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Transcript of 14 - 1© 2014 Pearson Education, Inc. Material Requirements Planning (MRP) and ERP PowerPoint...
14 - 1© 2014 Pearson Education, Inc.
Material Requirements Planning (MRP)
and ERP
PowerPoint presentation to accompany Heizer and Render Operations Management, Eleventh EditionPrinciples of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl
1414
© 2014 Pearson Education, Inc.
14 - 2© 2014 Pearson Education, Inc.
Outline
► Dependent Demand► Dependent Inventory Model
Requirements► MRP Structure► Lot Size Techniques
14 - 3© 2014 Pearson Education, Inc.
DEPEND DEMAND
14 - 4© 2014 Pearson Education, Inc.
Dependent Demand
▶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
▶In general, used whenever a schedule can be established for an item
▶MRP is the common technique
14 - 5© 2014 Pearson Education, Inc.
Independent Demand(final product)
Product A
Part B(4) Part C(2)
Material D(2) Material E(1) Material D(3) Material F(2)
Dependent Demand (Components)
Independent demand is uncertain. Dependent demand is certain.
EOQ
MRP
Dependent Demand
14 - 6© 2014 Pearson Education, Inc.
DEPENDENT INVENTORY MODEL REQUIREMENTS
► MPS
► BOM
► Inventory Availability
►Phase Orders Outstanding
►Lead time
14 - 7© 2014 Pearson Education, Inc.
Dependent Inventory Model Requirements
Effective use of dependent demand inventory models requires the following
1. Master production schedule (MPS)
2. Specifications or bill of material (BOM)
3. Inventory availability
4. Purchase orders outstanding
5. Lead times
14 - 8© 2014 Pearson Education, Inc.
Master Production Schedule (MPS)
▶Specifies what is to be made and when, not a forecast of demand
▶MPS is established in terms of specific products
▶ The MPS is quite often fixed or frozen in the near term part of the plan
TABLE 14.1Master Production Schedule for Chef John’s Buffalo Chicken Mac & Cheese
GROSS REQUIREMENTS FOR CHEF JOHN’S BUFFALO MAC & CHEESE
Day 6 7 8 9 10 11 12 13 14 And so on
Quantity 450 200 350 525 235 375
14 - 9© 2014 Pearson Education, Inc.
Bills of Material (BOM)
▶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 components or children
14 - 10© 2014 Pearson Education, Inc.
BOM Example
Question: If we want to produce 50 chairs, how many back supports do we need?
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
14 - 11© 2014 Pearson Education, Inc.
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
Chair
Seat
Legs (2) Crossbar
SideRails (2)
Crossbar
BackSupports (3)
LegAssembly
BackAssembly
Level 0
1
2
Question: If we want to produce 50 chairs, how many cross bars do we need?
BOM Example
14 - 12© 2014 Pearson Education, Inc.
Accurate Inventory Records
▶Accurate inventory records are absolutely required for MRP
▶Generally MRP systems require more than 99% accuracy
14 - 13© 2014 Pearson Education, Inc.
Product A
B (2) C (3)
D (2) E D (4) F
G (3) D
Question: If we want to produce 10 A, how many D do we need?
Accurate Inventory Records
14 - 14© 2014 Pearson Education, Inc.
Product A
B (2) C (3)
D (2) E D (4) F
G (3) DQuestion: we want to produce 10 A,Inventory of B is 3,Inventory of F is 10, how many D do we need?
14 - 15© 2014 Pearson Education, Inc.
Purchase Orders Outstanding
▶What is on order
▶Outstanding purchase orders must accurately reflect quantities and scheduled receipts
14 - 16© 2014 Pearson Education, Inc.
Lead Times for Components
▶The time required to purchase, produce, or assemble an item▶For production – the sum of the move, setup,
and assembly or run times
▶For purchased items – the time between the recognition of a need and when its available for production
14 - 17© 2014 Pearson Education, Inc.
| | | | | | | |
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
Start production of DMust have D and E completed here so
production can begin on B
1 week
2 weeks to produce
B
C
E
Product A
B C
D E(2) E(3) F
G D
Lead Time
14 - 18© 2014 Pearson Education, Inc.
A1 week
D (2)3 weeks
E (4)2 weeks
C (1)1 week
E (2)2 weeks
F (2)3 weeks
C (1)1 week
B (2)2 weeks
Lead Time▶ Cumulative Lead Time: the longest lead time path in the
BOM
1 week (A) + 2 weeks (B) + 3 weeks (F) = 6 weeks
1 week (A) + 3 weeks (D) + 2 weeks (E) = 6 weeks
1 week (A) + 1 weeks (C) = 2 weeks
So, cumulative lead time is 6 weeks.
14 - 19© 2014 Pearson Education, Inc.
A
2 weeks
D (3)2 weeks
E (1)1 week
C (1) 1 week
G (5)1 weekF(2)
2 weeksG (2)
1 week
B (2)1 week
J (4)1 week
I (2)1 week
J (2)1 week
I (2)1 week
J (2)1 week
Discussion Question
What is the cumulative lead time?
14 - 20© 2014 Pearson Education, Inc.
MPS STRUCTURE
14 - 21© 2014 Pearson Education, Inc.
MRP StructureFigure 14.4
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)
14 - 22© 2014 Pearson Education, Inc.
MRP Structure
14 - 23© 2014 Pearson Education, Inc.
▶ Gross Requirements: total amount of an item that is required
▶ Net Requirements: amount needed in a time period
▶ Planned Order Receipt: amount of an item planned to arrive in a time period
▶ Planned Order Release: amount of an item planned to be ordered in time period
NetRequirements
= GrossRequirements
_ ScheduledReceipts
_ AvailableInventory
MRP Structure
14 - 24© 2014 Pearson Education, Inc.
LOT SIZING TECHNIQUES► Lot-for-Lot► EOQ
14 - 25© 2014 Pearson Education, Inc.
Lot-Sizing Techniques
▶ Lot-sizing decision: how much to order
▶ Techniques to determine lot sizes▶Lot-for-lot techniques
▶Economic order quantity (EOQ)
14 - 26© 2014 Pearson Education, Inc.
Lot-sizing Techniques
1. Process all BOM items level by level following a top-down approach.
2. For each item at each level,
1) compute the gross requirement for each period
2) calculate the net requirement for each time period
3) apply a lot-sizing technique to determine the order quantities
4) offset each order for the lead time to yield a time-phased planned order release (POR).
NetRequirements
= GrossRequirements
_ ScheduledReceipts
_ AvailableInventory
14 - 27© 2014 Pearson Education, Inc.
Lot-Sizing Techniques
▶ 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, lot-for-lot can be expensive
▶When frequent orders are economical and just-in-time (JIT) inventory techniques implemented, Lot-for-Lot can be very efficient
© 2014 Pearson Education, Inc. 14 - 28
Item: X 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
Net requirements
Planned order receipts
Planned order releases
(LT = 1 week)
0 40 0 10 40 30 0 30 5530
30 40 10 40 30 30 55
30 40 10 40 30 30 55
0 0 0 0 0 0 0 0 035
Lot-for-Lot (L4L) Example 14.1: Use L4L to fill out the following MRP table
© 2014 Pearson Education, Inc. 14 - 29
Item: X 1 2 3 4 5 6 7 8 9 10
Gross requirements
35 30 40 0 10 40 30 0 30 55
Scheduled receipts
90 10
Projected on hand
35
Net requirements
Planned order receipts
Planned order releases
(LT = 1 week)
0 0 0 0 0 20 0 30 5530
30 20 30 55
30 20 30 55
0 0 50 50 40 0 0 0 035
Lot-for-Lot (L4L) Example 14.2: Use L4L to fill out the following MRP table
14 - 30© 2014 Pearson Education, Inc.
Children's scissors are made from four items:
two identical blades – two weeks lead time
one screw – one week lead time
one nut – one week lead time
The assembly process for one gross of scissors takes one week.
Screw NutBlade(2)
Level 1
ScissorsLevel 0
Lot-for-Lot (L4L) Example 14.3:
(1) Construct a product structure tree for the scissors.
14 - 31© 2014 Pearson Education, Inc.
Level 0 – Scissors: lead time (LT) = 1 week
1 2 3 4 5 6 7 8 9
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned order receipts
Planned order releases
144
432
432
144
144 432
144 432
Screw NutBlade(2)Level 1
ScissorsLevel 0
Screw NutNutBlade(2)Level 1
ScissorsLevel 0
14 - 32© 2014 Pearson Education, Inc.
Level 1 – Blade: lead time (LT) = 2 weeks
1 2 3 4 5 6 7 8 9
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned order receipts
Planned order releases
792
792
288 864
Project on hand > Requirements,
So, Net requirements =0
360 360 360 360 360 72
360 – 288 = 72
72
792
864 – 72 = 792360
Screw NutBlade(2)Level 1
ScissorsLevel 0
Screw NutNutBlade(2)Level 1
ScissorsLevel 0
Same as the row “Planned order release” of the upper level table
14 - 33© 2014 Pearson Education, Inc.
Level 1 – Screw: lead time (LT) = 1 week
1 2 3 4 5 6 7 8 9
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned order receipts
Planned order releases
144 432
Project on hand > Requirements,
So, Net requirements =0
600 600 600 600 600 600 456
600 – 144 = 456
456
456 – 432 = 24
24
Screw NutBlade(2)Level 1
ScissorsLevel 0
Screw NutNutBlade(2)Level 1
ScissorsLevel 0
Same as the row “Planned order release” of the upper level table
14 - 34© 2014 Pearson Education, Inc.
Level 1 – Nut: lead time (LT) = 1 week
1 2 3 4 5 6 7 8 9
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned order receipts
Planned order releases
432
432
144 432
43244
44
44
100 100 100 100 100100
Screw NutBlade(2)Level 1
ScissorsLevel 0
Screw NutNutBlade(2)Level 1
ScissorsLevel 0
0 0
14 - 35© 2014 Pearson Education, Inc.
EX 1 in class
LEVEL PART # ITEM QUANTITY LEAD TIME0 - - - - 11001 A 1 4 weeks- 1 - - - 21001 B 1 3 weeks- 1 - - - 21002 C 2 2 week- - 2 - - 31001 D 1 1 week- - 2 - - 31002 E 2 1 week
Week 1 2 3 4 5 6 7 8 9 10Quantity 125 150 175
Master Schedule
Bill of Materials
Item Quantity in Inv.A 80B 45C 105D 0E 650
Inventory Availability
11001
A
21001
B (1)
21002
C (2)
31001
D (1)
31002
E (2)
Level 0
Level 1
Level 2
11001
A
21001
B (1)
21002
C (2)
31001
D (1)
31002
E (2)
Level 0
Level 1
Level 2
Develop the MRP tables for each items by using L4L rule.
14 - 36© 2014 Pearson Education, Inc.
Lot-Sizing Techniques
▶ Lot-sizing decision: how much to order
▶Economic order quantity (EOQ)▶EOQ expects a known constant demand and
MRP systems often deal with unknown and variable demand
© 2014 Pearson Education, Inc. 14 - 37
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
Net requirements
Planned order receipts
Planned order releases
0 30 0 0 7 0 0 0 16
73 73 73
73 73 73 73
0 3 69 69 3943
73 – 30 = 43
3
43 – 40 = 3
73
Net requirement in 2nd week is not zero, so, a planned order should be receipted.
66
73 – 7 = 66
2666 – 40 =26
4
30 – 26 = 4
Economic Order Quantity (EOQ)Example 14.4: Use EOQ=73 to fill out the following MRP table
14 - 38© 2014 Pearson Education, Inc.
EX 2 in class
1 2 3 4 5 6 7 8 9 10 11 12
Gross requirements 30 40 30 70 20 10 80 50
Scheduled receipts 20
Projected on-hand
Net requirements
Planned order receipts
planned order release
Develop the following MRP table by using EOQ = 57. Beginning inventory = 40. Lead time = 1 week
14 - 39© 2014 Pearson Education, Inc.
P
A (1)
B (1)
C (1) C (2) D (2)
Level 0
Level 1
Level 2
Item ParentQuantity for1 of Parent
Currently On-Hand
Scheduled Rcpt (in wk)
LeadTime
Order Quantity
P - - - - 1 lot-for-lotA P 1 100 0 1 lot-for-lotB P 1 0 0 1 Multiples
of 450C A,B 1,2 90 100 (wk 2) 2 Multiples
of 600D B 2 50 80 (wk 2) 2 lot-for-lot
1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
Item P
400
400400
400
Example 14.5Construct a product tree diagram and develop a material requirements plan (MRP) that will yield 400 units of product P at the start of week 7
P
A (1)
B (1)
C (1) C (2) D (2)
Level 0
Level 1
Level 2
Item ParentQuantity for1 of Parent
Currently On-Hand
Scheduled Rcpt (in wk)
LeadTime
Order Quantity
P - - - - 1 lot-for-lotA P 1 100 0 1 lot-for-lotB P 1 0 0 1 Multiple
of 450C A,B 1,2 90 100 (wk 2) 2 Multiples
of 600D B 2 50 80 (wk 2) 2 lot-for-lot
1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
Item A
400
100 100 100 100 100 100300300
300
Item P 1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
400
400400
400
P
A (1)
B (1)
C (1) C (2) D (2)
Level 0
Level 1
Level 2
Item ParentQuantity for1 of Parent
Currently On-Hand
Scheduled Rcpt (in wk)
LeadTime
Order Quantity
P - - - - 1 lot-for-lotA P 1 100 0 1 lot-for-lotB P 1 0 0 1 Multiples
of 450C A,B 1,2 90 100 (wk 2) 2 Multiples
of 600D B 2 50 80 (wk 2) 2 lot-for-lot
1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
Item B
400
400450
450
50
Item P 1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
400
400400
400
14 - 42© 2014 Pearson Education, Inc.
P
A (1)
B (1)
C (1) C (2) D (2)
Level 0
Level 1
Level 2
Item ParentQuantity for1 of Parent
Currently On-Hand
Scheduled Rcpt (in wk)
LeadTime
Order Quantity
P - - - - 1 lot-for-lotA P 1 100 0 1 lot-for-lotB P 1 0 0 1 Multiples
of 450C A,B 1,2 90 100 (wk 2) 2 Multiples
of 600D B 2 50 80 (wk 2) 2 lot-for-lot
1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
Item C450*2+300 = 1200
1200100
90 90 190 190 190
10101200
190
1200
Since 1010 > 600, Planned order receipt = 600*2 = 1200
From the last row of table for item A: 300 @ week 5From the last row of table for item B: 450*2 = 900 @ week 5
P
A (1)
B (1)
C (1) C (2) D (2)
Level 0
Level 1
Level 2
Item ParentQuantity for1 of Parent
Currently On-Hand
Scheduled Rcpt (in wk)
LeadTime
Order Quantity
P - - - - 1 lot-for-lotA P 1 100 0 1 lot-for-lotB P 1 0 0 1 Multiples
of 450C A,B 1,2 90 100 (wk 2) 2 Multiples
of 600D B 2 50 80 (wk 2) 2 lot-for-lot
1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
Item D 450*2 = 900
90080
50 50 130 130 130
770770
770
Item B 1 2 3 4 5 6 7Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
400
400450
450
50
EX3 in classDevelop a material requirements plan for end item P and its components. One hundred units of P are needed at the start of each of weeks 4 and 8
Item Lead Time Quantity on Hand Scheduled Receipts Order Quantity
P 1 20 Lot-for-lotA 1 100 Lot-for-lotB 1 0 Lot-for-lotC 1 0 Lot-for-lotD 1 0 Lot-for-lotF 1 200 800 @ week 1 400
14 - 45© 2014 Pearson Education, Inc.
Period 8 9 10 11 12A 100 50 150H 100 50
Item On Hand Inventory
Scheduled Receipts
Lead Time
A 0 100 (@ week 2) 1B 100 0 2C 50 150 (@week 3) 2H 0 0 1J 100 0 2K 100 50 (@ week 2) 2
Item A 1 2 3 4 5 6 7 8 9 10 11 12Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
100 50 150
See “Master Schedule”
100
See “Scheduled Receipts”
100 100 100 100 100 100
50 15050 150
50 150
Master Schedule
Inventory Availability
A
B C(2)
H
J K(2) C
C(2)1st final product
Develop a MRP for Item C by using L4L technique
Example 14.6
Period 8 9 10 11 12A 100 50 150H 100 50
Item On Hand Inventory
Scheduled Receipts
Lead Time
A 0 100 (@ WK 2)
1
B 100 0 2C 50 150 (@WK3) 2H 0 0 1J 100 0 2K 100 50 (@ WK 2) 2
Item H 1 2 3 4 5 6 7 8 9 10 11 12Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
100 50
See “Master Schedule”
100 50100 50
100 50
Master Schedule
Inventory AvailabilityA
B C(2)
H
J K(2) C
C(2)
2nd final product
Period 8 9 10 11 12A 100 50 150H 100 50
Item On Hand Inventory
Scheduled Receipts
Lead Time
A 0 100 (@ week 2) 1B 100 0 2C 50 150 (@week 3) 2H 0 0 1J 100 0 2K 100 50 (@ week 2) 2
Item K 1 2 3 4 5 6 7 8 9 10 11 12Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
200 100
See “Planned order release” in upper level item “H” & Quantity relationship = 1 : 2
50 10010050
10050
Master Schedule
Inventory AvailabilityA
B C(2)
H
J K(2) C
C(2)
50100
See “Inventory Availability”
100 150 150 150 150 150 150
Period 8 9 10 11 12A 100 50 150H 100 50
Item On Hand Inventory
Scheduled Receipts
Lead Time
A 0 100 (@ wk 2) 1B 100 0 2C 50 150 (@wk 3) 2H 0 0 1J 100 0 2K 100 50 (@ wk 2) 2
Item C 1 2 3 4 5 6 7 8 9 10 11 12Gross requirements
Schedule receipts
Projected on hand
Net requirements
Planned order receipt
Planned order release
200+100 100
200 100
100200
Master Schedule
Inventory AvailabilityA
B C(2)
H
J K(2) C
C(2)
150
50
See “Inventory Availability”
50 50 200 200 200 100 100
100 50 300
50 300
30050
100200 30050
Path A – C (2): see last row of Item “A” 50*2 = 100 @ Week 9 150*2 = 300 @ Week 11
Path H – K(2) – C(2 ): see last row of Item “K” 50*2 = 100 @ Week 6
100*2 = 200 @ Week 8
Path H – C: see last row of Item “H” 100 @ Week 8 50 @ Week 10
14 - 49© 2014 Pearson Education, Inc.
EX 4 in classConstruct a material requirements plan which will result in 100 units of P1 at week 6, and 200 units of P2 at week 8
P1
A B(2)
P2
C(3) C(4)
A(2) B
C(3) C(4)
Item Lead Time
Quantity on Hand
Scheduled Receipts
Order Quantity
P1 1 0 L4LP2 1 0 L4LA 1 70 500B 3 50 250C 2 1000 2000 @ WK 2 2000
14 - 50© 2014 Pearson Education, Inc.
Lot-Sizing Summary▶ In theory, lot sizes should be recomputed
whenever there is a lot size or order quantity change
▶ Lot-for-lot should be used when low-cost setups can be achieved
▶When setup costs are significant and demand is reasonably smooth, EOQ should give reasonable results
▶Use lot-sizing with care as it can cause considerable distortion of requirements at lower levels of the BOM