o peration m anagement mps &mrp

Rachmat A. AnggaraPMBS, BOPR 5301, Session 6

Operation Management

MPS &MRP

OUTLINE

MRP & MPS StructureMRP Management

MRP DynamicsMRP and JIT

Lot-Sizing Techniques

OBJECTIVES

Understand Bill of MaterialsMaster Production ScheduleMaterials Requirement PlanningLot sizing

DEMAND TYPE

Independent Dependent

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

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

DEPENDENT DEMAND

1. Master production schedule2. Specifications or bill of material3. Inventory availability4. Purchase orders outstanding5. Lead times

Effective use of dependent demand inventory models requires the following

OPERATION MANAGEMENT FLOW

ManagementReturn oninvestmentCapital

EngineeringDesigncompletion

Aggregate productio

n plan

ProcurementSupplierperformance

Human resourcesManpowerplanning

ProductionCapacityInventory

MarketingCustomerdemand

FinanceCash flow

Master production schedule

Change production

plan?

Materials Requirement Planning

MASTER PRODUCTION SCHEDULE

MPS-Forecasts-Aggregate Planning-Customer order-Capacity

-What to produce-When To Produce-How Much to Produce

Master Production Schedule gives production, planning, purchasing, and top management the information needed to plan

and control the manufacturing operation.

The application ties overall business planning and forecasting to detail operations through the Master Production Schedule

(inventory& logistics solutions)

MASTER PRODUCTION SCHEDULE

MPS is disaggregation of Aggregate PlanningMONTHS JANUARY FEBRUARY MARCH

Aggregate Planning (Total Quantity of

Blackberry)100000 128000 135000

WEEKS 1 2 3 4 1 2 3 4 1 2 3 4

MPS (Shows specific

type and quantity of BB to be produced)

Onyx 15000 18000 15000 Storm 10000 10000 15000 10000 5000Bold 15000 20000 15000 20000 15000 20000 10000

Javelyn 20000 20000 30000 20000 20000 20000

MPS STRUCTURE

MPS (Shows specific type and quantity of BB to be produced)

Onyx Total Production January :15000

Total Production February: 18000

Total Production March :15000

week 1 2 3 4 1 2 3 4 1 2 3 4Quantity 5000 2000 3000 5000 3000 3000 6000 6000 2000 3000 5000 5000

Storm Total Production January: 10000

Total Production February :25000

Total Production March : 10000

week 1 2 3 4 1 2 3 4 1 2 3 4Quantity 2000 2000 2500 3500 10000 5000 5000 5000 5000 3000 1000 1000

BILL OF MATERIALS

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

Provides product structure Items above given level are called

parents Items below given level are called

children

BILL OF MATERIALS

LEAD TIMES

The time required to purchase, produce, or assemble an itemFor purchased items – the time

between the recognition of a need and the availability of the item for production

For production – the sum of the order, wait, move, setup, store, and run times

TIME PHASING FOR PRODUCT STRUCTURE

| | | | | | | |

1 2 3 4 5 6 7 8Time in weeks

F

2 weeks

3 weeks

1 week

A

2 weeks

1 weekD

E

2 weeks

D

G

1 week

1 week

2 weeks to produce

B

C

E

Start production of DMust have D and E completed here so

production can begin on B

MATERIAL REQUIREMENT PLANNING

Figure 14.5

Output Reports

MRP by period report

MRP by date

report

Planned order report

Purchase advice

Exception reports

Order early or late or not

needed

Order quantity too small or

too large

Data Files

Purchasing data

BOM

Lead times(Item master file)

Inventory data

Masterproduction schedule

Material requirement

planning programs

(computer and software)

MRP STRUCTURE

INPUTS• Objective: find material plans [planned order releases]

for all parts• Data requirements

MPS BOMsInventory records file

• Gross requirements are ultimately derived from MPS– But in calculations, the gross requirements for a part

depend only on the planned order releases of the parent parts

MRP STRUCTURE (2)

Parameters• Gross requirements demand for part (forecast)• Schedule receipts planned completion times for batches of parts

which have been already ordered• Projected on hand Number of ready stock• Net requirements Number of required item on that period• Planned-order receipts planned completion times for batches of

parts which have not yet been ordered• Planned-order releases planned start times for batches of parts

which have not yet been ordered

MRP STRUCTURE (3)

OUTPUTS• Planned orders - schedule indicating the

amount and timing of future orders.• Order releases - Authorization for the

execution of planned orders.• Changes - revisions of due dates or order

quantities, or cancellations of orders.

MRP’s TEMPLATE

Item

Lot Size Lead Time

Period 1 2 3 4 5 6 7 8 9 10 11 12Gross Requirements Scheduled Receipts Projected On Hand Net Requirements

Planned Order Receipts

Planned Order Releases

MRP’s TEMPLATE

Item Lot Size

Lead Time Period 1 2 3 4 5 6 7 8 9 10 11 12

Gross Requirements Scheduled Receipts Projected On Hand Net Requirements

Planned Order Receipts Planned Order

Releases

The logic of net requirements

available inventorynet requirementson hand scheduled

receipts+– =

total requirements

gross requirements allocations+

MRP’s TEMPLATE

exampleItem A

Lot Size 30Lead Time 2

Period 1 2 3 4 5 6 7Gross Requirements 10 0 30 10 20 25Scheduled Receipts 30 Projected On Hand 15 Net Requirements

Planned Order Receipts Planned Order Releases

Item ALot Size 30

Lead Time 2Period 1 2 3 4 5 6 7

Gross Requirements 10 0 30 10 20 25Scheduled Receipts 30 Projected On Hand 15 5 Net Requirements 0

Planned Order Receipts 0 Planned Order Releases 0

ALT 2

B(2)

LT 2

MRP’s TEMPLATE

exampleItem A


Period 1 2 3 4 5 6 7Gross Requirements 10 0 30 10 20 25Scheduled Receipts 30 Projected On Hand 15 5 35 Net Requirements 0 0

Planned Order Receipts 0 0 Planned Order Releases 0 0

Item ALot Size 30


Gross Requirements 10 0 30 10 20 25Scheduled Receipts 30 Projected On Hand 15 5 35 5 25 5 10Net Requirements 0 0 0 5 0 20

Planned Order Receipts 0 0 0 30 0 30Planned Order Releases 0 30 0 30 0 0

MRP for item B??

MRP’s TEMPLATE

example

Item BLot Size 15


Gross Requirements 0 0 60 0 60 0 0Scheduled Receipts Projected On Hand 20 20 0 0 0 0 0 Net Requirements 20 60

Planned Order Receipts 30 60 Planned Order Releases 30 60

MRP for item B??Item A


Period 1 2 3 4 5 6 7Gross Requirements 10 0 30 10 20 25Scheduled Receipts 30 Projected On Hand 15 5 35 5 25 5 10Net Requirements 0 0 0 5 0 20

Planned Order Receipts 0 0 0 30 0 30Planned Order Releases 0 30 0 30 0 0

LOT SIZING TECHNIQUE

Lot-for-lot techniques order just what is required for production based on net requirements May not always be feasible If setup costs are high, costs may be high as

well Economic order quantity (EOQ)

EOQ expects a known constant demand and MRP systems often deal with unknown and variable demand

Part Period Balancing (PPB) looks at future orders to determine most economic lot size


LOT FOR LOT

1 2 3 4 5 6 7 8 9 10

Gross requirements 35 30 40 0 10 40 30 0 30 55

Scheduled receipts

Projected on hand 35 35 0 0 0 0 0 0 0 0 0

Net requirements 0 30 40 0 10 40 30 0 30 55

Planned order receipts 30 40 10 40 30 30 55

Planned order releases 30 40 10 40 30 30 55

Holding cost = $1/week; Setup cost = $100

No on-hand inventory is carried through the system

Total holding cost = $0

There are seven setups for this item in this plan

Total setup cost = 7 x $100 = $700


EOQ

Holding cost = $1/week; Setup cost = $100;Average weekly gross requirements = 27; EOQ = 73 units

1 2 3 4 5 6 7 8 9 10

Gross requirements 35 30 40 0 10 40 30 0 30 55

Scheduled receipts 73 73 73 73


Net requirements 0 30 0 0 7 0 4 0 0 16

Planned order receipts 73 73 73 73

Planned order releases 73 73 73 73


PART PERIOD BALANCING

1. Find Economic Part Period Holding cost = $1/week; Setup cost = $100;EPP =Setup cost/holding cost= 100 units

2. Combine each period until reach/closest to EPP (period 1, period 1-2, period 1-3, period 1-4. and so on…

3. Stop until combined period larger than EPP



1 2 3 4 5 6 7 8 9 10Gross requirements 35 30 40 0 10 40 30 0 30 55

Scheduled receiptsProjected on hand 35

Net requirementsPlanned order receiptsPlanned order releases

Holding cost = $1/week; Setup cost = $100;EPP = 100 units



2 302, 3 702, 3, 4 702, 3, 4, 5 802, 3, 4, 5, 6 120

Combine periods 2 - 5 as this results in the Part Period closest to the EPP

Combine periods 6 - 9 as this results in the Part Period closest to the EPP

6 406, 7 706, 7, 8 706, 7, 8, 9 100

10 55



1 2 3 4 5 6 7 8 9 10Gross requirements 35 30 40 0 10 40 30 0 30 55

Scheduled receipts 80 100


Net requirements 30 40 55

Planned order receipts 80 100 55

Planned order releases 80 100 55

Fulfill The MRP TEMPLATE PLEASE

DISTRIBUTION RESOURCE PLANNING

Using dependent demand techniques through the supply chain Gross requirements, which are the same

as expected demand or sales forecasts Minimum levels of inventory to meet

customer service levels Accurate lead times Definition of the distribution structure

DISTRIBUTION RESOURCE PLANNING

http://product-image.tradeindia.com/00181414/b/0/Plants-Detergent-Bar-Soap-Manufacturing-Plant.jpg

ENTERPRISE RESOURCE PLANNING

An extension of the MRP system to tie in customers and suppliers1. Allows automation and integration of

many business processes2. Shares common data bases and

business practices3. Produces information in real time

Coordinates business from supplier evaluation to customer invoicing


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

HOME WORK!!!

o peration m anagement mps &mrp

Documents

productionfor production

producedonyxtotal production

quantity of bb

product structure12345678time

specific type

product structureitems

end item

given level