Presentation on theme: "Material Requirements Planning (MRP)"— Presentation transcript:
1 Material Requirements Planning (MRP) Lesson 18Material Requirements Planning (MRP)End ProductE(1)MRP is a computer based information system for ordering, scheduling, and managing dependent demand inventory requirements
2 Independent Versus Dependent Demand Independent Demand - demand at the customer end product levelEnd ProductDependent Demand - demand for items that are subassemblies, component parts or raw materials to be used in the production of end productsE(1)
3 Independent Versus Dependent Demand Independent DemandAB(4)C(2)D(2)E(1)D(3)F(2)Dependent DemandIndependent demand is uncertain Dependent demand is certain
4 Positive View Of MRP“ I don’t know how we managed to get along without MRP for as long as we did.Our scheduling has gone from a state of turmoil to relative calm.We have achieved a substantial reduction in inventory size and cost while increasing our customer service.We are more than satisfied with MRP; it allows to plan rather than spend all our time trying to meet one crisis after another.I would strongly recommend that all manufacturing firms adopt MRP or some similar approach”.
5 Negative View Of MRP“We had heard so many good things about MRP that we couldn’t wait to get started, but so far, it seems like we’ve just been spinning our wheels.We’re not even close to going online with it, and yet we’ve already exceeded our original time estimates and costs are out of sight.Everyone is discouraged, especially the brass.There is even some talk of just scrapping the whole idea”
6 Materials Requirement Planning - MRP Materials Requirements Planning is a a computer based information system designed to handle ordering and scheduling of dependent demand inventory requirements . It Takes into account lead times, and . Develops a production plan showing quantity and timing for materials, component parts and subassemblies from the first component to the lastAs you have learned or will learn in your information systems class, information systems are only as good as the input data. Two of the most prevalent reasons for MRP failure are . Lack of planning for implementation . GIGO
7 MRP Inputs & Outputs Primary reports Changes Order releases Planned-orderschedulesMasterScheduleBill of MaterialsInventoryFileMRP SystemSecondaryreportsException reportsPlanning reportsPerformance-controlInventoryTransactions
8 Master Scheduling Process Recall the Master Production Scheduling Process is a procedure for considering inventories, customer orders, & forecasts to produce a projected inventory, master production schedule & ATP.MasterschedulingBeginning InventoryForecastCustomer OrdersProjected InventoryMaster Production ScheduleAvailable To Promise (uncommitted inventory)
9 Master Production Schedule The Master Production Schedule (MPS) is a schedule of how much & when to produce independent (customer end product) demand. It shows when the end product is needed but does not show when raw materials, components, subassemblies or parts are needed.
10 Product Planning Horizon The Product Planning Horizon shows the timing, lead times and steps in the manufacturing process to assure that the end item is manufactured correctly and on-time.12345678910ProcurementFabricationSub-assemblyAssemblyProcurement Lead TimeSub-assembly Lead TimeAssembly Lead TimeCumulative Lead Time - the sum of the lead times that sequential phases of a process require.
11 Assembly Time ChartAssembly Time Charts show the material order points needed to meet scheduled availability of the end itemProcurement ofraw material DFabricationof part EProcurement ofraw material FSubassembly AFinal assemblyand inspectionProcurementOf part CProcurement ofpart HProcurement ofraw material ISubassembly BFabricationof part G1234567891011Material D, F and I must be ordered at the beginning of week 2 to meet a delivery at the beginning of week 12
12 Bill Of MaterialsThe Bill of Materials (BOM) is a listing of all of the raw materials, parts, subassemblies, and assemblies needed to produce one unit of an end product. The Bill of Materials File contains all Bill of Materials for each end product the company produces.A Product Structure Tree - a visual depiction of the requirements in a bill of materials, where all components are listed by levels.
13 Bill Of Materials – Chair Example Back SupportsCross BarSide RailsCross BarLegsSeat
14 Product Structure Tree - Chair Example Cross BarLegs (2)SeatBack Supports (3)Side Rails (2)ChairLeg AssemblyBack Assembly
15 Product Structure Tree - Example Example 1: Use the information presented below to answer the following? Determine the quantities of B, C, D, E and F to complete one X. Determine the quantities of each of these components to produce 200 X’s.LevelX1B(2)CB - 2C - 1D - 3x2 = 6E - 4x3x2+1x2+2 = 28F - 2B - 400C - 200DEF - 400D(3)EE(2)F(2)2E(4)3
16 Even though this template is provided, manual acuity will be necessary to solve some of the problems.
18 ED Worksheet21StepsEnter products and components in the columns to the left – this builds the product structure to the rightEnter quantities in the product structure tree in the bright green cells
19 2 1 EXPLODE Worksheet Steps Click the Explode BOM Components Macro Enter the end item quantity and click OK
20 EXPLODE WorksheetThe BOM explosion is automatically shown in the product structure tree and the total for all components and subcomponents are shown in the BOM Quantity to the left.
21 Here, the BOM explosion is shown for 200 X’s EXPLODE WorksheetHere, the BOM explosion is shown for 200 X’s
22 2 3 3 1 ASSEMBLY Worksheet Steps If the lead times are provided for each component, enter them in the Lead Time column (here we show the lead time is 1 unit of time for each component)Click the Calculate Assembly Paths macroChoose which assembly time paths you wish to show in the Assembly Time Chart.
23 MRP ElementsA Material Requirements Plan shows the following time phased elements.. Gross Requirements - total expected demand for an item or raw material in a time period. Scheduled Receipts - open orders scheduled to arrive (from vendors or elsewhere) in the pipeline. Projected on Hand - Expected amount of inventory that will be on hand at the beginning of each time period. Net Requirements - The actual amount needed in each time period. Planned Order Receipts - Quantity expected to be received by the beginning of the period in which it is shown. Planned Order Releases - Planned amount to order in each time period offset by lead time
24 Time Phased MRPThese can be shown in a time phased planning chart like the one below: The time phase can be variable (weeks, days, etc).
25 MRP – Example 1Example 1a: A firm that produces wood shutters and bookcases has received two orders for shutters. One for 100 shutters and one for 150 shutters. The 100 unit order is due for delivery a the start of week 4. The 150 unit order is due for delivery at the start of week 8. Each shutter consists of 4 slatted wood sections and two frames. The wood sections are made by the firm and fabrication takes one week. The frames are ordered, and lead time is two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections in week 1 (at the beginning of).Determine the size and timing of planned orders (MRP) necessary to meet the delivery requirements where there is lot for lot ordering (e.g. order size is equal to net requirements).
26 MRP – Example 1 The product structure tree for a wood shutter Frames (2)WoodSections (4)Wood ShutterTherefore, we need to develop the MRP for Wood Shutters, Frames, and Wood Sections.
28 MRP – Example 1 First, develop a master schedule for the Shutters From delivery requirement
29 MRP – Example 1 Next, calculate the MRP for the Wood Shutters From MPS Order Releases offset for lead time of 1 week
30 MRP – Example 1 Next, calculate the MRP for the Frames Shutter Planned Order Release * 2 becomes Frames Gross RequirementOrder Releases offset for lead time of 2 weeks
31 MRP – Example 1 Next, calculate the MRP for the Wood Sections Shutter Planned Order Release * 4 becomes Sections Gross Requirement70 Scheduled at beginning of Week 1Order Releases offset for lead time of 1 week
32 Even though this template is provided, manual acuity will be necessary to solve some of the problems.
34 ED Worksheet21Step 1: Enter the product components and subcomponents in the table to the left The representation is shown in the product structure tree.Step 2: Enter the component quantity in the product structure tree.
35 ED WorksheetStep 3: Enter the lead time, on hand, and lot ordering rule (lot size if not lot for lot, and 1 for lot for lot ordering)Step 4: Enter the end item demand in the appropriate starting weekStep 5: Enter any scheduled receipts in the appropriate week435
36 2 1 2 ASSEMBLY Worksheet Steps Click the Calculate Assembly Paths macroChoose which assembly time paths you wish to show in the Assembly Time Chart.
37 MRP Worksheet1The MRP is automatically calculated for each component and subcomponent in the product structure tree. The levels are color coded according to their position in the product structure tree.2Here the MRP is shown for:WSFS3
38 MRP – Example 2Example 1b: A firm that produces wood shutters and bookcases has received two orders for shutters. One for 100 shutters and one for 150 shutters. The 100 unit order is due for delivery a the start of week 4. The 150 unit order is due for delivery at the start of week 8. Each shutter consists of 4 slatted wood sections and two frames. The wood sections are made by the firm and fabrication takes one week. The frames are ordered, and lead time is two weeks. Assembly of the shutters requires one week. There is a scheduled receipt of 70 wood sections in week 1 (at the beginning of).Determine the size and timing of planned orders (MRP) necessary to meet the delivery requirements with lot size ordering of320 units for frames70 units for wood sections
40 MRP – Example 2 The MRP for Wood Shutters is the same as in Example 1. From MPSOrder Releases offset for lead time of 1 week
41 MRP – Example 2 Next, calculate the MRP for the Frames On hand after meeting requirementsLot size order quantity for frames
42 MRP – Example 2 Next, calculate the MRP for the Wood Sections On hand after meeting requirementsLot size order quantity for sections (increments of lot size of 70)
43 ED WorksheetNote the changes in the lot sizing rules.
44 MRP WorksheetNote the changes in the MRP for each component.
45 MRP OutputsOutputs include Primary & Secondary Reports and Inventory transactions.Primary Reports. Planned Orders - amount and timing of future orders. Order Releases - authorizing the execution of planned orders. Changes - to planned orders, including revisions of due dates or order quantities and cancellations of ordersSecondary Reports. Performance control reports - evaluate system operations including deviations from plans and cost information. Planning reports - data assessing future material requirements. Exception reports - data on any major discrepancies
46 MRP UpdatesUpdates to the system are necessary any time changes occur to make sure that planners are always aware of the latest occurrences. These updates primarily involve inventory updates regarding number produced, number received, quality fallout, etc. (e.g. if you were supposed to receive 70 units and only received 65 your MRP would be inaccurate. It must be updated to show the latest information)Depending on the business urgency or situation these updates may occur either periodically or on a continuous basis Periodic update systems are called “regenerative” . Continuous update systems are called “net-change”
47 Other MRP Considerations Other considerations include. Safety stock. Lot sizing (lot for lot, EOQ, fixed period ordering, part-period ordering). Capacity Requirements Planning - the process of determining the short range capacity requirements.. Once the MRP is completed for all items that a company produces it has visibility of all the requirements for assemblies, sub-assemblies, materials, etc. At this point, the company can evaluate its ability to meet the requirements based on equipment and labor availability. Plans may be adjusted as a result of the capacity planning procedure.
48 resource requirements Capacity PlanningDevelop a tentativemaster productionscheduleUse MRP tosimulate materialrequirementsConvert materialrequirements toresource requirementsFirm up a portionof the MPSIs shopcapacityadequate?Cancapacity bechanged to meetRevise tentativeChangeYesNo
49 Benefits Of MRPWhen MRP implementations are made successfully, benefits have been seen in the areas of. Lower levels of in-process inventories. Ability to keep track of material requirements. Ability to keep up with the results of day to day operational effects with respect to the Master Production Schedule. Ability to evaluate capacity requirements generated by the Master Production Schedule. A means of prioritizing and allocating production resources
50 Requirements For Successful MRP Requirements for successful MRP implementations include but are not limited to. Proper planning for implementation. A computer system with software to handle the nuances of a business. Accurate and up-to-date.. Master Schedules.. Bills of Materials.. Inventory Records. Integrity of data transactions
51 MRP IIMRP II is an expanded approach to MRP to include other areas of the company in the planning process. The MRP II system is integrated with other management information systems in the company to provide a consolidated view of all company operations.MRP II Modules include. Forecasting . MRP. Customer Order Entry . Capacity Planning. Production Planning/ MPS . Shop Floor Control. Product Structure/BOM . Purchasing. Inventory Control . Accounting. Financial Analysis
52 MRP II Master production schedule Business Plan Material requirements planningFeedbackMarketingPlanFinancialPlanCapacity requirementsplanningNoFeasible?ProductionPlanYesPurchaseordersWorkordersFeasible?NoInventoryShop floorcontrolYesManufacture
53 Enterprise Resource Planning ERP software is marketed by many vendors.It includes the same modules as MRP II as well as financial and distribution modules.
54 Homework Read and understand all material in the chapter. Discussion and Review QuestionsRecreate and understand all classroom examples