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Topics to be Covered 1. Material Requirement Planning 2. How Does MRP Fit in the Production Cycle 3. Inputs into MRP 4. MRP Processing 5. MRP Issues 6. Lot Sizing 7. Benefits and Limitations of MRP 8. MRP II and Closed Loop MRP 9. Keys to a Successful Implementation

Topics to be Covered

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Topics to be Covered. 1. Material Requirement Planning 2. How Does MRP Fit in the Production Cycle 3. Inputs into MRP 4. MRP Processing 5. MRP Issues 6. Lot Sizing 7. Benefits and Limitations of MRP 8. MRP II and Closed Loop MRP - PowerPoint PPT Presentation

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Page 1: Topics to be Covered

Topics to be Covered

1. Material Requirement Planning

2. How Does MRP Fit in the Production Cycle

3. Inputs into MRP

4. MRP Processing

5. MRP Issues

6. Lot Sizing

7. Benefits and Limitations of MRP

8. MRP II and Closed Loop MRP

9. Keys to a Successful Implementation

Page 2: Topics to be Covered

What we have learned !Supply Chain:

setup of our facility, suppliers, transportation and distribution

Process Planning:defined and arranged our process in terms of layout and order

penetration (product vs process layout, MTO,MTS,ATO)

Forecasting:defined anticipated end item demand over a specified time period.(Technique)

Capacity Planning:our tactical approach to how we anticipate meeting our anticipated demand ( Type and amount of Sources, chase vs level strategy)

What is the question we need to answer now?•What, How much and when to order the stuff to make our product

Page 3: Topics to be Covered
Page 4: Topics to be Covered

Material Requirement Planning

1. MRP is a computer-based information system designed to handle ordering and scheduling of dependent -demand inventories.

2. MRP is used to breakdown the demand requirements for each finished good into its lower level components requirements.

3. MRP identifies a higher level demand into all its lower level demand components , their quantities and timing requirements.

4. MRP continues this breakdown of component quantities and time needs until the source of each lower level component is supplied by an external source.

5. MRP attempts to solve two problems:a. Setting up scheduling for all components.b. Provide an effective means for controlling the scheduled requirements for each dependent items.

Page 5: Topics to be Covered

How Does MRP Fit In The Production Cycle.

Make or Buy

Facility Definition Forecasting

Aggregate Plan

Master Production Schedule

MRP

Rough Cut Capacity Planning

Resource Planning

Purchasing Shop Floor Control

Detailed Capacity Planning

Page 6: Topics to be Covered

Inputs Into MRP

1. Master Production Schedule

2. Bill Of Materials

3. Inventory Records File

Page 7: Topics to be Covered

MPS: Example

Model Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

123 50 54 58 59 68 51 49 48 47 59 56 62 661

456 110 120 130 140 150 160 90 140 170 120 130 150 1610

789 5 9 3 7 6 1 5 4 6 7 2 5 60

Manhrs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

520 600 580 645 700 585 475 560 635 605 560 660 7125

Aggregate Production Plan

Master Production Schedule

Scheduled Man hours

Products in that month

Page 8: Topics to be Covered

Master Production Schedule

1. MPS states which end items are to be produced, when these end items are needed and in what quantities.

2. The MPS is a result of disaggregating the Aggregate Production Plan.

3. Sources for a MPS.A. Customer OrdersB. ForecastsC. Internal Orders

4. Planning Horizon for MPS is separated into Time Periods (Time Buckets).- typically has a 1 year planning horizon.

5. The Time Horizon should cover the cumulative lead time necessary to produce the end product.

6. Initial requirements for items needed may or may not be possible.a. May exceed capacityb. modify aggregate planningc. recent demand changesd. assumes sufficient time to complete tasks

7. MRP can not distinguish between a feasible and a non-feasible MPS.

Page 9: Topics to be Covered

Bill Of Material

1. Contains a listing of all of the assemblies, subassemblies, parts and raw materials necessary to produce one unit of a finished product.

2. Frequently referred to as a Product Structure Diagram.

3. Parent component is a next higher level component which consists of one or more Child components.

4. A BOM will identify all components from end item through raw material or components procured from an outside source.

- includes nuts, bolts, screws, glue, etc.

5. It is important that the BOM is kept up to date.- requires some sort of change coordination be put into place between engineering and production.- Engineering Change Notice

Page 10: Topics to be Covered

Bill Of Material (BOM) Example

Office Chair

Back Cushion Seat Cushion Chair Frame Fasteners (8)

AdjusterMechanism Base Unit Wheels (6) Fasteners (3)

Item Part Number QtyOffice Chair 123-4567 1

Back Cushion 6520 1Seat Cushion 8947 1Chair Frame 1245 1

Adjuster Mechanism 1245-1 1Base Unit 1245-2 1Wheels 1245-3 6Fasteners 3145 3

Fasteners 3214 8

Indented Bill Of Material

Page 11: Topics to be Covered

Inventory Records File

1. Used to store supplier information and the status of each item by time period.

2. Gross requirements, schedule receipts, amount on-hand

3. Supplier name. location, lead time, pricing & lot size.

4. This step is the feedback for the system to highlight changes to scheduling.

Page 12: Topics to be Covered

BLAW-KNOX ITEM MASTER MAINTENANCE PAGE ________ ECN DATE

ADD CHANGE DELETE

* COMPANY NO. * PART NUMBER

*01 DESCRIPTION * CCN

*02 STOCK CODE (IR, IF) *03 ITEM STATUS *04 UNIT OF MEASURE STEEL PART NO. *05 BUYER OR PLANNER

*06 LEAD TIME (M-DAYS) 07 ORDER POLICY (B, M, R) 08 MPS TYPE (B,O,M,P) 09 POST UP CODE (B,P) 10 PRODUCT FAMILY STEEL QUANTITY 11 FAMILY SUBGROUP

12 FREE STOCK CODE (F) 13 PHANTOM CODE (N) 14 DRAWING NUMBER 15 DRAWING REVISION 16 DRAWING SIZE 17 COMMODITY CODE 18 ITEM CLASS 19 ITEM WEIGHT 20 PRIMARY VENDOR

GL ACCOUNT CODE

21 GENERAL LEDGER 22 ALT ROUTER OVERRIDE 23 MAXIMUM ORDER QTY. 24 SAFETY STOCK 25 MINIMUM ORDER QTY. 26 ORDER MULTIPLE 27 REORDER POINT 28 PERCENT SCRAP 29 DATE NEXT CYCLE CNT. - 30 SORT FIELD 31 ALT BOM OVERRIDE 32 VENDOR PART NO. 33 STANDARD LOT SIZE 34 LOT SIZE HORIZON 35 DEFAULT LOCATION 36 PO CONVERSION FACTOR 37 MPS TIME FENCE 38 ABC ANALYSIS CODE 39 REPLACED BY P/N

SERVICE PART (Y, N) ORIGIN CODE

*********** TO BE FILLED OUT BY ORIGINATOR * REQUIRED FIELDS WHEN ADDING PARTS

PROD. ENGR. I.E. CONT. PURCH. ACCT. PARTS

Form No. 206 / Rev. 1 – 3/09/00

Page 13: Topics to be Covered

MRP Processing1. Identify the quantity of each finished good and the time for their completion.

2. Use BOM to identify the subassemblies, components, and raw materials to create one unit.

3. Identify the Gross Requirements for each component. - These are the quantities of each part to construct the required quantity for each end item.

4. Define the Net Requirements.- This represents the quantity of each component or raw material that must be produced

internally or purchased from an external source.- Net Rqmts = Gross Rqmts - (Scheduled Receipts + units on Hand + Safety Stock)- Scheduled Receipts: Orders which have been previously placed and are anticipated to

arrive or be produced internally before the newly established need date.- Net Rqmts for a higher level part is the Gross Rqmts for a lower level part.

5. The Net Rqmts are then placed into the Planned Order Release category until the order for a given component/raw material is placed

- If the component is produced internally then the Release identifies when the same level component work order is released to the shop floor to begin production.

- So all lower level components or raw materials must be available by this date.- Should consider lead times.

6. The Planned Order Receipt identifies when the component or raw material anticipated to be received.

- If the part is produced internally the Receipt identifies when this level part will be complete.

7. This process is continued until all part requirements have been scheduled.

Page 14: Topics to be Covered

Updating The MRP System

1. Regenerative: Review the entire MRP system; usually a periodic batch process

(less frequent change; once a week or month)

2. Net Change: Continuous updating every time a change is made; Modifies only

areas of change. ( more frequent; once or more a day)

MRP Software Types: BPICS, KBM, SAP

MRP Issues

Safety Stock

1. Theoretically if demand is known then there is no need for safety stock.

2. Unanticipated variance in Demand causes inventory and safety stock to exist.

3. MRP does not consider machine breakdown, scrap rates, late deliveries.

4. MRP can reduce the amount of safety stock by removing variability.

5. Safety Stock determined by: History, lead time, experience

Page 15: Topics to be Covered

MRP Outputs

Time FencesSeries of time intervals during which order changes are allowed or restricted.

- Work Order release - Purchase order release. - Rescheduling

MRP Outputs Provides management with a range of possible reports. Reports can be classified as primary and secondary.

• Primary Reports concern production & inventory planning and control:- schedule of planned orders - amount & timing of future orders- order releases - executes the planned orders (POs & WOs)- Changes to planned orders - revisions of due dates & quantities

• Secondary Reports concern performance- evaluate system operation (missed deliveries & stock outs)- planning reports - forecasting future inventory requirements- exception reports - attributes to major discrepancies

Load Reports• Compares known and future capacity requirements- Typically requires a separate module

- Mini MRP: a review of current inventory and planned receipts to determine what is needed for a real or hypothetical demand.

Page 16: Topics to be Covered

Supplier Report

Bl anket P/ O Rel ease

Prog. No. RT0331 ***************************************************

* From Buyer: COREY WALL *

Suppl i er No: 8720 Fax No: 573-474-5859 * *

Suppl i er Name: WATLOW ELECTRI C MFG. CO. Buyer: 8 * Del i ver To: DON NYBOE *

***************************************************

P/ O Number:

B64704 P/ O

Past Opn

Part Number Descri pti on Rev Due 31- J ul 07-Aug 14-Aug 21-Aug J ul Aug Sep Oct Nov Dec J an Feb Beyond Eau Bal

04712-010-00 HEAT PAD MAI N ULTI MAT 10/ 01 20 20 20 10 30 10 30 30 170 162 110

04712-014-00 HEAT PAD MAI N ULTI MAT 8/ 1 01 6 10 16 20 10 10 10 20 70 247 136

04712-316-00 HEAT PAD BERMLESS EXTN 10 01 10 10 10 10 30 10 20 10 30 30 160 127 77

04712-317-00 HEAT PAD BERMLESS EXTN 8/ 01 26 26 10 10 20 10 70 238 137

04712-319-00 HEAT PAD 10' / 18" I NNER BE 00 4 4

04712-320-00 HEAT MAT - 12" BERM - I NN 00 4 4 4 10 3

04712-321-00 HEAT PAD 8' 18" I NNER BER 00 4 4 4

04712-324-00 HEAT PAD 8' 10' 18" OUTER B 00 4 4 8 4

04712-325-00 HEAT MAT - 24" OUTER 00 4 4 4 32 24

Page 17: Topics to be Covered

Lot Sizing

1. Goal is to minimize the setup/ordering cost & holding costs.

2. There can be advantages in grouping part orders

3. Problem is that by grouping middle and upper level parts you have a cascading effect on the lower level parts. - so it is important to consider all inventory requirements below the part/subassembly being considered for lot sizing.

4. Types of Lot Sizing Techniques.- Lot by Lot- EOQ- Wagner-Whitlin- Silver-Meal- Least Cost- Part-Period

All methods, except for Lot by Lot, consider the relationship between holding costs and ordering costs.

Page 18: Topics to be Covered

Limitations of MRP

1. Best used for Batch and job shop applications

2. Holding costs dependent on variations in system.

3. Inability to track material requirements

4. Inability to determine capacity requirements given a master schedule.

5. Lead Time is fixed

6. Necessary to Have:- computer and software- accurate way to maintain changes to parts BOM- integrity of inventory records

7. Inability to react to short term or system changes.

Page 19: Topics to be Covered

MRP II and Closed Loop MRP

Manufacturing Resources Planning 1. Expands on the scope of production resource planning

- involves marketing, finance, engineering, etc.

2. A major purpose of MRP II is to integrate these primary functions of production along with the other impacted areas in a common set of goals.

3. Can be used to simulate effects of different manufacturing plans.

4. Provides each function with insight into the other functions performance and plans.

Closed Loop MRP 1. Uses capacity planning and feedback to improve the ability of the production system to complete work as planned.

2. Timely feedback allows planners time to generate alternative plans.

Page 20: Topics to be Covered

Keys to a Successful Implementation

1. Top Management Support.

2. Good Information Technology Design.

3. Appropriate user-designer interaction and understanding.

4. Committing to change and to the implementation effort.

5. Defining and planning the project extensively.

6. Using organizational change theories to manage process.

Page 21: Topics to be Covered

Enterprise Resource Planning (ERP)

ERP integrates a basic MRP systems with information from marketing, sales, finance, accounting, and human resources through a common database.

Planning is cross functional

Planning begins from Sales planning, thru MRP to the accounts receivable.See Table 16.5 pg 421

ERP Video