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PRODUCTION AND OPERATIONS MANAGEMENT

Ch. 15: Material Requirements Planning (MRP). PRODUCTION AND OPERATIONS MANAGEMENT. Distinguish dependent from independent demand inventory Define material requirements planning Explain the benefits of MRP Identify the requirements of MRP, DRP, and ERP Explain the inputs & outputs of MRP

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PRODUCTION AND OPERATIONS MANAGEMENT

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  1. POM - J. Galván Ch. 15: Material Requirements Planning (MRP) PRODUCTION AND OPERATIONS MANAGEMENT

  2. POM - J. Galván Distinguish dependent from independent demand inventory Define material requirements planning Explain the benefits of MRP Identify the requirements of MRP, DRP, and ERP Explain the inputs & outputs of MRP Compute order releases Learning Objectives

  3. POM - J. Galván Dependent versus Independent Demand Materials With Materials With Item Independent Demand Dependent Demand Demand Company Customers Parent Items Source Material Finished Goods WIP & Raw Materials Type Method of Forecast & Booked Customer Orders Calculated Estimating Demand Planning EOQ & ROP MRP Method

  4. POM - J. Galván Inputs to the Production Plan Marketing Customer Demand Production Capacity Inventory Finance Cash Flow Human Resources Manpower Planning Production Plan Procurement Supplier Performance Management Return on Investment Capital Engineering Design Completion

  5. POM - J. Galván Requirements for Effective Use of Dependent Demand Inventory Models Effective use of dependent demand inventory models requires that the operations manager know the: master production schedule specifications or bills-of-material inventory availability purchase orders outstanding lead times

  6. POM - J. Galván The Planning Process Production Plan Master Production Schedule Material Requirements Plan Capacity Requirements Plan No Realistic?? Yes Execute Capacity Plans Execute Material Plans

  7. POM - J. Galván Typical Level for the Master Schedule A customer order in a job shop (process focused/make to order) company Modules in a repetitive (assemble-to-stock) company An end item in a continuous (product focused/make to stock) company

  8. POM - J. Galván List of components & quantities needed to make product Provides product structure (tree) Parents: Items above given level Children: Items below given level Shows low-level coding Lowest level in structure item occurs Top level is 0; next level is 1 etc. Bill-of-Material

  9. POM - J. Galván Bill-of-Material Product Structure Tree Bicycle(1) P/N 1000 Handle Bars (1) Frame Assy (1) P/N 1001 P/N 1002 Wheels (2) Frame (1) P/N 1003 P/N 1004

  10. POM - J. Galván Time-Phased Product Structure D B E A E G C F D 1 2 3 4 5 6 7 8 Must have D and E completed here so production can begin on B Start production of D 1 week 2 weeks to produce 2 weeks 1 week 2 weeks 1 week 2 weeks 3 weeks 1 week

  11. POM - J. Galván Manufacturing computer information system Determines quantity & timing of dependent demand items Material Requirements Planning (MRP)

  12. POM - J. Galván Computer system Mainly discrete products Accurate bill-of-material Accurate inventory status 99% inventory accuracy Stable lead times MRP Requirements

  13. MRP PURPOSE • Coordination of Production and Inventory in large, multi-stage production systems • Capacity planning, scheduling, supplier coordination • Timely dissemination of information • Synchronized production and procurement • Central engineering and logistic database (Central element of the ERP system)

  14. MRP PROBLEMS • Deterministicmodel • Large data requirements and GIGO (Garbage in garbage out) • Self-fulfilling lead-times, so thenwhathappensiffulfilmentisnotaccomplished? • Difficulty and cost of installation and maintenance • Centralized command and control mindset

  15. POM - J. Galván Increasedcustomersatisfactionduetomeetingdeliveryschedules Faster response tomarketchanges Improved labor & equipmentutilization Betterinventoryplanning & scheduling Reducedinventorylevelswithoutreducedcustomerservice MRP Benefits

  16. Variables in MRP • Master Schedule -WHEN • Bills of Material -WHAT • Stocks & Work in Progress (WIP) – HOW MUCH • Lead-times – WHEN TO HAVE AVAILABLE • Work orders / schedules – WHAT TO DO • Purchase orders / schedules –WHEN TO ORDER • Yields – WHAT IS LOST • Workingdays/ times - CALENDAR

  17. POM - J. Galván Structure of the MRP System Master Production Schedule BOM (Bill-of-Material) MRP by period report Lead Times MRP by date report (ItemMasterFile) MRP Programs Planned orders report Inventory Data Purchase requirements Purchasing data Exception reports

  18. POM - J. Galván Aggregate Production Planning Forecast & Firm Orders Resource Availability Material Requirements Planning Master Production Scheduling Capacity Requirements Planning Shop Floor Schedules Realistic? Yes modify CRP, MRP, or MPS MRP and The Production Planning Process No

  19. POM - J. Galván Shows items to be produced End item, customer order, module Derived from aggregate plan Master Production Schedule

  20. POM - J. Galván Shows itemstobeproduced Enditem, customerorder, module Derivedfromaggregate plan Example Master Production Schedule Item/Week Oct 3 Oct 10 Oct 17 Oct 24 Drills 300 200 310 300 Saws 300 450 310 330

  21. POM - J. Galván MRP Dynamics Supports “replanning” Problem with system “nervousness” “Time fence” - allows a segment of the master schedule to be designated as “not to be rescheduled” “Pegging” - tracing upward in the bill-of-materials from the component to the parent item Manager can react to changes, doesn’t mean he/she should

  22. POM - J. Galván MRP and JIT MRP - a planning and scheduling technique with fixed lead times JIT - a way to move material expeditiously Integrating the two: Small bucket approach and back flushing balanced flow approach

  23. POM - J. Galván Extensions of MRP Closed loop MRP Capacity planning - load reports MRP II - Material Resource Planning Enterprise Resource Planning

  24. POM - J. Galván Extensions of MRPClosed Loop MRP Production Plan Priority Planning Capacity Planning Desired Master Production Schedule Realistic? Resource Planning First Cut Capacity No Material Requirements (detailed) Capacity Requirements (detailed) Capacity Control Priority Control Input/Output Dispatch List Is average capacity adequate? Is specific capacity adequate? No No Yes Yes

  25. POM - J. Galván Extensions of MRPCapacity Planning Tactics for smoothing the load and minimizing the impact of changed lead time include: Overlapping - reduces the lead time, entails sending pieces to the second operation before the entire lot has completed the first operation Operations splitting - sends the lot to two different machines for the same operation Lot splitting - breaking up the order and running part of it ahead of the schedule

  26. POM - J. Galván Extensions to MRPEnterprise Resource Planning MRP II with ties to customers and suppliers

  27. POM - J. Galván MRP in Services Can be used when demand for service or service items is directly related to or derived from demand for other services restaurant - rolls required for each meal hospitals - implements for surgery etc.

  28. POM - J. Galván Distribution Resource Planning DRP requires: Gross requirements, which are the same as expected demand or sales forecasts Minimum levels of inventory to meet customer service levels Accurate lead times Definition of the distribution structure

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