MARTA ALARCÓN TAMAYOELOY ALGORRI FERRERO

ISABEL CELAYA MARTÍNEZ

MRPMaterial Requirements Planning

Demand for the items is dependent when the relationship between the items is determined.

Must be in accordance with the aggregate production plan.

When the requirements are met dependent models are preferable to EQC models.

They are better not only for manufacturers and distributors but also for a wide variety of firms from restaurant to hospitals.

The dependent technique use in a production environment is Material Requirement Planning known as “MRP”.

Dependent Demand

“A dependent demand technique that uses a bill- of –material, inventory, expected receipts and master production schedule to determine material requirements”

MBP provides such a clean structure for dependent demand, it has evolved as the basis for Enterprise Resource Planning(ERP).

An MRP system is intended to simultaneously meet three objectives:

Ensure materials are available for production and products are available for delivery to customers.

Maintain the lowest possible material and product levels in store

Plan manufacturing activities, delivery schedules and purchasing activities.

MRP

Effective use of dependent theory models requires that the operation management know the following:

1) Master production2) Specifications of bill3) Inventory availability4) Purchase orders outstanding

(also called expected receipts)5) Lead Times

MRP

MASTER PRODUCTION SCHEDULE

Specifies what is to be made and when.

It should be in accordance with the aggregate production plan

Inputs from financial plans, customer demands, engineering capabilities, labor availability, inventory fluctuations, supplier performance and other considerations.

Master Production schedule is focused on specific

products.

Master Production Schedule

Schedule must be followed for a reasonable length of time

MPS is a rolling schedule

The MPS is quite often fixed or frozen in the near term part of the plan

It is a statement of what is to be produced, not a forecast of demand.

Master Production Schedule

As the process moves from planning to execution each step should be tested for feasibility

When one is not, feedback to the next high level is used to make the necessary adjustment

In fact one of the major strengths of this model is its ability to determine precisely the feasibility of a schedule within aggregate capacity constraints.

The production plan sets the upper and lower bounds on the master production schedule.

Planning Process

Example

Can be expressed in any of the following terms: A customer order in a job

shop (make-to-order company).

Modules in a repetitive(assembly to order or forecast)Company

End item in a continuous (stock-to forecast) company.

MRP

BILLS OF MATERIALS

BILLS OF MATERIAL

Bills of material (BOM): List of quantities of components, ingredients and materials required to make a product

Engineering change notice Change or correction to a bill of

materials plan

Containing errors in specifications

PRODUCT STRUCTURE

BILLS OF MATERIAL

Parent

Parent/Children

Parent/Children

Levels

Children

BILLS OF MATERIAL

Order of 50 “Awesome” products

B: 2 x A 2 x 50: 100 units E: 2 x B + 2 x C 200 + 300: 500 u.

C: 3 x A 3 x 50: 150 units F: 2 x C 2 x 150: 300 u.

D: 2 x B + 2 x F 2 x 100 + 2 x 300: 800 units G: 1 x F 1 x 300: 300 u.

How many B,C,D,E,F

and G components do we need for an order

of 50 “Awesonme” products?

BILLS OF MATERIAL

As a tool for costing

“Pick lists”

Modular billsPlanning bills and

Phantom billsLow-level coding

• BOM organized in modules

• Major components of the final product or product options

• Facilitates production scheduling

• Pllaning bills: to reduce the number of components and

for using “kits”

• Phantom Bills: temporally

components: never inventoried; lead time equals zero.

• Identical items at different levels:

they are coded at the lowest level.

• For facilitating calculations

ACCURATE RECORDS

Accurate Records

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

Generally MRP systems require 99% accuracy

Outstanding purchase orders must accurately reflect quantities and scheduled receipts

LEAD TIME

DEFINITION:

“Lead time is the period between a customer´s order and delivery of the final product”.

PURCHASING

SYSTEMS

• Time between recognition of the need for an order and receiving it

PRODUCTION

SYSTEMS

•The order, wait, move, queue, setup, and run times for each component

DIFFERENT

CONCEPTS

Important for 4 reasons:

REVENUE

COSTS

Proportional to work-in-

process inventory

The firm cannot

produce instantaneou

sly

Short lead time:

favorably operations

costs

Short lead time: reduce agency costs

BENEFITS OF LEAD TIME REDUCTION

1 •Reduces customer order LT

2 •Improves on-time delivery

3 •Increase customer satisfaction levels

4 •Reduces inventory

5 •Increases flexibility

6 •Reduces impacts of changes to consumer orders or cancellation of orders.

7 •Identifies bottleneck and constraints.

TIME-PHASED PRODUCT STRUCTURE

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 D

| | | | | | | |

1 2 3 4 5 6 7 8Time in weeks

Must have D and E completed here so

production can begin on B

EXAMPLE

ORDER

DELIVERY

Highly dependent in

inputs

Better response to customer

orders

Advantages VS Disadvantges

MRP at wheeled Coach Ambulance

Largest manufacturer of ambulances in the worldInternational competitor12 major ambulance designs

18,000 different inventory items

6,000 manufactured parts12,000 purchased parts

MRP at wheeled Coach Ambulance

Four Key TasksMaterial plan must meet both the

requirements of the master schedule and the capabilities of the production facility

Plan must be executed as designedMinimize inventory investment Maintain excellent record integrity

TEST REVIEW

1. MRP is used for:

a) Independent demand items.

b) Dependent demand items.

c) Available-to-promise items.

d) Disaggregated items.

e) Pegged items.

2.Which of the following statements is false regarding MPS?

f) MPS is a rolling schedule

g) The MPS is quite often fixed or frozen in the near term part of the plan

h) Specifies what is to be made and when

i) Is focused on family products

TEST REVIEW

3.The Master Production Schedule which is input to the MRP program is automatically corrected when infeasible final loads on the productive system are generated.

a)True

b)False

4.MRP systems are:

a)Appropriate for all end items in the product line

b)Intended to be used for independent demand items

c)Intended to reduce inventory requirements, production lead times, and delivery times to customers

d)Intended to determine an appropriate master production schedule

e)Substitutes for fixed order point/order quantity systems

TEST REVIEW

5.A key goal of MRP is to:

a)Minimize variable cost.

b)Use scheduled receipts only when necessary.

c)Match what is on hand with what is needed to be on hand.

d)Order early to avoid late-order penalties.

6.In an MRP system, component demand is

a)Forecasted

b)Established by the master production schedule

c)Calculated by the MRP system from the master production schedule

d)Ignored

TEST REVIEW

7.The ………………is a plan for the production of individual itemsa)MPSb)JITc)MRP IId)MRP I

8.Three inputs for every MRP system are:a)Sales forecast, delivery cost, capacity planningb)Bill of Materials, sales forecast, sales historyc)Average replenishment time, re-order point, economic order quantityd)Mater Production schedule, Bill of Materials, sales forecaste)Stock on hand, Master Production Schedule, Bills of materials

TEST REVIEW

9.Some benefits of the MRP ARE:a)Minimum level of inventoryb)Master response to market changesc)Better response to customers’ ordersd)All of the above are correct

10.A wheeled Coach Ambulance is an example of MRP?a)Trueb)False