Presentation on theme: "Topics to be Covered 1. Material Requirement Planning"— Presentation transcript:
1 Topics to be Covered 1. Material Requirement Planning 2. How Does MRP Fit in the Production Cycle3. Inputs into MRP4. MRP Processing5. MRP Issues6. Lot Sizing7. Benefits and Limitations of MRP8. MRP II and Closed Loop MRP9. Keys to a Successful Implementation
2 What we have learned ! What is the question we need to answer now? Supply Chain:setup of our facility, suppliers, transportation and distributionProcess Planning:defined and arranged our process in terms of layout and orderpenetration (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
3 What have we learned to date about building this machine. Make or buyLocation of facilityProducts to offerProcess we will use (batch) per videoForecast of end itemEstablish labor need for end itemEstablish source of productsEstablish when we will obtain / produce each end item.What is the next stepDefine the qty of dependent partsDefine when we will begin to build or buy.What is the purpose of MRP?
4 Material Requirement Planning 1. MRP is a computer-based information system designed to handle ordering andscheduling of dependent -demand inventories.2. MRP is used to breakdown the demand requirements for each finished good intoits 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 thesource 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 foreach dependent items.
5 How Does MRP Fit In The Production Cycle. Make or BuyForecastingFacility DefinitionResource PlanningAggregate PlanMaster Production ScheduleRough Cut CapacityPlanningMRPDetailed CapacityPlanningPurchasingShop Floor Control
6 Inputs Into MRP 1. Master Production Schedule 2. Bill Of Materials 3. Inventory Records File
7 MPS: Example Aggregate Production Plan Master Production Schedule ScheduledMan hoursAggregate Production PlanManhrs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TotalThe manhours represent the total scheduled manhours identified in the aggregate plan.The MPS is the products and quantity that can be built within these scheduled hours.Model Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TotalProducts inthat monthMaster Production Schedule
8 Master Production Schedule 1. MPS states which end items are to be produced, when these end items areneeded 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 Orders4. 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 producethe 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 tasks7. MRP can not distinguish between a feasible and a non-feasible MPS.Some products take longer than one year from order time to completion.MRP horizon should cover this entire timeThe time buckets dependent upon the product.Some time in hours, days, weeks or months
9 Bill Of Material1. Contains a listing of all of the assemblies, subassemblies, parts and raw materialsnecessary 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 moreChild components.4. A BOM will identify all components from end item through raw material orcomponents 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 betweenengineering and production.- Engineering Change Notice
10 Bill Of Material (BOM) Example Office ChairBack CushionSeat CushionChair FrameFasteners (8)AdjusterMechanismBase UnitWheels (6)Fasteners (3)Indented Bill Of MaterialItem Part Number QtyOffice ChairBack CushionSeat CushionChair FrameAdjuster MechanismBase UnitWheelsFastenersFasteners
11 Inventory Records File Used to store supplier information and the status of each item by timeperiod.2. Gross requirements, schedule receipts, amount on-hand3. Supplier name. location, lead time, pricing & lot size.4. This step is the feedback for the system to highlight changes toscheduling.
12 Example from BKThere is an item master for each part and subassembly produced either internally or externally.Introduce modelThis is the document that was used to make a change to the MRP.An addition record included all the supplier information.
13 MRP ProcessingIdentify 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 producedinternally 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 toarrive 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 agiven component/raw material is placed- If the component is produced internally then the Release identifies when the same levelcomponent 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 bereceived.- 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.Description of how to process MRP.
14 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, experienceUpdating The MRP System1. 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 onlyareas of change. ( more frequent; once or more a day)MRP Software Types: BPICS, KBM, SAPWhat is safety stock: Used in cases where demand or production is variable beyond our control.
15 MRP Outputs Time Fences Series of time intervals during which order changes are allowed or restricted.- Work Order release Purchase order release ReschedulingMRP OutputsProvides 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 & quantitiesSecondary Reports concern performance- evaluate system operation (missed deliveries & stock outs)- planning reports - forecasting future inventory requirements- exception reports - attributes to major discrepanciesLoad ReportsCompares known and future capacity requirementsTypically requires a separate module- Mini MRP: a review of current inventory and planned receipts to determine what isneeded for a real or hypothetical demand.
17 Lot Sizing1. Goal is to minimize the setup/ordering cost & holding costs.2. There can be advantages in grouping part orders3. Problem is that by grouping middle and upper level parts you have acascading effect on the lower level parts.- so it is important to consider all inventory requirements below thepart/subassembly being considered for lot sizing.4. Types of Lot Sizing Techniques.- Lot by Lot- EOQ- Wagner-Whitlin- Silver-Meal- Least Cost- Part-PeriodAll methods, except for Lot by Lot, consider the relationship betweenholding costs and ordering costs.
18 Limitations of MRP Best used for Batch and job shop applications Holding costs dependent on variations in system.Inability to track material requirementsInability to determine capacity requirements given a master schedule.Lead Time is fixedNecessary to Have:- computer and software- accurate way to maintain changes to parts BOM- integrity of inventory records7. Inability to react to short term or system changes.
19 MRP II and Closed Loop MRP Manufacturing Resources Planning1. 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 ofproduction along with the other impacted areas in a common set ofgoals.3. Can be used to simulate effects of different manufacturing plans.4. Provides each function with insight into the other functionsperformance and plans.Closed Loop MRP1. Uses capacity planning and feedback to improve the ability of theproduction system to complete work as planned.2. Timely feedback allows planners time to generate alternative plans.
20 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.
21 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 functionalPlanning begins from Sales planning, thru MRP to the accounts receivable.See Table 16.5 pg 421ERP Video