Download - 2. MRPandCRP
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CAPACITY REQUIREMENTS PLANNING (CRP)
ADM 3301/Rim Jaber
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CRP and the Planning Process
Change master production schedule?
Execute material plans
Execute capacity plans
Detail capacity plan
Material requirements plan
Master production schedule
Aggregate production plan
Change requirements?
Change capacity?
RealisticNo
Yes
Change production plan?
Is capacity plan being
met?
Is execution meeting
the plan?
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CAPACITY REQUIREMENTS PLANNING (CRP) CRP is a process which determines
the expected capacity requirements for each period at each work station, given the MRP production schedule.
Production capacity per period is often limited. New MRP schedules must be
developed to obtain a feasible plan given the capacity constraints at all levels.
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CAPACITY REQUIREMENTS PLANNING (CRP)
The work loads of the work stations for all planning periods may need to be balanced: use of overtime; selection of alternate work centers to
perform tasks; use of external capacity (subcontracting); leveling of production: inventory vs.
stockout; renegotiation of due dates, and re-
scheduling.
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EXAMPLE 4 Going back to Example 4 of Aggregate
Planning, the optimal production plan required (obtained from the Linear Programming optimal solution): 180 units manufactured during month 1, 284 units manufactured during month 2,
280 regular time and 4 Over time 320 units manufactured during month 3, 352 units manufactured during month 4.
Demand for Product A for the next four months is 255, 294, 321, and 301 units; beg. Inv.= 85 units and end. Inv. = 50 units
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RECAPP: EXAMPLE 4 – Relevant Data Demand for product A for the next four months
is 255, 294, 321 and 301 units. The company has 30 employees who work an
average of 20 days per month, 8 hours a day, at a rate of $20 per hour. However, due to a 1-week lead time in the production process, there are only 15 production days left in Month 1. It is possible to hire more, or to lay off some workers, and these decisions are implemented at the beginning of each month.
Each unit requires 20 hours of labour, and overtime is limited to no more than 40 hours per employee per month (30 hours for Month 1) and costs $30 per hour. Initial inventory is 85 units and the company wishes to have a final inventory of 50 units at the end of the fourth month.
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Subcontracting (the work only: the company will provide the raw materials) is possible, but external capacity is limited to 12, 15, 15 and 17 units for the next four months respectively.
Costs for this problem are:- subcontracting: $650 per unit - inventory holding: $125 per unit per month- backlog: $250 per unit per month
(one month maximum)- hiring: $500 per worker- laying off: $750 per worker- raw materials: $500 per unit.
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Example 4: OPTIMAL SOLUTION (Using LP)
x1 = 180, x2 = 280, x3 = 320, x4 = 352, y2 = 4, s1 = 10, s4 = 50, r3 = 1, v2 = 5, v3 = 5, v4
= 4. Manufacture at regular time 180, 280, 320 and
352 units in months 1, 2, 3, and 4, respectively, as well as 4 units at over-time in month 2.
Keep in inventory 10 units at the end of month 1 and 50 units at the end of month 4.
Backorder 1 unit in month 3. Hire 5 workers in month 2, 5 in month 3 and 4 in
month 4.ADM 3301/Rim Jaber
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Bill of Materials (BOM) Product A is made up of 1 unit of
component B, and 1 unit of part C. Component B is made up of 2 units of
part C and 3 units of part D. Part C is made of 1 unit of raw
material E and 1 unit of raw material F.
Part D is made of 2 units of raw material E
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BOM: PRODUCT STRUCTURE TREE
A
B(1)
C(1)C(2) D(3)
E(1) F(1) E(2) E(1) F(1)
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INITIAL INVENTORIES, PROCESSING AND LEAD TIMES
Item Lead time(weeks)
Processingtime
Initialinventory
A 1 20 h 85
B 1 4 h 40
C 1 5 h 140
D 1 3 h 200
E 1 - 450
F 1 - 150
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MASTER PRODUCTION SCHEDULE (MPS) Split Periods 1 to 4 (month) into Weeks
1 to 16 the production plan is split equally
amongst the four weeks of each period (Due to a 1-week lead time in the production process, there are only 15 production days left in month 1 3 production weeks for month 1). 180/3 = 60 284/4 = 71 320/4 = 80 352/4 = 88 ADM 3301/Rim Jaber
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MASTER PRODUCTION SCHEDULE
Week 1 2 3 4
Requirement
Production
85
60
60
60
60
60
60
71
Week 5 6 7 8
Requirement
Production
71
71
71
71
71
71
71
80
Week 9 10 11 12
Requirement
Production
80
80
80
80
80
80
80
88
Week 13 14 15 16
Requirement
Production
88
88
88
88
88
88
88
???
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Material Requirements Planning (MRP) Refer to the Excel file. Gross Requirements:
For product A (end item) correspond to the weekly requirement quantities shown in the MPS.
For B, C, D, E, and F (components) these quantities are derived from the Order releases of their immediate “parents”
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Material Requirements Planning (MRP)
Available at week 1 = Initial Inventory Available at week t (where t >= 2):
Available(t) = Max(Available(t-1) – Gross Req.(t-1), 0) Net Requirements
Net Req.(t) = Max(Gross Req.(t)-Available(t), 0) Order Receipts(t) = Net Req.(t) Order releases = orders Receipts offset by
lead time If Net Req.(1) >= 0 what does this implies?
Order Receipts(1) = 0 Net Req.(1) = 0 for item A, B, C, D, E, and F
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Capacity Requirements Planning (CRP) (Excel File)
Inputs Order releases from MRP (“Units Produced” in
Excel file) Job times, shop load…
Output Conversion of quantity requirements into labor and
machine requirements. Compare these capacity requirements with
available department capacity to determine the extent to which these product utilizes capacity.
Underutilization unused capacity can be used for other jobs
Overutilization available capacity is insufficient to handle requirementsADM 3301/Rim Jaber
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SYSTEM NERVOUSNESS The term system nervousness
describes the way a system might react to changes.
Changes to the MPS in future periods cause a chain reaction of changes in material requirements in earlier periods. If the cascade of changes continues into past periods, shortages may result.
This kind of chain reaction can be prevented by freezing the MPS. ADM 3301/Rim Jaber
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TIME FENCES Time fences attempt to achieve a
balance by requiring higher level authorization for changes to the MPS that are closer in time, but allowing changes further removed in time to be authorized by lower levels of management.
Time fences is a series of time intervals during which order changes are allowed or restricted.ADM 3301/Rim Jaber
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TIME FENCES Frozen
No schedule changes allowed within this window
Moderately Firm Specific changes allowed within product
groups as long as parts are available Flexible
Significant variation allowed as long as overall capacity requirements remain at the same levels ADM 3301/Rim Jaber
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Computer system Mainly discrete products Accurate bill-of-material Accurate inventory status
99% inventory accuracy Stable lead times
© 1984-1994 T/Maker Co.
MRP REQUIREMENTS
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Extensions of MRP Closed-Loop MRP
MRP system provides input to the capacity plan, MPS, and production planning process
Capacity Planning MRP system generates a load report
which details capacity requirements This is used to drive the capacity
planning process Changes pass back through the MRP
system for rescheduling21© 2011 Pearson Education, Inc. publishing as Prentice Hall
Material Requirements Planning II
Once an MRP system is in place, inventory data can be augmented by other useful information Labor hours Material costs Capital costs Virtually any
resource
System is generally called MRP II or Material Resource Planning
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Material Resource PlanningWeek
5 6 7 8A. Units (lead time 1 week) 100
Labor: 10 hours each 1,000Machine: 2 hours each 200Payable: $0 each 0
B. Units (lead time 2 weeks, 2 each required) 200Labor: 10 hours each 2,000Machine: 2 hours each 400Payable: Raw material at $5 each 1,000
C. Units (lead time 4 weeks, 3 each required) 300Labor: 2 hours each 600Machine: 1 hour each 300Payable: Raw material at $10 each 3,000
Table 14.4
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Closed-Loop MRP System
Figure 14.8
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Closed-Loop MRP System
Figure 14.8
Capacity Planning
Resource planningFirst cut capacity
No
Capacity requirements (detailed)
Yes
Material requirements
(detailed)
Priority Planning
Desired master
production scheduleRealistic?
Production plan
Planning
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Closed-Loop MRP System
Figure 14.8
Capacity Control(work center throughput)
Priority Control(detailed scheduling)
Execution
Yes
Execute the plan
No No
Input/output report
Isaverage capacity adequate
?
Dispatch list
Isspecific capacity adequate
?
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Resource Requirements Profile
Figure 14.9
Lot1
Lot2 Lot
4
Lot7
Lot8Lot
3Lot5
Lot10 Lot
13
Lot9 Lot
12
Lot14 Lot
16
Lot6
Lot15
Lot11
Available capacity
Capacity exceeded in
periods 4 & 6
Lot1
Lot2 Lot
4
Lot7
Lot8Lot
3Lot5
Lot10 Lot
13
Lot9 Lot
12
Lot14 Lot
16
Lot6
Lot15
Lot11
Available capacity
Lot 6 “split”Lot 11 moved200 –
150 –
100 –
50 –
–1 2 3 4 5 6 7 8
Period(a)
Sta
ndard
labor
hours
200 –
150 –
100 –
50 –
–1 2 3 4 5 6 7 8
Period(b)
Sta
ndard
labor
hours
27© 2011 Pearson Education, Inc. publishing as Prentice Hall
Resource Requirements Profile
Figure 14.9
Lot1
Lot2 Lot
4
Lot7
Lot8Lot
3Lot5
Lot10 Lot
13
Lot9 Lot
12
Lot14 Lot
16
Lot6
Lot15
Lot11
Available capacity
Capacity exceeded in
periods 4 & 6
Lot1
Lot2 Lot
4
Lot7
Lot8Lot
3Lot5
Lot10 Lot
13
Lot9 Lot
12
Lot14 Lot
16
Lot6
Lot15
Lot11
Available capacity
Lot 6 “split”Lot 11 moved200 –
150 –
100 –
50 –
–1 2 3 4 5 6 7 8
Period(a)
Sta
ndard
labor
hours
200 –
150 –
100 –
50 –
–1 2 3 4 5 6 7 8
Period(b)
Sta
ndard
labor
hours
It is also possible to split lots 6 and 11 and move them earlier in the schedule. This
would avoid any potential problems with late orders but would increase inventory holding
cost.
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Smoothing Tactics1. Overlapping
Sends part of the work to following operations before the entire lot is complete
Reduces lead time 2. Operations splitting
Sends the lot to two different machines for the same operation
Shorter throughput time but increased setup costs
3. Order or lot splitting Breaking up the order into smaller lots and
running part ahead of schedule 29
MRP in Services Some services or service items
are directly linked to demand for other services
These can be treated as dependent demand services or items Restaurants Hospitals Hotels
30© 2011 Pearson Education, Inc. publishing as Prentice Hall
Uncooked linguini #30004
Sauce #3000
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Veal #3000
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MRP in Services
Chef;Work
Center #1
Helper one;Work
Center #2
Asst. Chef;Work
Center #3
Cooked linguini #20002
Spinach #20004
Prepared veal and sauce #20003
(a) PRODUCT STRUCTURE TREE Veal picante #10001
Figure 14.10
31© 2011 Pearson Education, Inc. publishing as Prentice Hall
MRP in Services
(b) BILL OF MATERIALS
Part Number Description Quantity
Unit of Measure
Unit cost
10001 Veal picante 1 Serving —
20002 Cooked linguini 1 Serving —
20003 Prepared veal and sauce 1 Serving —
20004 Spinach 0.1 Bag 0.94
30004 Uncooked linguini 0.5 Pound —
30005 Veal 1 Serving 2.15
30006 Sauce 1 Serving 0.80 32© 2011 Pearson Education, Inc. publishing as Prentice Hall
MRP in Services
(c) BILL OF LABOR FOR VEAL PICANTE
Labor Hours
Work Center Operation Labor Type Setup Time Run Time
1 Assemble dish Chef .0069 .0041
2 Cook linguini Helper one .0005 .0022
3 Cook veal and sauce
Assistant Chef.0125 .0500
33© 2011 Pearson Education, Inc. publishing as Prentice Hall
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Product Structure, Bill of Materials, Bill of Labor for Veal Picante
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Distribution Resource Planning (DRP)
Using dependent demand techniques through the supply chain
Expected demand or sales forecasts become gross requirements
Minimum levels of inventory to meet customer service levels
Accurate lead times Definition of the distribution
structure35© 2011 Pearson Education, Inc. publishing as Prentice Hall
Enterprise Resource Planning (ERP)
An extension of the MRP system to tie in customers and suppliers1. Allows automation and integration
of many business processes
2. Shares common data bases and business practices
3. Produces information in real time
Coordinates business from supplier evaluation to customer invoicing 36© 2011 Pearson Education, Inc. publishing as Prentice Hall
Enterprise Resource Planning (ERP)
ERP modules include Basic MRP Finance Human resources Supply chain management (SCM) Customer relationship
management (CRM)
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ERP and MRP
Figure 14.11
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ERP and MRP
Figure 14.11
Customer Relationship Management
Invoicing
ShippingDistributors,
retailers,and end users
Sales Order(order entry,
product configuration,
sales management)
39ADM 3301/Rim Jaber
Table 13.6
Bills of Material
Work Orders
Purchasingand
Lead Times
Routingsand
Lead Times
Master Production Schedule
Inventory Management
ERP and MRP
Figure 14.11
MRP
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ERP and MRP
Figure 14.11
Supply Chain Management
Vendor Communication(schedules, EDI, advanced shipping notice,
e-commerce, etc.)
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ERP and MRP
Figure 14.11Table 13.6
Finance/Accounting
General Ledger
Accounts Receivable
Payroll
Accounts Payable
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Enterprise Resource Planning (ERP)
ERP can be highly customized to meet specific business requirements
Enterprise application integration software (EAI) allows ERP systems to be integrated with Warehouse management Logistics Electronic catalogs Quality management 43
Enterprise Resource Planning (ERP)
ERP systems have the potential to Reduce transaction costs Increase the speed and accuracy of
information
Facilitates a strategic emphasis on JIT systems and integration
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Advantages of ERP Systems
1. Provides integration of the supply chain, production, and administration
2. Creates commonality of databases
3. Can incorporate improved best processes
4. Increases communication and collaboration between business units and sites
5. Has an off-the-shelf software database
6. May provide a strategic advantage45© 2011 Pearson Education, Inc. publishing as Prentice Hall
Disadvantages of ERP Systems
1. Is very expensive to purchase and even more so to customize
2. Implementation may require major changes in the company and its processes
3. Is so complex that many companies cannot adjust to it
4. Involves an ongoing, possibly never completed, process for implementation
5. Expertise is limited with ongoing staffing problems
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SAP’s ERP ModulesFigure 14.12
Cash to CashCovers all financial related activity:Accounts receivable General ledger Cash managementAccounts payable Treasury Asset management
Dock to DispatchCovers internal inventory management:Warehousing Forecasting Physical inventoryDistribution planning Replenishment planning Material handling
Promote to DeliverCovers front-end customer-oriented activities:MarketingQuote and order processingTransportationDocumentation and labelingAfter sales serviceWarranty and guarantees
Procure to PayCovers sourcing activities:Vendor sourcingPurchase requisitioningPurchase orderingPurchase contractsInbound logisticsSupplier invoicing/ matchingSupplier payment/ settlementSupplier performance
Design to ManufactureCovers internal production activities:Design Shop floor engineering reportingProduction
Contract/project engineering
managementPlant Subcontractor maintenance
managementRecruit to HireCovers all HR- and payroll-oriented activity:Time and attendance PayrollTravel and expenses
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ERP in the Service Sector
ERP systems have been developed for health care, government, retail stores, hotels, and financial services
Also called efficient consumer response (ECR) systems
Objective is to tie sales to buying, inventory, logistics, and production
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