D 0854

Supply Chain : Manufacturing and Warehousing

Session 10 Production Planning and Control MRP explosion for multi-stage production systems .

Resource Requirements Planning

Aggregate Planning
Master Production Scheduling (MPS) Material Requirements Planning (MRP) Capacity Requirements Planning (CRP)

Resource Requirements Planning

Adapted from Operations Management by Gaither & Frazier South-Western

Material Requirements Planning (MRP)

Adapted from Operations Management by Gaither & Frazier South-Western

Materials Requirements Planning (MRP)

Computer based system Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS Nets against current orders and inventories to develop production and purchased material ordering schedules

Adapted from Operations Management by Gaither & Frazier South-Western

Objectives of MRP
Improve customer service Reduce inventory investment Improve plant operating efficiency

Adapted from Operations Management by Gaither & Frazier South-Western

Inputs Service-Parts Orders and Forecasts Inventory Status File Master Production Schedule Bill of Materials File

Elements of MRP

Outputs Inventory Transaction Data Order Changes Order Planned Order Schedule

MRP System

Planning Report Performance

Exception Reports

Adapted from Operations Management by Gaither & Frazier South-Western

How MRP Integrates the Manufacturing Function

Exhibit 15.1
Copyright 2005 The McGraw-Hill Companies. All rights reserved.

MRP
Begins with number of end items needed Add service parts not included in MPS Explode MPS into gross requirements by consulting bill of materials file Modify gross requirements to get net requirements: Net Requirements = Gross Requirements + Allocated Inventory + Safety Stock - Inventory On Hand Offset orders to allow for lead time

Adapted from Operations Management by Gaither & Frazier South-Western

Outputs of MRP
Planned order schedule - quantity of material to be ordered in each time period Changes to planned orders - modifications to previous planned orders Secondary outputs:
Exception reports Performance reports Planning reports

Adapted from Operations Management by Gaither & Frazier South-Western

Past Due - Burn-Off Plan

100 90 80 70 60 50 40 30 20 10 0
8/11 Past Due Targe t 69 90 8/18 74 90 8/25 68 90 9/1 62 90 9/8 59 90 9/15 57 90 9/22 53 90 9/29 69 90 10/6 67 80 10/13 69 80 10/20 10 39 10/27 13 39 11/3 10 31 11/10 14 31 11/17 8 31 11/24 7 31 12/1 11 24 12/8 12 24

600 550 500 450 400 350 300 250 200 150 100 50 0
CNR NET LOAD 10 WEEK OUTPUT AVG.

PAST DUE & FUTURE WORK ORDER LOAD PROFILE

12/1 PD

12/8 12/15 12/22 12/29 1/5

1/12

1/19

1/26

2/2

2/9

2/16 2/23

3/1

3/8

3/15 3/22 3/29 4/5

274 306

21 8 288

55 288

143 288

290 288

0 288

180 288

266 288

275 288

302 288

227 288

41 7 288

324 288

343 288

359 288

467 288

327 288

455 288

393 288

307 288

LATE TO START W/OS

W/Os Past Start Date = 500 Late to Start = 259 (52%)

800 700 600 500 400 300 200 100 0

100 80 60 40 20
7/7
7/7

8/4
8/4 1 87 1 01 46 1 93 294 54

9/1
9/1 76 85 22 1 69 233 52

9/8
9/8 94 1 09 24 0 94 291 55

9/15 9/22 9/29 10/6 10/13 10/20 10/27 11/3 11/10 11/17 11/24 12/1 12/8 12/15 12/22
9/1 5 1 1 7 1 07 1 7 0 92 274 52 9/22 1 01 1 08 1 6 0 80 305 54 9/29 1 05 1 1 2 1 7 0 70 363 54 1 0/6 1 53 1 27 1 6 0 72 396 58 1 0/1 3 1 97 1 79 7 0 1 05 31 7 55 1 0/20 1 27 24 8 1 30 31 0 62 1 0/27 1 23 51 4 1 44 21 4 58 1 1 /3 1 37 47 2 1 42 1 70 58 1 1 /1 0 73 35 4 1 29 1 76 53 1 1 /1 7 29 31 7 1 38 21 6 52 1 1 /24 52 50 1 3 1 37 1 44 60 1 2/1 46 45 2 1 23 1 83 55 1 2/8 35 25 1 4 1 29 1 55 52 1 2/1 5 1 2/22

Wo rkable Sho rt Self M E Ho ld /Late Engr Sho rt RA WM A Sho rt Indirects Sho rt P urchased % Late To Start

1 92 62 21 1 33 1 85 48

% of W/O's Late to Start

# of W/O's

Indirects Owed from Others

Purchased
200 180 160 140 120 100 80 60 40 20 0
Act. Other Grps . Act. Gro up 2 To tal Burn Off P lan

Shop
150

173 134 132 128 107 131 130 99

70
59

127 127 122

127 128 103 90 89 81

60
49

51

55 45 37 38 31 25 17 21 19 19

50 40 30 20 10 0
MTC Fab Ctr DMC Subs Total 8/4 1 36 18 4 59

45

45

41

16

14

8/11
8/11 34 93 127 70

8/18
8/18 34 93 127 70

8/25
8/25 40 82 122 70

9/1
9/1 49 85 134 70

9/8
9/8 50 82 132 70

9/15
9/15 47 81 128 70

9/22
9/22 40 67 107 70

9/29
9/29 35 96 131 70

10/6
10/6 35 95 130 70

10/13 10/20 10/27

10/13 47 126 173 70 10/20 27 72 99 70 10/27 29 98 127 70

11/3
11/3 32 96 128 70

11/10 11/17 11/24

11/10 37 113 150 70 11/17 25 65 90 70 11/24 25 64 89 70

12/1
12/1 31 72 103 70

12/8
12/8 29 52 81 70

8/11 1 29 12 3 45

8/18 1 29 12 3 45

8/25 0 27 10 4 41

9/1 1 37 8 3 49

9/8 1 35 12 3 51

9/15 1 37 16 1 55

9/22 0 31 12 2 45

9/29 0 27 8 2 37

10/6 10/13 10/20 10/27 11/3 1 28 6 3 38 1 22 7 1 31 17 1 13 3 1 15 6 3 25 1 13 6 1 21

11/10 11/17 11/24 1-Dec 1 13 4 1 19 1 14 4 0 19 0 10 6 0 16 0 8 6 0 14

Lot-Sizing in MRP
Lot-size is the quantity ordered/produced at one time Large lots are preferred because:

Small lots are preferred because:

Changeovers cost less and capacity greater Annual cost of purchase orders less Price breaks and transportation breaks can be utilized Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order

Adapted from Operations Management by Gaither & Frazier South-Western

Lot-Sizing Methods
Economic Order Quantity (EOQ)
does not consider quantity discounts does not always provide the most economical approach with lumpy demand

Lot-for-Lot (LFL)
accommodates lumpy demand

Period Order Quantity (POQ)

The best method, resulting in least cost, depends on cost and demand patterns.
Adapted from Operations Management by Gaither & Frazier South-Western

Issues in MRP
Lot-Sizing
Useful at lower levels but may drive excess inventory when applied at higher levels

Net Change versus Regenerative MRP

Net change may generate too many action notices Regenerative more costly to run but appears to be easier to manage

Assemble-to-Order Firms
MPS and MRP treated separately from Final Assembly Schedule(FAS) Use Modular Bill of Material

Adapted from Operations Management by Gaither & Frazier South-Western

MRP I to MRP II
MRP I simply exploded demand (MPS) into required materials MRP II became Manufacturing Resource Planning which provides a closed-loop business management system
Financial management Shop floor control Operations management Simulation capability

Adapted from Operations Management by Gaither & Frazier South-Western

Evaluation of MRP
Most beneficial to process-focused systems that have long processing times and complex multistage production steps Lead times must be reliable Must freeze MPS for some time before actual production... certain demand Difficult to implement

Adapted from Operations Management by Gaither & Frazier South-Western

Where MRP Can Be Used

Industries with a job-shop environment in which a number of products are made in batches using the same production equipment. Companies involved in assembly operations and least valuable to those in fabrication. Firms with products that have a large number of levels in the product in terms of subassemblies and components.

Copyright 2005 The McGraw-Hill Companies. All rights reserved.

Capacity Requirements Planning (CRP)

Capacity Requirements Planning (CRP)

Tests MPS for feasibility Utilizes routings to determine labor/machine loads If schedule feasible, recommends freezing If schedule overloads resources, points out processes that are overscheduled

Adapted from Operations Management by Gaither & Frazier South-Western

Load Schedules
Compares actual labor and machine hours against available hours Offsets schedules between successive stages of production by lead times Provides feasible MPS and economically loaded work centers Promotes system operating efficiency ... lowers costs!

Adapted from Operations Management by Gaither & Frazier South-Western