dependent inventory: material requirements planning ba 339 mellie pullman

Dependent Inventory: Material Requirements Planning

BA 339

Mellie Pullman

Role of the MPS(Master Production Schedule)

• Master production schedule:– Specifies the number & when to produce

each end item (the anticipated build schedule)

– The MPS is the result of the production The MPS is the result of the production planning processplanning process

Link between Total Monthly Group Plan and MPS

Month: January February MarchOutput: 200 300 400

Push Mowers 25 25 25 25Self-propelled 35 40Riding 12 13

January (weeks) 1 2 3 4

Total

Mowers

MPS

So Far ...

We have only considered Master scheduling

But we haven’t ordered the parts or materials!

We’ve scheduled 500 chairs to be ready five weeks from now . . .

. . . Now what?

Back supports (3)

Side rails (2)

Front legs (2)

Cross bars (2)

Seat

Material Needed for a Chair

Chair Structure Tree(aka “Bill of Materials”)

Chair

LegAssembly

Seat Back Assembly

Legs (2) Crossbar

Siderails (2)

Crossbar

BackSupports

(3)

ChairAssembly

(1 week)

Week 5Week 4

If final assembly takes one week, then we must startassembly at the beginningof Week 4 . . .

Lead-Time I

ChairAssembly

BackAssembly

LegAssembly

(1 week)

(1 week)

(1 week)

Seats (2 weeks)

Week 5Week 4Week 3Week 2Whichmeans thatthe majorsubassembliesand seats must bedone by thebeginningof Week 4 ...

Lead-Time II

ChairAssembly

BackAssembly

LegAssembly

(1 week)

(1 week)

(1 week)

Back Support (2 weeks)

Legs (2 weeks)

Side Rails (2 weeks)

Cross Bar (2 weeks)

Cross Bar (2 weeks)

Seats (2 weeks)

Week 5Week 4Week 3Week 2Week 1

Lead-Time III

Lead-Time Key Points

• To have finished chairs at the beginning of Week 5, we must begin production and order materials in Week 1.

• “Exploding” the bill of materials tells us when to order things.

• Not much we can do to adjust output of chairs for the next 4 weeks. Why?

Material Requirements Planning (MRP)

Requires:

1. Bill-of-Materials (BOM)

2. Inventory record

3. Master schedule

to determine what should be ordered when, and how much to order.

MRPDependent Demand

The demand for one item is related The demand for one item is related to the demand for another itemto the demand for another item

Given a quantity for the end item, Given a quantity for the end item, the demand for all parts and the demand for all parts and components can be calculatedcomponents can be calculated

In general, used whenever a In general, used whenever a schedule can be established for an schedule can be established for an itemitem

MRP is the common techniqueMRP is the common technique

Bills of Material

List of components, ingredients, List of components, ingredients, and materials needed to make and materials needed to make product product

Provides product structureProvides product structure Items above given level are called Items above given level are called

parentsparents

Items below given level are called Items below given level are called childrenchildren

BOM Example

BB(2)(2) Std. 12” Speaker kitStd. 12” Speaker kit CC(3)(3)

Std. 12” Speaker kit w/ Std. 12” Speaker kit w/ amp-boosteramp-booster11

EE(2)(2)EE(2)(2) FF(2)(2)

Packing box and Packing box and installation kit of wire, installation kit of wire,

bolts, and screwsbolts, and screws

Std. 12” Speaker Std. 12” Speaker booster assemblybooster assembly

22

DD(2)(2)

12” Speaker12” Speaker

DD(2)(2)


GG(1)(1)

Amp-boosterAmp-booster

33

Product structure for “Awesome” Product structure for “Awesome” ((AA))

AA

LevelLevel

00

BOM Example: 50 A needed

BB(2)(2) Std. 12” Speaker kitStd. 12” Speaker kit CC(3)(3)

Std. 12” Speaker kit w/ Std. 12” Speaker kit w/ amp-boosteramp-booster11

EE(2)(2)EE(2)(2) FF(2)(2)

Packing box and Packing box and installation kit of wire, installation kit of wire,

bolts, and screwsbolts, and screws

Std. 12” Speaker Std. 12” Speaker booster assemblybooster assembly

22

DD(2)(2)


DD(2)(2)


GG(1)(1)

Amp-boosterAmp-booster

33

Product structure for “Awesome” Product structure for “Awesome” ((AA))

AA

LevelLevel

00

Part B: 2 x number of As = (2)(50) = 100Part C: 3 x number of As = (3)(50) = 150Part D: 2 x number of Bs

+ 2 x number of Fs = (2)(100) + (2)(300) = 800Part E: 2 x number of Bs

+ 2 x number of Cs = (2)(100) + (2)(150) = 500Part F: 2 x number of Cs = (2)(150) = 300Part G: 1 x number of Fs = (1)(300) = 300

Accurate Records

Accurate inventory records are Accurate inventory records are absolutely required for MRP (or absolutely required for MRP (or any dependent demand system) to any dependent demand system) to operate correctlyoperate correctly

Generally MRP systems require Generally MRP systems require 99% accuracy99% accuracy

Outstanding purchase orders must Outstanding purchase orders must accurately reflect quantities and accurately reflect quantities and schedule receipts schedule receipts

Additional MRP Scheduling Terminology

• Gross Requirements: needed during each period.

• Scheduled Receipts: Existing orders that arrive at beginning of period.

• On-hand or available balance:

– Book: Inventory balance at end of each period.

• Net requirements: What is need to meet requirements and safety stock.

• Planned order receipt: planned orders that should arrive at beginning of planned period.

• Planned order release: Addresses lead time.

End items are also known as “Level 0” items

The MRP Process Starts with the MPS

Chairs Lead Time = 1 week

1 2 3 4 5 6 7MPS Due Date 0 0 0 0 500 400 400Start Assembly 0 0 0 500 400 400 0

Week

Where do the gross requirements come from?Do you understand the MRP logic?

The “Parent / Child” Relationship

ChairsLT = 1 week


SeatLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 500 400 400Planned Receipts 500 400 400Planned Order 500 400 400

Week

Week

Going Deeper…

ChairsLT = 1 week


SeatLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 500 400 400Planned Receipts 500 400 400Planned Order 500 400 400

Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000

Back AssemblyLT = 1 weekMinimum Order = 250 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled Receipts 250Projected On Hand 0 0 250 250 0 100 200 200Net Requirements 250 400 300Planned Receipts 250 500 500Planned Order 250 500 500

Week

Week

Week

Week

Do You Understand ...

• Why it is important to have an accurate BOM and accurate inventory information?

• Where gross requirements come from?

• The difference between planned and scheduled receipts?

Recall ...

Look at the “lumpiness” of demand for legs

Leg AssemblyLT = 1 weekMinimum Order = 1000 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 525 125 725 725Net Requirements 475 275Planned Receipts 1000 1000Planned Order 1000 1000

LegsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 2000 0 2000 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 2000 2000Planned Receipts 2000 2000Planned Order 2000 2000

Week

Week

If we order “lot-for-lot”

Much smoother demand for legs, lower average inventory

Leg AssemblyLT = 1 weekMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 0 500 400 400 0Scheduled ReceiptsProjected On Hand 25 25 25 25 0 0 0 0Net Requirements 475 400 400Planned Receipts 475 400 400Planned Order 475 400 400

LegsLT = 2 weeksMinimum Order = 1 1 2 3 4 5 6 7Gross Requirements 0 0 950 800 800 0 0Scheduled ReceiptsProjected On Hand 0 0 0 0 0 0 0 0Net Requirements 950 800 800Planned Receipts 950 800 800Planned Order 950 800 800

Week

Week

Elements of JIT as a Philosophy

Setup TimeReduction

Small LotSizes

JIT Deliveryfrom Suppliers

Suppliers'Quality Level

KANBANSystem

RepetitiveMPS

DailyScheduleDiscipline

"Pull"Production

System

Product DesignSimplicity

Equipment &Facility Layout

Multi-functionWorkers

Small GroupProblemSolving

EmployeeTraining

PreventiveMaintenance

JIT

• A “pull” production system• A physical (normally visual) control

system• Normally composed of cards and

containers (production card and withdrawal card), but can be any type of signal

• Number of containers

Kanban System

C

DTn

The Kanban System

• The Kanban system uses simple cards or signals to strictly control production

• The basic idea is that no station is permitted to produce more than is immediately required by the succeeding station

• This simple idea prevents the buildup of inventory

• No computer is required!

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Kanban System

Reducing Setup Times and Lot Sizes

• Reducing setup times:– increases available capacity– increases flexibility– reduces inventory

• Reduce setup times and run times simultaneously to reduce lot sizes and throughput times

• Single-digit Setup Times

• Small lots require short setups!

Suppliers

• Very close relationship with suppliers

• Frequent deliveries demanded from suppliers

• Sole-sourcing

• Integrated supplier programs

• Deliveries to production line

• No inspection—high quality

Comparison of MRP and JIT

• Pull versus Push production systems• Situations for comparing MRP and JIT:

– Pure repetitive manufacturing situation; JIT works best

– A batch process; JIT works well with cellular manufacturing

– A job shop; MRPII with some elements of JIT• MRP assumes the present system is correct and

seeks to make the best of that system.• JIT seeks to change the system to make it better.

The Traditional Push System

• In traditional manufacturing, an item is released for production at a specified time, with an associated due date generated by MRP.

• The item moves through a sequence of operations

• When one operation is finished, the item is “pushed” to the next operation

• Finally, the product is pushed to inventory, to meet the demand forecast

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The Pull System• The pull system focuses on the output of

the system rather than the input.• Finished products are “pulled” from the

final operation in response to firm customer orders.

• This leads to a chain reaction, with each station pulling material from its preceding station.

• JIT uses the “Kanban” system to control the flow of material with very little work-in-process inventory.

17-17-3333

dependent inventory: material requirements planning ba 339 mellie pullman

Documents

week week

weeks week

week seats

beginning of week

chair slide

assembly leg assembly

speaker booster assembly

chair assembly