Session 6,7, 8 & 9 SEM 5
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Transcript of Session 6,7, 8 & 9 SEM 5
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Framework for Production,
Planning and Control
Sessions 6,7,8 & 9
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Definition
Gorden and Carson observe : production; planningand control involve generally the organization and planning of manufacturing process.
Especially it consists of the planning of routing,
scheduling, dispatching, inspection, and coordination,control of materials, method, machines, tools andoperating times.
The objective is the organization of the supply andmovement of materials and labour, machines
utilization and related activities, in order to bringabout the desired manufacturing results in terms ofquality, quantity, time and place.
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Production planning
Technique of foreseeing every step in a longseries of separate operations,
each step to be taken at the right time and in the
right place and each operation to be performedwith maximum efficiency.
It helps entrepreneur to work out the quantityof material, manpower, machine and money
required for producing predetermined level ofoutput in a given period of time.
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The Planning Process
Long-range plans(over one year)Research and DevelopmentNew product plansCapital investmentsFacility location/expansion
Intermediate-range plans
(3 to 18 months)Sales planningProduction planning and budgetingSetting employment, inventory,
subcontracting levelsAnalyzing operating plans
Short-range plans
(up to 3 months)Job assignmentsOrdering
Job schedulingDispatchingOvertimePart-time help
Topexecutives
Operationsmanagers
Operationsmanagers,supervisors,foremen
Responsibility Planning tasks and horizon
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Aggregate Planning
Objective is to minimize cost over theplanning period by adjusting
Production rates
Labor levels
Inventory levels
Overtime work
Subcontracting rates
Other controllable variables
Determine the quantity and timing ofproduction for the immediate future
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Aggregate Planning
A logical overall unit for measuring sales and
output A forecast of demand for an intermediate
planning period in these aggregate terms
A method for determining costs
A model that combines forecasts and costs sothat scheduling decisions can be made for the
planning period
Required for aggregate planning
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Aggregate Planning
Quarter 1
Jan Feb Mar
150,000 120,000 110,000
Quarter 2
Apr May Jun
100,000 130,000 150,000
Quarter 3
Jul Aug Sep
180,000 150,000 140,000
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Aggregate Planning
Product decisions
Process planning and
capacity decisions
Aggregate plan forproduction
Master production schedule
and
MRP systems
Resource
schedules
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Aggregate Planning
Combines appropriate resources intogeneral terms
Part of a larger production planningsystem
Disaggregation breaks the plan down
into greater detail Disaggregation results in a master
production schedule
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Aggregate Planning Strategies
1. Use inventories to absorb changes in demand
2. Accommodate changes by varying workforcesize
3. Use part-timers, overtime, or idle time toabsorb changes
4. Use subcontractors and maintain a stableworkforce
5. Change prices or other factors to influencedemand
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Capacity Options
Changing inventory levels
Increase inventory in low demandperiods to meet high demand in the
future
Increases costs associated with storage,insurance, handling, obsolescence, andcapital investment 15% to 40%
Shortages can mean lost sales due tolong lead times and poor customerservice
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Capacity Options
Varying workforce size by hiring orlayoffs
Match production rate to demand
Training and separation costs for hiringand laying off workers
New workers may have lower
productivity Laying off workers may lower morale
and productivity
C i O i
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Capacity Options
Varying production rate throughovertime or idle time
Allows constant workforce
May be difficult to meet large increasesin demand
Overtime can be costly and may drive
down productivityAbsorbing idle time may be difficult
C it O ti
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Capacity Options
Subcontracting
Temporary measure during periods ofpeak demand
May be costly
Assuring quality and timely deliverymay be difficult
Exposes your customers to a possiblecompetitor
C it O ti
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Using part-time workers
Useful for filling unskilled or low skilledpositions, especially in services
Capacity Options
D d O i
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Demand Options
Influencing demand
Use advertising or promotion toincrease demand in low periods
Attempt to shiftdemand to slow
periods
May not besufficient tobalance demandand capacity
D d O ti
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Demand Options
Back ordering during high- demandperiods
Requires customers to wait for an order
without loss of goodwill or the order
Most effective when there are few ifany substitutes for the product orservice
Often results in lost sales
D d O ti
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Counterseasonal product and servicemixing
Develop a product mix of
counterseasonal items
May lead to products or services outsidethe companys areas of expertise
Demand Options
A t Pl i O ti
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Aggregate Planning Options
Option Advantages Disadvantages Some Comments
Changing
inventory
levels
Changes in
human
resources are
gradual or none;no abrupt
production
changes.
Inventory holding
cost may
increase.
Shortages mayresult in lost
sales.
Applies mainly to
production, not
service,
operations.
Varying
workforce
size byhiring or
layoffs
Avoids the costs
of other
alternatives.
Hiring, layoff, and
training costs
may besignificant.
Used where size
of labor pool is
large.
A t Pl i O ti
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Aggregate Planning Options
Option Advantages Disadvantages Some Comments
Varying
production
rates
throughovertime or
idle time
Matches seasonal
fluctuations
without hiring/
training costs.
Overtime
premiums; tired
workers; may not
meet demand.
Allows flexibility
within the
aggregate plan.
Sub-
contracting
Permits flexibility
and smoothing
of the firms
output.
Loss of quality
control; reduced
profits; loss of
future business.
Applies mainly in
production
settings.
A Pl i O i
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Aggregate Planning Options
Option Advantages Disadvantages Some Comments
Using part-
time workers
Is less costly and
more flexible
than full-time
workers.
High turnover/
training costs;
quality suffers;
schedulingdifficult.
Good for unskilled
jobs in areas with
large temporary
labor pools.
Influencing
demand
Tries to use
excess capacity.
Discounts draw
new customers.
Uncertainty in
demand. Hard to
match demand to
supply exactly.
Creates marketing
ideas.
Overbooking
used in some
businesses.
A Pl i O i
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Option Advantages Disadvantages Some Comments
Back
ordering
during high-
demandperiods
May avoid
overtime. Keeps
capacity
constant.
Customer must be
willing to wait,
but goodwill is
lost.
Many companies
back order.
Counter-
seasonal
product and
servicemixing
Fully utilizes
resources;
allows stable
workforce.
May require skills
or equipment
outside the firms
areas ofexpertise.
Risky finding
products or
services with
opposite demandpatterns.
Aggregate Planning Options
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Aggregate Production Planning
Session 7
Methods for Aggregate Planning
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Methods for Aggregate Planning
A mixed strategy may be the best way toachieve minimum costs
There are many possible mixedstrategies
Finding the optimal plan is not always
possible
Mixing Options to Develop a Plan
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Mixing Options to Develop a Plan
Chase strategy
Match output rates to demand forecast for
each period
Vary workforce levels or vary productionrate
Favored by many service organizations
Mixing Options to Develop a Plan
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Mixing Options to Develop a Plan
Level strategyDaily production is uniform
Use inventory or idle time as buffer
Stable production leads to better qualityand productivity
Some combination of capacity options, amixed strategy, might be the bestsolution
G hi l M th d
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Graphical Methods
Popular techniques
Easy to understand and use
Trial-and-error approaches that do notguarantee an optimal solution
Require only limited computations
Graphical Methods
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Graphical Methods
1. Determine the demand for each period2. Determine the capacity for regular time,
overtime, and subcontracting each period
3. Find labor costs, hiring and layoff costs, andinventory holding costs
4. Consider company policy on workers and stocklevels
5. Develop alternative plans and examine theirtotal costs
R fi S li E l 1
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Roofing Supplier Example 1
Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57
May 1,500 22 68
June 1,100 20 55
6,200 124
= = 50 units per day6,200
124
Averagerequirement =
Total expected demand
Number of production days
Roofin S pplier E ample 1
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70
60
50
40
30
0 Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
Productionrateper
workingday
Level production using averagemonthly forecast demand
Forecast demand
Roofing Supplier Example 1
Roofing Supplier Example 2
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Cost Information
Inventory carrying cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Roofing Supplier Example 2
Roofing Supplier Example 2
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Table 13.3
Cost Information
Inventory carry cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Month
Production at
50Units per DayDemand
Forecast
MonthlyInventory
Change
Ending
Inventory
Jan 1,100 900 +200 200
Feb 900 700 +200 400
Mar 1,050 800 +250 650
Apr 1,050 1,200 -150 500
May 1,100 1,500 -400 100
June 1,000 1,100 -100 0
1,850
Total units of inventory carried over from onemonth to the next = 1,850 units
Workforce required to produce 50 units per day = 10 workers
Roofing Supplier Example 2
Roofing Supplier Example 2
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Table 13.3
Cost Information
Inventory carry cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Month
Production at
50Units per DayDemand
Forecast
MonthlyInventory
Change
Ending
Inventory
Jan 1,100 900 +200 200
Feb 900 700 +200 400
Mar 1,050 800 +250 650
Apr 1,050 1,200 -150 500
May 1,100 1,500 -400 100
June 1,000 1,100 -100 0
1,850
Total units of inventory carried over from onemonth to the next = 1,850 units
Workforce required to produce 50 units per day = 10 workers
Costs Calculations
Inventory carrying $9,250 (= 1,850units carried x $5per unit)
Regular-time labor 49,600 (= 10workers x $40per day
x 124 days)Other costs (overtime,
hiring, layoffs,
subcontracting) 0
Total cost $58,850
Roofing Supplier Example 2
Roofing Supplier Example 2
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Cumulativedeman
dunits
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Jan Feb Mar Apr May June
Cumulative forecastrequirements
Cumulative levelproduction using
average monthlyforecastrequirements
Reductionof inventory
Excess inventory
6,200 units
Roofing Supplier Example 2
Roofing Supplier Example 3
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Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57
May 1,500 22 68
June 1,100 20 55
6,200 124
Minimum requirement= 38 units per day
Roofing Supplier Example 3
Roofing Supplier Example 3
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70
60
50
40
30
0 Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
Productionrateper
workingday
Level productionusing lowest monthly
forecast demand
Forecast demand
Roofing Supplier Example 3
Roofing Supplier Example 3
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Table 13.3
Cost Information
Inventory carrying cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Roofing Supplier Example 3
Roofing Supplier Example 3
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Table 13.3
Cost Information
Inventory carry cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
In-house production = 38 units per day
x124 days
= 4,712 units
Subcontract units = 6,200 - 4,712
= 1,488 units
Roofing Supplier Example 3
Roofing Supplier Example 3
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Table 13.3
Cost Information
Inventory carry cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate$ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
In-house production = 38 units per day
x124 days
= 4,712 units
Subcontract units = 6,200 - 4,712
= 1,488 units
Costs Calculations
Regular-time labor $37,696 (= 7.6workers x $40perday x 124 days)
Subcontracting 14,880 (= 1,488units x $10perunit)
Total cost $52,576
Roofing Supplier Example 3
Roofing Supplier Example 4
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Month Expected Demand Production DaysDemand Per Day
(computed)
Jan 900 22 41
Feb 700 18 39
Mar 800 21 38
Apr 1,200 21 57May 1,500 22 68
June 1,100 20 55
6,200 124
Production = Expected Demand
Roofing Supplier Example 4
Roofing Supplier Example 4
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70
60
50
40
30
0 Jan Feb Mar Apr May June = Month
22 18 21 21 22 20 = Number ofworking days
Productionrateper
workingday
Forecast demand and
monthly production
Roofing Supplier Example 4
Roofing Supplier Example 4
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Cost Information
Inventory carrying cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate $ 7per hour
(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Roofing Supplier Example 4
Roofing Supplier Example 4
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Table 13.3
Cost Information
Inventory carrying cost $ 5per unit per month
Subcontracting cost per unit $10per unit
Average pay rate $ 5per hour($40per day)
Overtime pay rate $ 7per hour(above 8hours per day)
Labor-hours to produce a unit 1.6hours per unit
Cost of increasing daily production rate
(hiring and training)
$300per unit
Cost of decreasing daily production rate
(layoffs)
$600per unit
Month
Forecast
(units)
Daily
Prod
Rate
BasicProduction
Cost (demandx 1.6hrs/unit
x $5/hr)
Extra Cost of
Increasing
Production
(hiring cost)
Extra Cost of
Decreasing
Production
(layoff cost) Total Cost
Jan 900 41 $ 7,200 $ 7,200
Feb 700 39 5,600
$1,200(= 2 x $600) 6,800
Mar 800 38 6,400 $600
(= 1 x $600)7,000
Apr 1,200 57 9,600$5,700
(= 19 x $300) 15,300
May 1,500 68 12,000$3,300
(= 11 x $300)
15,300
June 1,100 55 8,800 $7,800
(= 13 x $600)16,600
$49,600 $9,000 $9,600 $68,200
Table 13.4
Roofing Supplier Example 4
Comparison of Three Plans
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Comparison of Three Plans
Cost Plan 1 Plan 2 Plan 3
Inventory carrying $ 9,250 $ 0 $ 0
Regular labor 49,600 37,696 49,600
Overtime labor 0 0 0
Hiring 0 0 9,000
Layoffs 0 0 9,600
Subcontracting 0 14,880 0Total cost $58,850 $52,576 $68,200
Plan 2 is the lowest cost option
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MPS, MRP AND ERP
Session 8 and 9
Benefits of MRP
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Benefits of MRP
1. Better response to customer orders
2. Faster response to market changes
3. Improved utilization of facilities and
labor
4. Reduced inventory levels
Dependent Demand
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Dependent Demand
The demand for one item is related to thedemand for another item
Given a quantity for the end item, thedemand for all parts and components can
be calculated
In general, used whenever a schedule canbe established for an item
MRP is the common technique
Dependent Demand
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Dependent Demand
1. Master production schedule
2. Specifications or bill of material
3. Inventory availability4. Purchase orders outstanding
5. Lead times
Effective use of dependent demandinventory models requires the following
Master Production Schedule (MPS)
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Master Production Schedule (MPS)
Specifies what is to be made and when
Must be in accordance with the aggregateproduction plan
Inputs from financial plans, customer demand,
engineering, supplier performance As the process moves from planning to execution,
each step must be tested for feasibility
The MPS is the result of the production planningprocess
Master Production Schedule (MPS)
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MPS is established in terms of specific products
Schedule must be followed for a reasonablelength of time
The MPS is quite often fixed or frozen in the nearterm part of the plan
The MPS is a rolling schedule
The MPS is a statement of what is to beproduced, not a forecast of demand
Master Production Schedule (MPS)
The Planning Process
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The Planning Process
Changeproduction
plan?Master production
schedule
ManagementReturn oninvestmentCapital
EngineeringDesigncompletion
Aggregateproduction
plan
ProcurementSupplier
performance
Human resourcesManpower
planning
ProductionCapacityInventory
MarketingCustomerdemand
FinanceCash flow
The Planning Process
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The Planning Process
Figure 14.1
Is capacityplan being
met?
Is executionmeeting the
plan?
Changemaster
productionschedule?
Change capacity?
Changerequirements?
No
Executematerial plans
Execute capacityplans
Yes
Realistic?
Capacityrequirements plan
Materialrequirements plan
Master productionschedule
Aggregate Production Plan
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gg g
Months January February
Aggregate Production Plan 1,500 1,200(Shows the totalquantity of amplifiers)
Weeks 1 2 3 4 5 6 7 8
Master Production Schedule(Shows the specific type andquantity of amplifier to beproduced
240-watt amplifier 100 100 100 100
150-watt amplifier 500 500 450 450
75-watt amplifier 300 100
Master Production Schedule (MPS)
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Master Production Schedule (MPS)
A customer order in a job shop (make-to-order) company
Modules in a repetitive (assemble-to-order orforecast) company
An end item in a continuous (stock-to-forecast) company
Can be expressed in any of thefollowing terms:
Focus for Different Process Strategies
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Focus for Different Process Strategies
Stock to Forecast
(Product Focus)
Schedule finishedproduct
Assemble to Order orForecast
(Repetitive)
Schedule modules
Make to Order
(Process Focus)
Schedule orders
Examples: Print shop Motorcycles Steel, Beer, Bread
Machine shop Autos, TVs Lightbulbs
Fine-dining restaurant Fast-food restaurant Paper
Typical focus of themaster production
schedule
Number ofend items
Number ofinputs
MPS Examples
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MPS Examples
Gross Requirements for Crabmeat Quiche
Gross Requirements for Spinach Quiche
Day 6 7 8 9 10 11 12 13 14 and so onAmount 50 100 47 60 110 75
Day 7 8 9 10 11 12 13 14 15 16 and so on
Amount 100 200 150 60 75 100
For Nancys Specialty Foods
Bills of Material
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List of components, ingredients, andmaterials needed to make product
Provides product structure
Items above given level are called parents
Items below given level are called children
BOM Example
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p
B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster
1
E(2)E(2) F(2)
Packing box and installationkit of wire, bolts, and screws
Std. 12 Speakerbooster assembly
2
D(2)
12 Speaker
D(2)
12 Speaker
G(1)
Amp-booster
3
Product structure for Awesome (A)
A
Level
0
BOM Example
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p
B(2)Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/amp-booster
1
E(2)E(2) F(2)
Packing box and installationkit of wire, bolts, and screws
Std. 12 Speakerbooster assembly
2
D(2)
12 Speaker
D(2)
12 Speaker
G(1)
Amp-booster
3
Product structure for Awesome (A)
A
Level
0
Part B: 2 x number of As = (2)(50) = 100
Part C: 3 x number of As = (3)(50) = 150
Part D: 2 x number of Bs+ 2 x number of Fs = (2)(100) + (2)(300) = 800
Part E: 2 x number of Bs
+ 2 x number of Cs = (2)(100) + (2)(150) = 500
Part F: 2 x number of Cs = (2)(150) = 300
Part G: 1 x number of Fs = (1)(300) = 300
Bills of Material
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Modular Bills
Modules are not final products butcomponents that can be assembled intomultiple end items
Can significantly simplify planning andscheduling
Bills of Material
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Planning Bills (Pseudo Bills)
Created to assign an artificial parent to theBOM
Used to group subassemblies to reduce thenumber of items planned and scheduled
Used to create standard kits for
production
Bills of Material
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Phantom Bills
Describe subassemblies that exist onlytemporarily
Are part of another assembly and never gointo inventory
Low-Level Coding
Item is coded at the lowest level at which itoccurs
BOMs are processed one level at a time
Accurate Records
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Accurate inventory records areabsolutely required for MRP (or anydependent demand system) to operatecorrectly
Generally MRP systems require 99%accuracy
Outstanding purchase orders must
accurately reflect quantities andscheduled receipts
Lead Times
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The time required to purchase,
produce, or assemble an item
For production the sum of the order,wait, move, setup, store, and run times
For purchased items the time betweenthe recognition of a need and theavailability of the item for production
Time-Phased Product Structure
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| | | | | | | |
1 2 3 4 5 6 7 8
Time in weeks
F
2 weeks
3 weeks
1 week
A
2 weeks
1 week
D
E
2 weeks
D
G
1 week
1 week
2 weeks toproduce
B
C
E
Start production of DMust have D and Ecompleted here so
production can begin onB
MRP Structure
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Output Reports
MRP by periodreport
MRP by datereport
Planned orderreport
Purchase advice
Exception reports
Order early or late ornot needed
Order quantity toosmall or too large
Data Files
Purchasing data
BOM
Lead times
(Item master file)
Inventory data
Masterproduction schedule
Materialrequirement
planning programs
(computer andsoftware)
Determining Gross Requirements
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g q
Starts with a production schedule for the enditem 50 units of Item A in week 8
Using the lead time for the item, determine theweek in which the order should be released a 1
week lead time means the order for 50 unitsshould be released in week 7
This step is often called lead time offset ortime phasing
Determining Gross Requirements
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From the BOM, every Item A requires 2 Item Bs100 Item Bs are required in week 7 to satisfy theorder release for Item A
The lead time for the Item B is 2 weeks release
an order for 100 units of Item B in week 5 The timing and quantity for component
requirements are determined by the orderrelease of the parent(s)
g q
Determining Gross Requirements
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The process continues through the entire BOMone level at a timeoften called explosion
By processing the BOM by level, items withmultiple parents are only processed once, saving
time and resources and reducing confusion Low-level coding ensures that each item appears
at only one level in the BOM
Gross Requirements Plan
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Week
1 2 3 4 5 6 7 8 Lead Time
A. Required date 50Order release date 50 1 week
B. Required date 100Order release date 100 2 weeks
C. Required date 150Order release date 150 1 week
E. Required date 200 300Order release date 200 300 2 weeks
F. Required date 300Order release date 300 3 weeks
D. Required date 600 200Order release date 600 200 1 week
G. Required date 300Order release date 300 2 weeks
Net Requirements Plan
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Net Requirements Plan
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Determining Net Requirements
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Starts with a production schedule for the enditem 50 units of Item A in week 8
Because there are 10 Item As on hand, only 40are actually required (net requirement) =(gross requirement - on- hand inventory)
The planned order receipt for Item A in week 8 is
40 units 40 = 50 - 10
Determining Net Requirements
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Following the lead time offset procedure, theplanned order release for Item A is now 40 unitsin week 7
The gross requirement for Item B is now 80 units
in week 7 There are 15 units of Item B on hand, so the net
requirement is 65 units in week 7
A planned order receipt of 65 units in week 7generates a planned order release of 65 units inweek 5
Determining Net Requirements
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A planned order receipt of 65 units in week 7generates a planned order release of 65 units inweek 5
The on-hand inventory record for Item B is
updated to reflect the use of the 15 items ininventory and shows no on-hand inventory inweek 8
This is referred to as the Gross-to-Net calculation
and is the third basic function of the MRPprocess
Net Requirements Plan
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The logic of net requirements
Available inventory
Net requirementsOn hand Scheduledreceipts+ =
Total requirements
Gross requirementsAllocations+
Gross Requirements Schedule
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A
B C
5 6 7 8 9 10 11
40 50 15
Lead time = 4 for A
Master schedule for A
S
B C
12 138 9 10 11
20 3040
Lead time = 6 for S
Master schedule for S
1 2 3
10 10
Master schedule
for B
sold directly
Periods
Therefore, these arethe grossrequirements for B
Gross requirements: B 10 40 50 2040+10 15+30
=50 =45
1 2 3 4 5 6 7 8Periods
MRP Planning Sheet
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Safety Stock
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BOMs, inventory records, purchase andproduction quantities may not be perfect
Consideration of safety stock may beprudent
Should be minimized and ultimatelyeliminated
Typically built into projected on-hand
inventory
MRP Management
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MRP is a dynamic system
Facilitates replanning when changes occur
System nervousness can result from toomany changes
Time fences put limits on replanning
Pegging links each item to its parentallowing effective analysis of changes
Enterprise Resource Planning (ERP)
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ERP can be highly customized to meetspecific business requirements
Enterprise application integration software(EAI) allows ERP systems to be integrated
with
Warehouse management
Logistics
Electronic catalogs
Quality management
Enterprise Resource Planning (ERP)
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ERP systems have the potential to
Reduce transaction costs
Increase the speed and accuracy of
information
Facilitates a strategic emphasis on JITsystems and integration
Advantages of ERP Systems
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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 collaborationbetween business units and sites
5. Has an off-the-shelf software database
6. May provide a strategic advantage
Disadvantages of ERP Systems
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1. Is very expensive to purchase and even more so tocustomize
2. Implementation may require major changes in the
company and its processes3. 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
Summary
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Scope of production planning and control Inputs of MRP
Enterprise Resource Planning