Material Requirements Planning

Transcription

1 Section Objectives After completing this section, you should be able to: 1. Describe the conditions under which MRP is most appropriate. 2. Describe the inputs, outputs and nature of MRP processing. 3. Explain how requirements in a master schedule are translated into material requirements for lower level items. 4. Discuss possible uses of safety stock and safety time. 5. Explain how an MRP system is useful in capacity requirements planning. 6. Outline benefits and difficulties of MRP. 7. Describe MRP II and how it relates to MRP. 8-1

2 MRP: Whazzit a computer-based information system designed to handle ordering and scheduling of of dependent-demand inventories (i.e. raw materials, component parts and subassemblies). MRP Inputs Master Production Schedule (MPS) Based on customers orders and demand forecasts, the MPS details exactly what end products must be manufactured or assembled, when they must be manufactured and what quantities are needed. Bill of Materials File (BOM) Specifies amount of raw materials, components and subassemblies needed to manufacture or assemble the end product. Tells both the requirements and when they will be needed. Inventory Status File Maintains inventory records so that the company may subtract the amount on hand from the gross requirements, thus identifying net requirements at any time. MRP Program Explodes end product demand into gross requirements for individual parts and other materials. Then the program calculates net requirements based on the inventory status file and places orders for the inputs necessary to the production / assembly process. 8-2

3 MRP Inputs MRP Processing MRP Outputs Changes Orders Forecast Master production schedule Primary Reports Order releases Planned-order schedules Design Changes Bill-ofmaterials file MRP Computer Program Secondary Reports Exception reports Planning reports Performancecontrol reports Receipts Withdrawals Inventory status file Inventory transaction 8-3

4 MRP Outputs: Outputs and Reports Records and information related to: (i) quantities the company should order and when (ii) any need to expedite or reschedule arrival dates or needed product quantities (iii) cancelled need for product (iv) MRP system status 8-4

5 Master Schedule A master schedule for end item X Item X Quantity Week Number Planning horizon for cumulative lead time Assembly Subassembly Fabrication Procurement

6 Bill of Materials File X Level 0 B (2) C 1 D (3) E E (2) F (2) 2 E (4) 3 Product structure tree for end item X 8-6

7 Using the information presented in the product structure tree: a. Determine the quantities of B, C, D, E and F needed to assemble one X. b. Determine the quantities of these components necessary to assemble 200 Xs. Solution to a & b: Quantity Quantity to make to make Component 1 X 200 X B...2 Bs per X = 2 = 400 D...3 Ds per B * 2 Bs per X = 6 = 1200 E...1 E per B * 2 Bs per X = 2 = 400 E...4 Es per D * 3 Ds per B * 2 Bs per X = 24 = 4800 C...1 C per X = 1 = 200 E...2 Es per C * 1C per X = 2 = 400 F...2 Fs per C * 1 C per X = 2 =

8 Inventory Records File Stores information on the status of each item by time period. Includes: 1. Gross Requirements. The total expected demand for an item or raw material during each time period. 2. Scheduled Receipts. Open orders scheduled to arrive from vendors or elsewhere. 3. Projected on Hand. Expected amount of inventory that will be on hand at the beginning of each time period. = scheduled receipts + available from last period. 4. Supplier. The name(s) and address(es) of the item s supplier(s). 5. Lead Time. The average length of time, in days or weeks, between placing and receiving an order from the supplier. 6. Lot Size. Standard order size. This may be determined by techniques such as lot-for-lot ordering, EOQ, part period balancing, etc. 8-8

9 MRP Processing MRP processing involves taking end item requirements and exploding them into time-phased requirements for assemblies, parts and raw materials. Procurement of RM D Fabrication of part E Order point Subassembly A Procurement of RM F Procurement of part C Final assembly and inspection Subassembly B Procurement of RM I Fabrication of part G Week number Available for delivery 8-9

10 MRP Processing Week number: Item: Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases 8-10

11 MRP Processing Problem Illustration A firm that produces wood shutters and bookcases has received two orders for shutters: one for 100 shutters and one for 150 shutters. The 100-unit order is due at the start of week 4 of the current schedule, and the 150-unit order is due for delivery at the start of week 8. Each shutter consists of four slated wood sections and two frames. The wood sections are made by the firm, and fabrication takes one week. The frames are ordered, and lead time is two weeks. There is a scheduled receipt of 70 wood sections in week 1 (i.e. at the beginning of week 1). Determine the size and timing of planned-order releases necessary to meet delivery requirements under each of the following conditions: 1. Lot-for-lot ordering (i.e. order size equal to net requirements). 2. Lot-size ordering with a lot size of 320 units for frames and 70 units for wood sections. 8-11

12 MRP Processing Problem Solution - Lot-for-Lot Ordering 1. Develop a Master Schedule Week number: Quantity Develop a Product Tree Structure Shutter 3. Develop an Assembly Time Chart Frames (2) Wood sections (4) Make wood sections Assemble shutters Procure frames Make wood sections Assemble shutters Procure frames

13 4. Master schedule for shutters Week number: Gross requirements Shutters: Scheduled receipts Projected on hand LT = 1 week Net requirements Planned-order receipts Planned-order releases times 2 times 2 Gross requirements Frames: Scheduled receipts Projected on hand LT = 2 week Net requirements Planned-order receipts Planned-order releases

14 4. Master schedule for shutters Week number: Gross requirements Shutters: Scheduled receipts Projected on hand LT = 1 week Net requirements Planned-order receipts Planned-order releases times 4 times 4 Wood sections: LT = 1 week Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases

15 MRP Processing Problem Solution - Lot Size Ordering 1. Develop a Master Schedule Week number: Quantity Develop a Product Tree Structure Shutter 3. Develop an Assembly Time Chart Frames (2) Wood sections (4) Make wood sections Assemble shutters Procure frames Make wood sections Assemble shutters Procure frames

16 4. Master schedule for shutters Week number: Gross requirements Shutters: Scheduled receipts Projected on hand LT = 1 week Net requirements Planned-order receipts Planned-order releases times 2 times 2 Gross requirements Frames: Scheduled receipts LT = 2 week Projected on hand Net requirements Lot size = 320 Planned-order receipts Planned-order releases

17 4. Master schedule for shutters Week number: Gross requirements Shutters: Scheduled receipts Projected on hand LT = 1 week Net requirements Planned-order receipts Planned-order releases times 4 times 4 Wood sections: LT = 1 week Lot size = 70 Gross requirements Scheduled receipts Projected on hand Net requirements Planned-order receipts Planned-order releases

18 MRP Outputs Primary Reports: Planned orders - amount and timing of future orders Order releases - authorize the execution of planned orders Changes to planned orders - changes of due dates and/or order quantities Secondary Reports: Performance-control reports - measure deviation from plans, including missed deliveries and stockouts. Provide information that can be used to assess cost performance. Planning reports - include purchase commitments and other data that can be used to assess future material requirements. Useful in forecasting future material requirements. Exception reports - illustrate major discrepancies such as late and overdue orders, excessive scrap rates, reporting errors and requirements for nonexistent parts. 8-18

19 Capacity Requirements Planning (CRP) Process of determining short-range capacity requirements. The necessary inputs include planned-order releases for MRP, the current shop load, routing information and job times. Outputs include load reports for each work centre. Develop a tentative master production schedule Using MRP to assist in planning capacity requirements Use MRP to simulate material requirements Convert material requirements to resource requirements Revise tentative master production schedule No Shop capacity adequate? Yes No Can capacity be changed? Yes Develop a tentative master production schedule Change capacity 8-19

20 Benefits, Requirements and Limitations of MRP Benefits: Low levels of in-process inventories Ability to keep track of material requirements Ability to evaluate capacity requirements generated by the master schedule A means of allocating production time Requirements: Computer and necessary software Accurate and up-to-date: master schedules bills of materials inventory records Integrity of file data Limitations: Recordkeeping deficiencies Resistance of supervisory staff Time for education, training and convincing of employees - often a year or more 8-20

21 Manufacturing Resource Planning - MRP II Finance Market demand Master production schedule Marketing Manufacturing Production plan MRP Rough-cut capacity planning Capacity requirements planning Adjust production plan Yes Problems? No Adjust master schedule Yes Problems? No Requirements schedule 8-21

22 Enterprise Resource Planning (ERP) An extension of the MRP system to tie in customers and suppliers 1. Allows automation and integration of many business processes 2. Shares common data bases and business practices 3. Produces information in real time Coordinates business from supplier evaluation to customer invoicing ERP modules include Basic MRP Finance Human resources Supply chain management (SCM) Customer relationship management (CRM) 8-22

23 Enterprise Resource Planning (ERP) ERP can be highly customized to meet specific business requirements ERP systems can be integrated with Warehouse management Logistics Electronic catalogs Quality management 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 8-23

24 ERP and MRP Customer Relationship Management Invoicing Sales Order (order entry, product configuration, sales management) Shipping Distributors, retailers, and end users 8-24

25 ERP and MRP Supply Chain Management Vendor Communication (schedules, EDI, advanced shipping notice, e-commerce, etc.) Figure

26 ERP and MRP 8-26

27 Advantages of ERP Systems 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 collaboration between business units and sites 5. Has an off-the-shelf software database 6. May provide a strategic advantage 8-27

28 Disadvantages of ERP Systems 1. Is very expensive to purchase and even more so to customize 2. Implementation may require major changes in the company and its processes 3. Is so complex that many companies cannot adjust to it 4. Involves an ongoing, possibly never ending, process for implementation 5. Expertise is limited with ongoing staffing problems 8-28