Session Vii b -Mrp-Toni

8/8/2019 Session Vii b -Mrp-Toni

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P/OM

SESSION VII B


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Managing production system includes

materials management, sourcing, follow up,

controlling productivity

Complexities of producing numerous

different products can causeconfusion, inefficiencies & inferior

customer service

MATERIAL REQUIREMENT PLANNING


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To control such an environment, timely

and accurate information is required

MRP system can provide this vital info



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Managers using reactive systems

ask, What should I do now?

Managers using planning

systems ask, What will I need in

the future? How much and

when?



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simple to manage

high inventory cost OR ordering cost

unreliable delivery performance

Reactive systems


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complex to manage

reduced inventory cost (it carries only those

items & components that are needed no

more/no less)

Reduces order processing delays => reduced LT=> better deliveries => better customer service

accurate information required

Planning system


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requires a lot of discipline

Commitment by scheduler, supervisor, managers,

etc.

Planning system


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It is the degree to which demand of an item is

dependent on demand for another item

E.g. demand for tea/coffee will determine the

quantity of sugar/milk, etc. required

MRP obviates the need of large safety stocks for

dependent demand items

Demand Dependency


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It is a software based production, planning and

inventory control system used to manage the

manufacturing process

It generates time-phased materials requirements

for production operations (provides due dates for

components)

MRP : a scheduling & ordering system


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Operations Planning & Scheduling System

Aggregate output

planning

Master production

scheduling

Material requirements

planning

Loading

Sequencing

Detailed

Scheduling

Expediting

Aggregate capacity

planning

Rough-cut capacity

planning

Detailed capacity

planning

Short-term

capacity control

Operations

Output planning Capacity planning

Shop

floor control


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MRP enables to estimate dept.-wise

capacity requirement

Operations Planning & Scheduling System


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Inventoryreduction how much of what and

when? No extra inventory

Reductionin production & delivery LT priorities

production activities. Ensures smooth production

due to efficient inventory management

MRP : Objective & Methods


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Realisticcommitments WYSIWYG better

customer satisfaction. New orders are added to the

system and revised total load plan is generated andgiven to production manager.

Increasedefficiency MRP ensures close

coordination among various departments as

products progress through them. Fewer unplanned

interruptions, better production efficiency.

MRP : Objective & Methods


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Mainsourcesofinformation (input)are:

1. Master Production Schedule

2. Inventory Status File

3. BOM

4. Purchase orders outstanding

5. Lead times

MRP : System Components


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3 kinds of information

1. Order release requirements (ordersto

bereleasednow)

2. Order re-scheduling (expedite,de-

expedite,cancelopenorders)

3. Planned orders (future)

MRP provides


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MRP system

Master

production

schedule (MPS)

BOMfileInventory

statusfile

MRP

processing

logic

Planned

orders

(future)

Orderrelease

requirements (orders

to bereleasednow)

Ordersrescheduling

(expedite,de-expedite,

cancelopenorders)


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Initially developed from (a) existing orders OR

(b) demand forecast

MPS provides input to MRP system

MPS includes replacement (service) components

for customers

MPS ultimately governs MRP on sourcing plan &

producing sub-components, to meet deliveries

MPS (master production schedule)


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Itcontainsthefollowing:

identification number,

quantity on hand,

safety stock level,

quantity disbursed and

sourcing LT for every item

Inventory Status File


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Identifies manufacturing process (sequence of

build up)

Identifies quantities of finished unit & the

departments performing the build up sequence

*PrimaryinfotoMRPfromBOMisthe product

structure

BOM


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Product structures for 2 assembled products


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Product structures for 2 assembled products

A&D are upper level end itemsComponents are lower-level items

Each item is given unique identification number

MRP schedules & time-phases the orders for lower

level component items


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MRP processing logic


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It accepts the Master Production Schedule

Determines components schedules

Calculates for each item in each product for eachtime period (normally 1 week) in the planning

horizon

How much is required Vs. how much is already

available in-house



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Data processing determines the overall

requirements to meet deliveries



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Bicycle components


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The report clearly identifies the sourcing actions required for on-schedule

production

Can notify the suppliers in advance

Weekly updating expedite, de-expedite, cancel

**Information system is valuable when thousands of sub-components must

be coordinated among numerous suppliers & work centers

Management info from MRP

MRP report for one item


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Terminology of MRP


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1. Allocated quantity : in-house quantity but already

allocated to some other order

2. Gross requirements : overall quantity neededto

meet planned output levels. *Planned output for end

items come from MIS. *Planned output for

components come from MRP

3. Scheduled receipts : quantity that will be received at

the start of time period against previously placed

orders

Terminology of MRP


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4. Available quantity : quantity expected to be available

at the end of a time period for production in

subsequent periods

Terminology of MRP

Available qty = qty available from the previous period +

schedule receipts + planned order receipts gross

requirement


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5. Net requirements : net quantity to be acquired to

meet production requirements for the period

6. Planned order receipts quantity that is planned to

be ordered for receiving at the start of the period.

The order has not yet been placed

Terminology of MRP

net requirements = gross requirement scheduled receipts

qty. available from previous period


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7. Planned order release : its a release that shows

the order plan of items vis--vis time period.

What, how much & when. When this order isreleased, it becomes a scheduled receipt

Terminology of MRP


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MRP - example


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Chair manufacturing sequence


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Chair manufacturing sequence


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MRP - example


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Determine & plan for end products

Determine and plan for lower level items

Info Processing System (Reverse T&A)


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Q. When must the order be placed so that the item

arrives when it is needed?

A. The processing system responds by offsettingthe length of LT as indicated in the inventory status

file for that item

Lead-time off-setting


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Provides the information regarding relationshipbetween product and its components

Its easy to see how many of which component is

required at which level

Indented BOM

indented BOM for Model H chair


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To produce a product, often multiple units of a

lower level item is required.

E.g.1

unit of H requires 4 units of E.450 units of H requires 450 x 4 = 1800 units of E

This process of multiplication is called Product

Explosion or BOM explosion

Product Explosion


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A single item may be used at several points of

production. E.g. nut-bolts

MRP by convention assigns the item to the lowest

level in which it occurs in the product structure

Low Level Coding


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In order to maintain the schedule, planned order

releases must be acted upon in the relevant weeks

The cells which represent the weeks are the

ACTIONBUCKETS.

*The action is to release the order.

Using MRP outputs for material decisions


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MRP is not static

Changes with (i) new orders (ii) current production

floor conditions (iii) anticipated changes for the

future

MRP must be updated with current information

BUT should also provide stability for production

operations

Keeping MRP current in a changing environment


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(i) Pegging

(ii) Cycle Counting

(iii) Updating

(iv) Time Fences

Four aspects of MRP


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tracing upward in the BOM from the components tothe parent item

In real life material plans get disrupted every now

and then

Pegging identifies which components get affected

by such disruptions

(i) Pegging


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Pegging shows the level-

by-level linkages among

components and their

time-phased status in the

MRP records

(i) Pegging

pegging the MRP records


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(ii) Cycle Counting

Components are counted, deducting defective units at

each stage of production and in storage area on a regular

basisSystem data should be same as actual physical inventory

MRP records are updated, weekly or daily

Updated records highlight excesses or shortages and

thereby indicated how the production schedules need to

be adjusted


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(iii) Updating

Updating is required when new jobs arrive OR

when technology changes the production design

Two updating approaches are used

(a) regenerative

(b) net change


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(iii) Updating

Regenerative completely reprocesses the entire

set of information & recreates the complete MRP

from start to endNet change reprocesses only those portions

that are affected by informational changes


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allows a part of the master schedule to be

designated as notto berescheduled

Dynamics of MRP environment can create

potential confusion => systemnervousness

(iv) Time Fences


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Stability is gained by using timefence

Timefence= shortest LT fromrawmaterialto

finished product

Within the time fence, add longest LT at each level

of product structure + longest LT for sourcing

*frozen part of MPS is called firm plannedorders

(iv) Time Fences


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(iv) Time Fences


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(iv) Time Fences

The longest LT at levels 0, 1 & 2 are 1, 2 and 4 = 7 weeks + sourcing LT


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MRP system generates planned order releases

which triggers P.O. for vendors

Set up costs(cost of ordering) + holding cost

a. LOT-FOR-LOT ORDERING (dynamic)

b. E.O.Q. TECHNIQUE (static)

LOT sizing


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LOT SIZING L4L TECHNIQUE

Lot sizing technique that generates exactly what is

needed

No safety stock or anticipation of further orders

Works most efficiently when

Frequent orders are economical (low set-up or

ordering costs) JIT inventory techniques has been implemented


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Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

50 60 70 60 95 75 60 55

Consider the given lot sizing problem, the netrequirement are given for 8 weeks

Cost per item Rs 10

Order/Setup cost Rs 47

Inventory carrying cost/week 0.5 %



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Week NetRequirement Production

Quantity

Ending

Quantity

Holding Cost Setup Cost TotalCost

1 50 50 0 Rs 0.00 Rs 47 Rs 47

2 60 60 0 0.00 47 94

3 70 70 0 0.00 47 141

4 60 60 0 0.00 47 188

5 95 95 0 0.00 47 235

6 75 75 0 0.00 47 282

7 60 60 0 0.00 47 329

8 55 55 0 0.00 47 376

Lot-for-Lot Run Size for an MRP schedule



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Annual demand = D = 525 x 52 = 3412.5 units

8

Annual holding cost =H= 0.5%xRs 10x52 weeks=2.60units

Setup cost = S = Rs 47

EOQ = 2DS = 351unit

s

H

LOT SIZING E.O.Q. TECHNIQUE


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Week NetRequirement Production

Quantity

Ending

Inventory

Holding Cost Setup Cost TotalCost

1 50 351 301 Rs 15.05 Rs 47 Rs 62.05

2 60 0 241 12.05 0 74.10

3 70 0 171 8.55 0 82.65

4 60 0 111 5.55 0 88.20

5 95 0 16 0.80 0 89.00

6 75 351 292 14.60 47 150.60

7 60 0 232 11.60 0 162.20

8 55 0 177 8.85 0 171.05

EOQ Run Size for an MRP schedule

=525

LOT SIZING E.O.Q. TECHNIQUE


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a.k.a. capacity requirements planning

Each time the MRP system is updated, it is

imperative to check whether sufficient capacity is

available

DCP addresses this question

Detailed Capacity Planning (DCP)


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*E.g. detailed capacity analysis for component A

(the front legs)

Step 1:route sheet is developed for component A

Detailed Capacity Planning

route sheet for component A


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Step 2 :construct the operation set-back chart

Detailed Capacity Planning

partial operation set-back chart for chair model H


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A computer is necessary

Product structure must be assembly oriented

BOM + inventory status information must be

recorded & computerised

Valid master schedule must be prepared

Data integrity

Training people else ad hoc methods resurfaces

Limitations of MRP


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Dynamic nature

Reacts well to changing activities (real time

adjustments for thousands of components)

Better PPC

Better inventory management

Shorter delivery LT sourcing

Better deliveries

Advantages of MRP


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Least accurate information is available on

capacity, market forecasts, production control

Most accurate information on BOM, MPS,

inventory records

Managers speak


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closed loopMRP

MRP systems was developed on a segregated

basis

MRPII connects many of the information

subsystems to the MRP system

Synchronises all aspects of the business (sales,

purchasing, manufacturing, finance, engineering) by

adopting a focal production plan

Manufacturing Resource Planning (MRPII)


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MRPII involves developing a production plan from

the business plan to specify monthly projections for

each product line over next 1 to 5 years.

Developed by consensus of all executives

Production dept. produce (PS)

Sales dept. sell (PSFPD)

Finance ??

MRPII


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MRPII: an integrated system for planning & control


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MRPII: an integrated system for planning & control

BUSINESSPLAN

PRODUCTION

PLAN

M.P.S.

ROUGHCUT

CAPACITY

PLAN

M.R.P.

DETAILED

CAPACITYPLAN

SHOP FLOORCONTROL;

PURCHASESCONTROL

MANUFACTURING

(materials, capacity,

production schedules

Purchasing

(vendor orders)

Engineering

(process &

product design)

Marketing (sales

order entry, delivery

projections)

Finance (capital

requirements for

capacity, working capital

requirements)

Accounting (a/c

payable; a/c

receivable)


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1. Purchasing activities related to procuring materials

and supplies consumed during production

2. Materialsmanagement activities relating to

managing the flow of materials into and through the

firm

3. Physicaldistribution activities relating to (2) as

well as to storing & transporting finished products

through distribution system to customers

Purchasing


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1. Goodvalue price & quality combo

2. Reliableschedule on time, JIT

3. Minimisedinvestment depends on economies

of order size, carrying costs, stock out costs

4. Efficientadmin keeping the cost of buying at

low levels, coordinate with other depts.

effectively

Purchasing : objectives


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a. Purchasing requirement description, qty, del.

date, etc.

b. Sourcesofsupply personnel knowledge,

salespersons, ads, trade & industry associations,

peers, company records, etc. (sometimes

vendors must be developed)

c. Costofsupply cost per transaction, inventory

carrying costs, make or buy

Effective purchasing


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d. Prices & Value buy at better prices (common

sources of price lists, quotations, market px.,

competitive bids, direct negotiations)

e. Administering the purchase requisition costs

are evaluated sources identified price & values

established P.O. is raised supplies are received payments

authorised records are kept

Effective purchasing

These admin. functions must be performed efficiently/timely

Documents

Session Vii b -Mrp-Toni