 9 10 11 12 13 14 and so on Amount 50 100 47 60 110 75 Provides product structure P id d t t t Gross Requirements for Spinach Quiche Items above given level are called Day 7 8 9 10 11 12 13 14 15 16 and so on parents Amount 100 200 150 60 75 100 Items below given level are called Table 14.1 children © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 21 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 22 BOM Example BOM Example Level Product structure for “Awesome” (A) Level Product structure for “Awesome” (A) 0 A 0 A Part B: 2 x number of As = (2)(50) =Std. 12” Speaker kit w/ 100 1 B(2) Std. 12” Speaker kit C(3) Std. 12” Speaker kit w/ amp-booster 1 B(2) Std. 12” 3 x number of As = Part C: Speaker kit C(3) (3)(50) =amp-booster 150 Part D: 2 x number of Bs + 2 x number of Fs = (2)(100) + (2)(300) = 800 2 E(2) E(2) F(2) Std. 12” Speaker 2 E Part E:(2) 2 x number of Bs E(2) F(2) Std. 12” Speaker booster assembly booster assembly + 2 x number of Cs = (2)(100) + (2)(150) = 500 Packing box and Part F: 2 x Packing box and = number of Cs (2)(150) = 300 3 D(2) installation kit of wire, G(1) D(2) 3 D(2) G(1) D(2) bolts, and screws Part G: 1installation kit ofFs = number of wire, xbolts, and screws (1)(300) = 300 Amp-booster Amp-booster 12” Speaker 12” Speaker 12” Speaker 12” Speaker © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 23 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 24 4
  • 5. 10/16/2010 Bills of Material Bills of Material Planning Bills Modular Bills Also called “pseudo” or super bills Modules are not final products but components that can be assembled Created to assign an artificial into i t multiple end items lti l d it parent to the BOM Can significantly simplify planning Used to group subassemblies to and scheduling reduce the number of items planned and scheduled Used to create standard “kits” for production © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 25 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 26 Bills of Material Accurate Records Phantom Bills Accurate inventory records are Describe subassemblies that exist absolutely required for MRP (or only temporarily any dependent demand system) to Are part of another assembly and operate correctly p y never go into inventory Generally MRP systems require Low-Level Coding more than 99% accuracy Item is coded at the lowest level at Outstanding purchase orders must which it occurs accurately reflect quantities and BOMs are processed one level at a time scheduled receipts © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 27 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 28 Time- Time-Phased Product Lead Times Structure Must have D and E Start production of D completed here so The time required to purchase, production can begin on B produce, or assemble an item 1 week 2 weeks to D produce For production – the sum of the B 2 weeks order, wait, move, setup, store, order wait move setup store E and run times A 2 weeks 1 week For purchased items – the time 2 weeks E 1 week between the recognition of a need G C 3 weeks and the availability of the item for F 1 week production D | | | | | | | | 1 2 3 4 5 6 7 8 Figure 14.4 Time in weeks © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 29 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 30 5
  • 6. 10/16/2010 MRP Structure Determining Gross Data Files Output Reports Requirements MRP by BOM Master period report production schedule Starts with a production schedule for the MRP by date report end item – 50 units of Item A in week 8 Lead times Using the lead time for the item, g , (Item master file) Planned order report determine the week in which the order Inventory data should be released – a 1 week lead time Purchase advice Material requirement means the order for 50 units should be planning programs released in week 7 (computer and Exception reports Purchasing data software) Order early or late or not needed This step is often called “lead time Order quantity too offset” or “time phasing” small or too large Figure 14.5 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 31 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 32 Determining Gross Determining Gross Requirements Requirements From the BOM, every Item A requires 2 The process continues through the entire Item Bs – 100 Item Bs are required in BOM one level at a time – often called week 7 to satisfy the order release for “explosion” Item A By processing the BOM by level, items The lead time for the Item B is 2 weeks – with multiple parents are only processed release an order for 100 units of Item B in once, saving time and resources and week 5 reducing confusion The timing and quantity for component Low-level coding ensures that each item requirements are determined by the order appears at only one level in the BOM release of the parent(s) © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 33 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 34 Gross Requirements Plan Net Requirements Plan Week 1 2 3 4 5 6 7 8 Lead Time A. Required date 50 Order release date 50 1 week B. Required date 100 Order release date 100 2 weeks C. Required date 150 Order release date 150 1 week E. Required date 200 300 Order release date 200 300 2 weeks F. Required date 300 Order release date 300 3 weeks D. Required date 600 200 Order release date 600 200 1 week G. Required date 300 Order release date 300 2 weeks Table 14.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 35 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 36 6
  • 7. 10/16/2010 Net Requirements Plan Determining Net Requirements Starts with a production schedule for the end item – 50 units of Item A in week 8 Because there are 10 Item As on hand, only 40 are actually required – (net requirement) = (gross requirement - on- hand inventory) The planned order receipt for Item A in week 8 is 40 units – 40 = 50 - 10 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 37 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 38 Determining Net Determining Net Requirements Requirements Following the lead time offset procedure, A planned order receipt of 65 units in the planned order release for Item A is week 7 generates a planned order release now 40 units in week 7 of 65 units in week 5 The gross requirement for Item B is now The on-hand inventory record for Item B on hand 80 units in week 7 is updated to reflect the use of the 15 There are 15 units of Item B on hand, so items in inventory and shows no on-hand the net requirement is 65 units in week 7 inventory in week 8 A planned order receipt of 65 units in This is referred to as the Gross-to-Net week 7 generates a planned order release calculation and is the third basic function of 65 units in week 5 of the MRP process © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 39 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 40 Gross Requirements Net Requirements Plan Schedule Figure 14.6 A S The logic of net requirements B C B C Master schedule Gross Allocations requirements + Lead time = 4 for A Lead time = 6 for S for B Master schedule for A Master schedule for S sold directly Periods 5 6 7 8 9 10 11 8 9 10 11 12 13 1 2 3 40 50 15 40 20 30 10 10 Total requirements On Scheduled Net – hand + receipts = requirements Periods 1 2 3 4 5 6 7 8 Therefore, these Gross requirements: B 10 40+10 =50 40 50 20 15+30 =45 are the gross Available inventory requirements for B © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 41 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 42 7
  • 8. 10/16/2010 MRP Planning Sheet Safety Stock BOMs, inventory records, purchase and production quantities may not be perfect Consideration of safety stock may be p prudent Should be minimized and ultimately eliminated Typically built into projected on-hand inventory Figure 14.7 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 43 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 44 MRP Management MRP and JIT MRP is a dynamic system MRP is a planning system that Facilitates replanning when changes occur does not do detailed scheduling Regenerating Net change MRP requires fixed lead times which might actually vary with System nervousness can result from too many changes batch size Time fences put limits on replanning JIT excels at rapidly moving small batches of material through the Pegging links each item to its parent allowing effective analysis of changes system © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 45 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 46 Finite Capacity Scheduling Small Bucket Approach 1. MRP “buckets” are reduced to daily or hourly MRP systems do not consider capacity during normal planning 2. Planned receipts are used internally to sequence production cycles 3. Inventory is moved through the plant on a JIT Finite capacity scheduling (FCS) basis recognizes actual capacity limits 4. Completed products are moved to finished goods inventory which reduces required By merging MRP and FCS, a finite quantities for subsequent planned orders schedule is created with feasible 5. Back flushing based on the BOM is used to capacities which facilitates rapid deduct inventory that was used in production material movement © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 47 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 48 8
  • 9. 10/16/2010 Balanced Flow Supermarket Used in repetitive operations Items used by many products are MRP plans are held in a common area often called executed using a supermarket JIT techniques Items are withdrawn as needed based on “pull” principles Inventory is maintained using JIT systems and procedures Flows are carefully balanced with Common items are not planned by small lot sizes the MRP system © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 49 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 50 Lot- Lot-Sizing Techniques Lot- Lot-Sizing Techniques Lot-for-lot techniques order just what Part Period Balancing (PPB) looks at is required for production based on future orders to determine most net requirements economic lot size May not always be feasible The Wagner-Whitin algorithm is a If setup costs are high, lot-for-lot can complex dynamic programming be expensive technique Economic order quantity (EOQ) Assumes a finite time horizon EOQ expects a known constant Effective, but computationally demand and MRP systems often deal burdensome with unknown and variable demand © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 51 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 52 Lot-for- Lot-for-Lot Example Lot-for- Lot-for-Lot Example No on-hand inventory is carried through the system 1 2 3 4 5 6 7 8 9 10 Total holding cost = $0 3 4 5 6 7 8 9 10 1 2 Gross Gross requirements 35 30 40 0 10 40 30 0 30 55 There are seven 35 30 for this 10 40 this plan requirements setups 40 0 item in 30 0 30 55 Scheduled Total ordering cost = 7 x $100 = $700 Scheduled receipts receipts Projected on Projected on 35 35 0 0 0 0 0 0 0 0 0 35 35 0 0 0 0 0 0 0 0 0 hand hand Net Net 0 30 40 0 10 40 30 0 30 55 0 30 40 0 10 40 30 0 30 55 requirements requirements Planned order Planned order 30 40 10 40 30 30 55 30 40 10 40 30 30 55 receipts receipts Planned order Planned order 30 40 10 40 30 30 55 30 40 10 40 30 30 55 releases releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 53 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 54 9
  • 10. 10/16/2010 EOQ Lot Size Example EOQ Lot Size Example Annual demand = 1,404 Total cost = setup cost + holding cost 1 2 3 4 5 6 7 8 9 10 Total cost = (1,404/73) x $1004 + (73/2) x ($1 x852 weeks) 1 2 3 5 6 7 9 10 Gross requirements 35 30 40 0 10 40 30 0 30 55 Total cost = $3,798 30 40 0 10 40 30 0 30 55 Gross requirements 35 Cost for 10 weeks = $3,798 x (10 weeks/52 weeks) = Scheduled Scheduled receipts $730 receipts Projected on Projected on 35 35 0 43 3 3 66 26 69 69 39 35 35 0 0 0 0 0 0 0 0 0 hand hand Net Net 0 30 0 0 7 0 4 0 0 16 0 30 0 0 7 0 4 0 0 16 requirements requirements Planned order Planned order 73 73 73 73 73 73 73 73 receipts receipts Planned order Planned order 73 73 73 73 73 73 73 73 releases releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Average weekly gross requirements = 27; EOQ = 73 units Average weekly gross requirements = 27; EOQ = 73 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 55 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 56 PPB Example Periods PPB Example Trial Lot Size (cumulative net Costs Combined requirements) Part Periods Setup Holding Total 2 30 0 1 2 3 4 5 6 7 8 9 10 2, 3 70 1 2 40 = 40 x41 5 3 6 7 8 9 10 Gross 2, 3, 4 Gross 70 40 35 30 40 0 10 40 30 0 30 55 35 30 40 0 10 40 30 0 30 55 requirements requirements 2, 3, 4, 5 80 70 = 40 x 1 + 10 x 3 100 + 70 = 170 Scheduled Scheduled 6 2, 3, 4, 5, 120 230 = 40 x 1 + 10 x 3 receipts receipts + 40 x 4 Projected on Projected on e periods Co b Combine pe ods 2 - 5 as t s results in t e Part Period this esu ts the a t e od 35 35 hand hand closest to the EPP Net 6 Net 40 0 requirements requirements 6, 7 70 30 = 30 x 1 Planned order 6, 7, 8 Planned order 70 30 = 30 x 1 + 0 x 2 receipts receipts 9 6, 7, 8, 100 120 = 30 x 1 + 30 x 3 100 + 120 = 220 Planned order Planned order Combine periods 6 - 9 as this results in the Part Period releases releases closest to the EPP 10 55 0 100 + 0 = 100 Holding cost = $1/week; Setup cost = $100; Lead time = 1 week Holding cost = $1/week; Setup cost = 300 + 190 = 490 Total cost $100; EPP = 100 units EPP = 100 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 57 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 58 PPB Example Lot- Lot-Sizing Summary 1 2 3 4 5 6 7 8 9 10 For these three examples Gross 35 30 40 0 10 40 30 0 30 55 requirements Scheduled receipts Lot-for-lot $700 Projected on hand 35 35 0 50 10 10 0 60 30 30 0 EOQ $730 Net requirements 0 30 0 0 0 40 0 0 0 55 PPB $490 Planned order 80 100 55 receipts Planned order 80 100 55 releases Holding cost = $1/week; Setup cost = $100; Lead time = 1 week EPP = 100 units © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 59 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 60 10
  • 11. 10/16/2010 Lot- Lot-Sizing Summary Lot- Lot-Sizing Summary In theory, lot sizes should be recomputed Lot sizes can be modified to allow for whenever there is a lot size or order scrap, process constraints, and quantity change purchase lots In practice, this results in system Use lot-sizing with care as it can cause nervousness and instability considerable distortion of requirements Lot-for-lot should at lower levels of the BOM be used when When setup costs are significant and low-cost JIT can demand is reasonably smooth, PPB, be achieved Wagner-Whitin, or EOQ should give reasonable results © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 61 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 62 Extensions of MRP Material Requirements Planning II MRP II Requirement data can be enriched by Closed-Loop MRP other resources MRP system provides input to the capacity Generally called MRP II or Material plan, MPS, and production planning process Resource Planning Capacity Planning Outputs include MRP system generates a load report which Scrap details capacity requirements Packaging waste This is used to drive the capacity planning process Carbon emissions Changes pass back through the MRP system Data used by purchasing, production for rescheduling scheduling, capacity planning, inventory © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 63 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 64 Material Resource Planning Closed- Closed-Loop MRP System Weeks LT 5 6 7 8 Computer 1 100 Aggregate Production Plan Labor Hrs: .2 each 20 OK? Machine Hrs: .2 each 20 NO Priority Management Capacity Management Scrap: 1 ounce fiberglass each 6.25 lbs Payables: $0 each $0 Develop Master Production Evaluate Resource Availability Schedule (Rough Cut) PC Board (1 each) 2 100 OK? NO OK? YES Planning Labor Hrs: .15 each 15 Machine Hrs: .1 each 10 Prepare Materials Determine Capacity Availability Requirements Pan Scrap: .5 ounces copper each 3.125 lb OK? YES Payables: raw material at $5 each $500 Execution Processor (5 each) 4 500 Detailed Production Implement Input/Output Control (in repetitive Activity Control systems JIT Labor Hrs: .2 each 100 (Shop Scheduling/Dispatching) techniques Machine Hrs: .2 each 100 are used) Scrap: .01 ounces of acid waste each 0.3125 lb Payables: processors at $10 each $5,000 Figure 14.8 Table 14.4 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 65 © 2011 Pearson Education, Inc. publishing as Prentice Hall 14 - 66 11