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MRP as a Planning Tool in QADDon Lindsey, CFPIM, CIRM
Business Analyst
GenMark Diagnostics Inc.
May 10, 2018
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Don Lindsey, CFPIM, CIRM
Business Analyst
GenMark Diagnostics Inc.
Introduction
MRP as a Planning Tool in QAD
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The role of MRP in ERP
Basic methods for calculating time-phased material
requirements
The location of data elements within the QAD menu structure
How to optimize MRP data planning elements
By the End of this Session, You Should Understand
MRP as a Planning Tool in QAD
4
Three Objectives for MRP
MRP as a Planning Tool in QAD
The goal of MRP
is to plan delivery of the right item, in the right
quantity, at the right time
Ensure materials are available for production and products
are available for delivery to customers
Maintain the lowest possible material and product levels in
inventory
Plan manufacturing activities, delivery schedules and
purchasing activities
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The Principle of Exception
MRP as a Planning Tool in QAD
Only manage that which goes
Wrong, not that which goes Right
The Role of MRP in ERP
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MRP as a Planning Tool in QAD
The Head
The Heart
The Hands
Top
Management
Planning
Operations
Management
Planning
Operations
Management
Execution
Business Planning
Sales Planning
Production Planning
Master Scheduling
Material Requirements Planning
Capacity Requirements Planning
Purchasing
Shop Floor Control
Performance Management
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Product oriented
- Based on BOM relationships
- Versus item by item
orientation
Forward looking
- Based on MPS
- Versus historical usage
orientation
- Versus "launch and forget"
Characteristics of MRP
MRP as a Planning Tool in QAD
Time phased
- Based on shop calendar and
planning periods
- Versus next order orientation of order
point
Flexible
- Continually re-plans priorities based
on changing requirements
- Versus "launch and expedite"
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Demand data- MPS
- Independent demand (optional)
Forecast
Customer orders
Bill of material- Quantity per
- Scrap factors
Shop order data- Shop calendar
- Due Date
- Open material requirements (allocations)
Inventory records- On hand, on order
Purchase and assembly
order data- Allocations
- Order policy, lot size, safety stock
quantity, etc.
- Lead time
- Due date
- Open line items
Computer
MRP Prerequisites
MRP as a Planning Tool in QAD
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Independent demand
- Depends on external factors
- Must be forecast
Dependent demand
- Depends on demand for another item
- Should be calculated
Dependent vs. Independent Demand
MRP as a Planning Tool in QAD
Some items may have both independent
and dependent demand
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MRP Information Flow
MRP as a Planning Tool in QAD
MPS
Dependent Demand
Customer Orders
Forecast
Independent Demand
BOM
Shop Calendar
Inventory Status
Open Shop Orders
Open PO’s
Action NoticesPlanned Shop
Orders
Planned
Purchase Orders
MRP
Existential phenomenology
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
PERIODS
FINAL
ASSY
SUBASSY A
SUB B
PURCH A
PURCH B
SUBASSY D
SUBASSY C
PURCH C
PURCH D
SUBASSY E
PURCH E
PURCH F
PURCH G
PURCH H Due
Date
Start
Date
Due
Date
Start
Date
Offset
CMLT - Cumulative Manufacturing Lead Time
Bill of
Material
turned 90
degrees
MRP System Basis
MRP as a Planning Tool in QAD
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MRP Basic Processing Steps
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MRP as a Planning Tool in QAD
Determine Gross
Requirements
By low level code
By item
By time period
Determine Available
Inventory
Calculate Net
Requirements
Calculate Planned
Order Receipts
Offset by
Lead Time
Write
Action Messages
Dependent demand,
independent demand,
allocations
On hand, projected on hand,
scheduled receipts
Net rqmts = gross
requirements - available
inventory
Based on:Order policyLot size rulesEtc.
E.g.,Launch orderReschedule open orderCancel open order
100
60 20 80 50 35 35 90 90
20
100
100
(-10)
25
X Y
1 2 1 3
LEAD TIME = 4 LEAD TIME = 6 MASTER SCHEUDLE
PLANNED ORDERS FOR "X" PLANNED ORDERS FOR "Y" FOR "1"
PERIODS 5 6 7 8 9 10 11 8 9 10 11 12 13 1 2 3
PART "1"
ON HAD 95
ALLOCATED 20
SAFETY STOCK 10
LEADT IME 3 PERIODS
LOTSIZE 100
1 2 3 4 5 6 7 8 PERIODS
GROSS REQUIEMENTS
SCHEUDLED RECEIPTS
PROJECTED ON HAND
NET REQUIREMENTS
PLANNED ORDER RECEIPTS
PLANNED ORDER RELEASES
40
15
15
15
40
40
30
30 15
45
30
15
15
The MRP Process
MRP as a Planning Tool in QAD
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=100
100
2
25
27
73
5
25
30
43
3
0
3
40
100
0
100
0
REQUIRED
GROSS REQUIREMENT
LEVEL
0 E FINAL GROSS REQUIREMENTS
PARENT ON HAND
+ SCHEDULED RECEIPTS
= TOTAL AVAILABLE
NET REQUIREMENTS
COMPONENT
1 A(1) ASSEMBLY GROSS REQUIREMENTS
PARENT ON HAND
+ SCHEDULED RECEIPTS
= TOTAL AVAILABLE
NET REQUIREMENTS
COMPONENT
2 B(1) SUB ASSEMBLY GROSS REQUIREMENTS
PARENT ON HAND
+ SCHEDULED RECEIPTS
= TOTAL AVAILABLE
NET REQUIREMENT
COMPONENT
3 C(1) PART GROSS REQUIREMENTS
PARENT ON HAND
+ SCHEDULED RECEIPTS
= TOTAL AVAILABLE
NET REQUIREMENT
COMPONENT
4 R(.X) RAW MATERIAL
100
73
40
43
MRP Explosion & Netting
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You're going to do what it says
You told it the truth
It is easier to expedite an order than to place a new order
If told that it would take XXX Days to complete a work order or
place a purchase order, then it will be accomplished in that
time
If MRP tells you to expedite or delay scheduled receipts, it
assumes you were successful
MRP Assumes
MRP as a Planning Tool in QAD
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Discrete (lot for lot)
- Order quantity = exact net requirement for period
Fixed order quantity
- Order quantity = fixed lot size
- Lot size varies by item
Period order quantity
- Order quantity = exact net requirements for “n”
periods
- Number of periods varies by item
Order quantity modifiers
- Sometimes specified with fixed order policy or
period order quantity
- Order minimum quantity
- Order maximum quantity
- Order multiple quantity
Order Policies and Modifiers
MRP as a Planning Tool in QAD
MRP Exercise: Order Policies and Modifiers
ARM ASSEMBLY 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts 50
Proj. On-Hand (50)
Net Requirements
Planned Order Receipts
Planned Order ReleasesPlanned Order Releases
ITEM: CHAIR 1 2 3 4 5 6 7 8 9 10
MPS Orders 20 30 10 20 5 10 25
ARM REST 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
Proj. On-Hand (10)
Net Requirements
Planned Order Receipts
Planned Order ReleasesPlanned Order Releases
40 60 20 40 10 20 50
10 10 0 -2020
25
25
5 -3535
50
50
15 5 -1515
25
25
10 10 -4040
50
50
10 10
25 50 25 50
10 10 -15
15
9090
75 25 25 0 0 -50
50
6060
1010 10
Arm Assy (2)
Chair
Arm Rest (1)
Arm Assy Arm Rest
Order Policy: Fixed Order Qty Period Order Qty
Lead Time: 1 week 1 week
Safety Stock: 0 0
On hand: 50 10
Lot size 25 0
# Periods for POQ 0 4
Order minimum 25 60
Order multiple 25 0
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"Uncashed requisitions"
The shop order or
customer order is
released, but the
material is not yet issued
MRP handles allocations
as additional gross
requirements for the
allocated item
Allocations
MRP as a Planning Tool in QAD
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Safety stock at the sub-assembly
level in MRP can- Cause the system to carry dead inventory
- Call for material to be received earlier than
needed
- Cause loss of MRP credibility
Recommendation- Carry safety stock at MPS level
- MRP will then explode material requirements
for finished goods safety stock accordingly
- Carry safety stock on purchased items where
supply or lead time is erratic
Safety Stock
MRP as a Planning Tool in QAD MRP handles safety stock as an additional net
requirement in any period where projected
on-hand crosses below the safety stock level
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The ratio of usable output from a process
relative to its input
Applies to the parent
Increases the planned order quantity for
the parent
E.g., during manufacture of the arm
assembly, 5% are defective
- Manufacturer of arm assemblies has a 95% yield
- To produce 200 arm assemblies, we must start
building 211
- 200 arms / 95% = 210.52, rounded up to 211
Recorded at item level
Yield
MRP as a Planning Tool in QAD
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Percent of a component that is wasted
during assembly of a specific parent
Increases the gross requirement of the
component when exploding planned
order for the parent
E.g., during assembly of chairs, 10% of
the arms are wasted
- To produce 100 chairs, must issue 223 arms
- 100 chairs * 2 arms = 200 arms
- 200 arms / 90% = 222.22 rounded up to 223
Recorded at BOM level
Scrap
MRP as a Planning Tool in QAD
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Example: Scrap Factor
MRP as a Planning Tool in QAD
ARM ASSEMBLY 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
Proj. On-Hand (100)
Net Requirements
Planned Order Receipts
Planned Order ReleasesPlanned Order Releases
ITEM: CHAIR 1 2 3 4 5 6 7 8 9 10
MPS Orders 50 50 50
Order Policy = Lot for Lot Lead Time = 1 week Safety Stock = 0 On-Hand = 100
Scrap Factor = 10% (whenever chairs are assembled, 10% of the arms are scrapped)
Arm Assy (2)
Chair
112 112 112
100 -12
12
12
12
0 0 0 -112
112
112
112
0 0 0 -112
112
112
112
0 0 0
Answer
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MRP as a Planning Tool in QAD
Example:
Yield
Factor
ARM ASSEMBLY 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts
Proj. On-Hand (100)
Net Requirements
Planned Order Receipts
Planned Order ReleasesPlanned Order Releases
ITEM: CHAIR 1 2 3 4 5 6 7 8 9 10
MPS Orders 50 50 50
Order Policy = Lot for Lot Lead Time = 1 week Safety Stock = 0 On-Hand = 100
Arm Assy (2)
ChairYield Factor = 95% (i.e., Whenever arms are assembled,
5% of the arms are unusable )
Scrap Factor = 10%
Arm Rest (1)
ARM REST 1 2 3 4 5 6 7 8 9 10
Gross Requirements
112 112 112
100 -12
12
1313
11 1 -111
111
117117
7 7 7 -105
105
111111
6 6 6
13 117 111
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Planned orders
- MRP automatically changes quantities and dates
Firm planned orders (FPO)
- MRP will not change
- Planner has control
Released orders (or, open orders)
- Paperwork generated
- Material allocated
Closed orders
- All transactions posted
Purged orders
- All transactions deleted from computer
MRP Order Status
MRP as a Planning Tool in QAD
Planned
Firm
Planned
Released
Closed
Purged
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MRP a tool for both material planning and
priority planning
- MRP continually compares due dates of all
open orders with current need date
MRP recommends rescheduling open
orders whenever due date is not equal need date
- Reschedule in (expedite)
- Reschedule out (de-expedite)
- Cancel order
Dampeners reduce MRP "nervousness"
- E.g. “Do not reschedule out less than ‘n’
periods”
- E.g. “Do not reschedule in (expedite) only
to cover safety stock requirements”
Rescheduling Open Orders
MRP as a Planning Tool in QAD
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Exercise: Rescheduling
MRP as a Planning Tool in QAD
ARM ASSEMBLY 1 2 3 4 5 6 7 8 9 10
Gross Requirements
Scheduled Receipts 200 50 50
Proj. On-Hand (50)
Net Requirements
Planned Order Receipts
Planned Order ReleasesPlanned Order Releases
ITEM: CHAIR 1 2 3 4 5 6 7 8 9 10
MPS Orders 50 50 50
Order Policy = Discrete Lead Time = 1 week
Safety Stock = 0 On-Hand = 50Arm (2)
Chair
100 100 100
100 -50 150 50 50 100 0 0 0150 5050 0
Rules for misalignment
• An open order
scheduled for a
period following
the period in
which the on
hand balance
goes negative
(period 2)
• An open order
scheduled for a
period in which
the gross
requirement is
equal to or less
than the
projected on
hand quantity
(period 6)
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Release order
Firm up order
Lead time
violation
Reschedule
in/out/cancel
Past due
Typical Action Messages
MRP as a Planning Tool in QAD
50 action message
types in QAD
CodeMessage
1003De-expedite
1004Expedite
1005Cancel
1006Release due for
1007Release past due for
1010Past due
1013Shipment past due for
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Regeneration
- MRP is totally exploded through all bills of material
- New requirements and planned orders are
completely regenerated
Net change
- MRP is kept in the computer
- Partial explosion is made only for parts affected by
change to requirements, open orders, inventory
status, changes to planning parameters (e.g. order
policy), or BOM quantity changes
Selective materials plan
- Explodes only the part number indicated
In What Sequence Will MRP Process?
MRP as a Planning Tool in QAD
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Horizontal Display
MRP as a Planning Tool in QAD
Horizontal vs. Vertical Display
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MRP as a Planning Tool in QAD
MRP Summary Report
Vertical
[pegging]
Horizontal vs. Vertical Display
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Bill of material- Component identification
- Quantity per
- Scrap factors
Inventory records- On hand quantity
- Allocations
- Timely entry of all transactions
Open shop orders and purchase orders- Due dates
- Quantities
- Timely closure of completed orders
Accuracy Requirements for MRP
MRP as a Planning Tool in QAD
Effective use of MRP
demands high degree of
knowledge, accuracy
and discipline
32
1.4.7- 1.4.17 – Item-Site Planning Maintenance
MRP as a Planning Tool in QAD
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13.5 – Product Structure Maintenance
How to Automate Your MRP Planning Data
15.5 - Formula Maintenance
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3.21.2 - Transactions by Item Browse
MRP as a Planning Tool in QAD
Value Description
ADD-SO Sales Order Maintenance
ADD-WO Work Order Maintenance
CYC-RCNT Cycle Count (Recount)
ISS-SO Sales Order Shipments
ISS-UNP Unplanned Issue
ISS-WO WO Issue or Backflush
RCT-PO Purchase Order Receipt
RCT-UNP Unplanned Receipt
RCT-WO WO Receipt or Backflush
Transactions that will effect MRP
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23.24 - MRP Control
MRP as a Planning Tool in QAD
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MRP Equals the Future
MRP as a Planning Tool in QAD
PFEP – Plan for Every Part
Data Dictionary/WIKI
MDS - Master Data Steward
SME - Subject Matter Experts
An average is a forecast and a forecast is an average
Define each element
Make someone ultimately responsible
Use the knowledge of those who use the system every day
Requires consistent and disciplined measurement
37
Reduced inventory levels
Fewer component shortages
Lower manufacturing costs
Improved scheduling accuracy
Enhanced productivity
Higher customer satisfaction
MRP Benefits and Summary
MRP as a Planning Tool in QAD
38
Don Lindsey, CFPIM, CIRM
- 909-993-2057
Questions and Answers
MRP as a Planning Tool in QAD