Materials Requirement Planning (MRP) The approach to coordinated scheduling for dependent demand items. Introduction to lean

The Responsibility of Manufacturing activities 1. Design requirements and specifications and standards. 2. Be manufactured economically and environmentally friendly. 3. Build-in quality at each stage. 4. Production methods must be sufficiently flexible to respond to changing market demands, types of products, production rates, and production quantities and to provide on-time delivery to the customer. 5. New developments in materials, production methods, and computer integration of both technological and managerial activities. 6. Safety. Introduction to lean

Production Planning and Control Planning and control of the flow of materials through the manufacturing process 1. Production planning Production must be able to meet the demand of the marketplace a). Forecasting b). Master planning c). Material requirements planning d). Capacity planning 2. Implementation and control 3. Inventory management Introduction to lean

Production Planning System Introduction to lean

Material Requirements Plan (MRP) The quantities of each product group that must be produced in each period. The desired inventory levels. The resources of equipment, labor, and material needed in each period. Time Introduction to lean

a). How much should be produced each period? Example 1. Amalgamated Fish Sinkers makes a product group of fresh fish sinkers and wants to develop a production plan for them. The expected opening inventory is 100 cases, and they want to reduce that to 80 cases by the end of the planning period. The number of working days is the same for each period. There are no back orders. The expected demand for the fish sinkers is as follows: a). How much should be produced each period? b). What is the ending inventory for each period? c). If the cost of carrying inventory is $5 per case per period based on ending inventory, what is the total cost of carrying inventory? d). What will be the total cost of the plan? Introduction to lean

1 2 3 4 5 Total 110 120 130 600 Period Forecast (cases) Production Ending Inventory 100 Introduction to lean

Answer a). Total production required = 600 + 80 - 100 = 580 cases   Production each period = 580 / 5 = 116 cases Period 1 2 3 4 5 Total Forecast (cases) 110 120 130 600 Production 116 580 Ending Inventory 100 Introduction to lean

b). Ending inventory = opening inventory + production - demand   Ending inventory after the first period = 100 + 116 - 110 = 106 cases + - = Period 1 2 3 4 5 Total Forecast (cases) 110 120 130 600 Production 116 580 Ending Inventory 100 106 Introduction to lean

b). Ending inventory = opening inventory + production - demand   Ending inventory after the first period = 100 + 116 - 110 = 106 cases + - = Period 1 2 3 4 5 Total Forecast (cases) 110 120 130 600 Production 116 580 Ending Inventory 100 106 Introduction to lean

c). The total cost of carrying inventory would be:   (106 + 102 + 88 + 84 + 80)($5) = $2300 d). Since there were no stockouts and no changes in the level of production, this would be the total cost of the plan. Period 1 2 3 4 5 Total Forecast (cases) 110 120 130 600 Production 116 580 Ending Inventory 100 106 102 88 84 80 Introduction to lean

Master Scheduling Production plan: Families of products Master production schedule (MPS): End items. It breaks down the production plan into the requirements for individual end items, in each family, by date and quantity. The total of the items in the MPS should be equal to the total shown on the production plan. Master Scheduling

Master Scheduling The information needed to develop an MPS : The production plan Forecasts for individual end items Actual orders received from customers and for stock replenishment Inventory levels for individual end items Capacity restraints Master Scheduling

Example 1. The Hotshot Lightning Rod Company makes a family of two lightning rods, Models H and I. It bases its production planning on months. For the present month, production is leveled at 1000 units. Opening inventory is 500 units, and the plan is to reduce that to 300 units by the end of the month. The MPS is made using weekly periods. There are four weeks in this month, and production is to be leveled at 250 units per week. The forecast and projected available for the two lightning rods follows. Calculate an MPS for each item. Master Scheduling

Answer Production Plan: Period 1 2 3 4 Total Forecast 300 350 250 1200 Projected Available 500 450 Production Plan 1000 Master Scheduling

Forecasts for individual end items , Model H and I Period 1 2 3 4 Total Forecast 300 350 250 1200 Forecast for H 200 100 700 Forecast for I 50 150 500 Opening inventories are: Model H 200 Model I 300 Master Scheduling

Master Schedule: Model H: Period 1 2 3 4 Total Forecast 200 300 100 700 Projected Available 250 MPS Master Schedule: Model I: Period 1 2 3 4 Total Forecast 100 50 200 150 500 Projected Available 300 MPS 250 Master Scheduling

Master Schedule: Model H: Period 1 2 3 4 Total Forecast 200 300 100 700 Projected Available MPS Master Schedule: Model I: Period 1 2 3 4 Total Forecast 100 50 200 150 500 Projected Available 300 MPS Master Scheduling

The objectives in developing an MPS To maintain the desired level of customer service by maintaining finished-goods inventory levels or by scheduling to meet customer delivery requirements. To make the best use of material, labor, and equipment . To maintain inventory investment at the required levels. Master Scheduling

MRP Process MRP Process uses four basic techniques Exploding and offsetting Gross and net requirements Releasing orders Low-level coding and netting The most important thing to consider before making any decisions is lead time MRP

MRP Process Exploding requires a planner determine actual material required by multiplying usage by the quantity needed. Information is collected from the product tree. Offsetting takes information from explosion and plans production based upon lead-time and relationship to parent. MRP

MRP Process Planned order composes of two elements: Planned order receipt. Planned order release. Gross and Net requirements Net = Gross requirements – Available inventory MRP

Example 2:  Using the product tree and lead times shown in figure below, determine the planned order receipts and releases. There are 50 As required in week 5. Suppose there are 10 Bs available as well as the 20 As. MRP

A B C D E Part # Week 1 2 3 4 5 Gross Requirements Projected Available 20 Net requirements Planned Order Receipt Planned Order Release 20 30 50 B Projected Available 10 C Projected Available D E MRP

A B C D E Part # Week 1 2 3 4 5 Gross Requirements Projected Available 20 Net requirements Planned Order Receipt Planned Order Release 20 30 50 B Projected Available 10 10 C Projected Available D E MRP

A B C D E Part # Week 1 2 3 4 5 Gross Requirements Projected Available 20 Net requirements Planned Order Receipt Planned Order Release 20 30 50 B Projected Available 10 10 C Projected Available D E MRP

MRP Process Scheduled Receipts: Open Orders: Promised materials Become available to use immediately Open Orders: Incomplete orders that have not been fully satisfied Example, we completed the production of markers but do not have packaging Net Requirements (Modified) = gross requirements- scheduled receipts – available inventory MRP

Example 3:  Complete the following table. The lead time for the item is two weeks, and the order quantity is 200. What action should be taken? Week 1 2 3 4 Gross Requirements Scheduled Receipts Projected Available 150 Net requirements Planned Order Receipt Planned Order Release 50 250 200 100 MRP

Week 1 2 3 4 Week 1 2 3 4 Answer Gross Requirements Scheduled Receipts Projected Available 150 Net requirements Planned Order Receipt Planned Order Release 50 100 250 200 Week 1 2 3 4 Gross Requirements Scheduled Receipts Projected Available 150 Net requirements Planned Order Receipt Planned Order Release 50 100 250 200 MRP

Week 1 2 3 4 Week 1 2 3 4 Answer X Gross Requirements Scheduled Receipts Projected Available 150 Net requirements Planned Order Receipt Planned Order Release 50 100 250 200 50? X Week 1 2 3 4 Gross Requirements Scheduled Receipts Projected Available 150 Net requirements Planned Order Receipt Planned Order Release 50 100 200 250 150 MRP

Example 1 of MRP Given the following product tree, explode, offset, and determine the gross and net ret requirements. All lead times are one week, and the quantities required are shown in parentheses. The master production schedule calls for the completion of 100 As in week 5. There is scheduled receipt of 100 Bs in week 1. There are also 200 Fs available. Introduction to lean

Example 2 of MRP Given the following product tree, explode, offset, and determine the gross and net ret requirements. All lead times are one week, and the quantities required are shown in parentheses. The master production schedule calls for the completion of 100 As in week 4 and 50 in week 5. There are 300 Bs scheduled to be received in week 1 and 200 Ds in week 3. There are also 20 As available. The ordering quantity for all parts is lot-for lot. Introduction to lean

Example 3 of MRP Given the following product tree, explode, offset, and determine the gross and net ret requirements. All lead times are one week, and the quantities required are shown in parentheses. The master production schedule calls for the completion of 100 As in week 4 and 50 in week 5. There are 100 Cs scheduled to be received in week 2. Lot size for part E is 500. Other parts are all lot-for lot. Introduction to lean

References Dave Dixon (2004), The truce between lean and IT, IE Industrial Engineer, 36(6), 42-45. Charles M. Parks (2003), The Bare Necessities of Lean, IE Industrial Engineer, 35(8), 39-42. Introduction to lean