4. Production and Material Planning
Planning Process
Execute material plans
Execute capacity plans
Capacity plan
Material requirements plan
Master production schedule
Aggregate production plan
RealisticNo
Yes
Master Production Schedule A time-phased production plan that
specifies how many of, and when to build, each end item
Must be in accordance with the aggregate production plan, which sets the overall level of output in broad terms
MPS Example 1Months January FebruaryAggregate Production Plan 1,500 1,200(shows the totalquantity of amplifiers)Weeks 1 2 3 4 5 6 7 8Master Production Schedule(shows the specific type andquantity of amplifier to beproduced240 watt amplifier 100 100 100 100150 watt amplifier 500 500 450 45075 watt amplifier 300 100
MPS Planning Lot-for-lot or batch production policies
Ft = forecast for period tOt = (confirmed) customer orders for period tIt = end-item inventory in period tQt = MPS, manufacturing quantity in period t
MPS Example 2Io = 1600, lot for lot or batch = 2500
W1 W2 W3 W4 W5 W6 W7 W8
Ft 1000 1000 1000 1000 2000 2000 2000 2000Ot 1200 800 300 200 100 0 0 0It Qt
W1 W2 W3 W4 W5 W6 W7 W8
Ft 1000 1000 1000 1000 2000 2000 2000 2000Ot 1200 800 300 200 100 0 0 0It Qt
Material Requirements Planning (MRP) Determines quantity & timing of
dependent demand items Creates requirements and schedules
identifying the parts, components, and materials necessary to produce the end products specified in the MPS
Objectives of MRP Minimize inventory level Maximize operating efficiency Improve customer service
Inputs of MRP Master production schedule Specifications or bills-of-material Inventory availability Purchase orders outstanding Lead times
Structure of the MRP System
Output ReportsOutput 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 FilesData Files
Purchasing data
BOM
Lead times
(Item master file)
Inventory data
Masterproduction schedule
Material requirement
planning programs
(computer and software)
Bill 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 children
Product Structure Diagram
BB(2)(2) Std. 12” Speaker kitStd. 12” Speaker kit CC(3)(3)Std. 12” Speaker kit Std. 12” Speaker kit w/ amp-boosterw/ amp-booster11
EE(2)(2)EE(2)(2) FF(2)(2)
Packing box and Packing box and installation kit of wire, installation kit of wire,
bolts, and screwsbolts, and screws
Std. 12” Speaker Std. 12” Speaker booster booster assemblyassembly
22
DD(2)(2)
12” Speaker12” Speaker
DD(2)(2)
12” Speaker12” Speaker
GG(1)(1)
Amp-boosterAmp-booster
33
Product structure for “Awesome” Product structure for “Awesome” ((AA))AA
LevelLevel00
BOMLvl Part Qty UM Description Lead time0 A 1 EA Awesome speaker kits 1 week1 B 1 EA Std. 12" speaker set 2 weeks1 C 1 EA Std. 12" speaker set w/ amp-booster 1 week2 E 1 EA packing box and installation kit 2 weeks2 F 1 EA 12" speaker & booster assembly 3 weeks3 D 1 EA 12" speaker 1 week3 G 1 EA Amp-booster 2 weeks
May add other factors such as lot size, weight, etc.
BOM Explosion
Part B: 2 x number of As = (2)(50) = 100Part C: 3 x number of As = (3)(50) = 150Part D: 2 x number of Bs
+ 2 x number of Fs = (2)(100) + (2)(300) = 800Part E: 2 x number of Bs
+ 2 x number of Cs = (2)(100) + (2)(150) = 500Part F: 2 x number of Cs = (2)(150) = 300Part G: 1 x number of Fs = (1)(300) = 300
To produce 50 part A:
Gross Requirements WeekWeek
1 2 3 4 5 6 7 8 Lead TimeA. Required date 50
Order release date 50 1 weekB. Required date 100
Order release date 100 2 weeksC. Required date 150
Order release date 150 1 weekE. Required date 200 300
Order release date 200 300 2 weeksF. Required date 300
Order release date 300 3 weeksG. Required date 600 200
Order release date 600 200 1 weekG. Required date 300
Order release date 300 2 weeks
MRPLevel 0, Part A 0 1 2 3 4 5 6 7 8 9 10
GrossRequirements 50 50 50 50 100ScheduledReceipts 50 InventoryBalance
NetRequirements PlannedReceipts Planned OrderRelease
Level 1, Part B 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts 50 50 Inv. Balance 50 Net Req. Plan. Receipts Plan. Order
Level 1, Part C 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts 50 Inv. Balance 50 Net Req. Plan. Receipts Plan. Order
Level 2, Part E 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts 100 100 Inv. Balance 300 Net Req. Plan. Receipts Plan. Order
Level 2, Part F 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts Inv. Balance 200 Net Req. Plan. Receipts Plan. Order
Level 3, Part D 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts Inv. Balance 500 Net Req. Plan. Receipts Plan. Order
Level 3, Part G 0 1 2 3 4 5 6 7 8 9 10Gross Req. Sch. Receipts 100 100 Inv. Balance 100 Net Req. Plan. Receipts Plan. Order
Capacity Plan MRP systems do not consider capacity
during normal planning cycles Finite capacity scheduling (FCS) recognizes
actual capacity limits By merging MRP and FCS, a finite schedule
is created with feasible capacities which facilitates rapid material movement
Example MPS/MRP Bill of capacity (min)
W 1 W 2 W 3 W 4 Assembly Inspection
Item A 1000 1000 1000 1000 20 2.0Item B 500 500 24 2.5Item C 1500 1500 1500 1500 22 2.0Item D 600 600 25 2.4
Capacity required (hr) Given
Week 1 Week 2 Week 3 Week 4 capacity
Assm. 1200Insp. 110
Enterprise Resource Planning (ERP) An extension of the MRP system to tie in
customers and suppliers Allows automation and integration of many
business processes Shares common data bases and business
practices Produces information in real time levels Coordinates business from supplier evaluation to
customer invoicing Has potential to reduce transaction costs and to
increase the speed and accuracy of information
ERP Modules Basic MRP Finance Human resources Supply chain management (SCM) Customer relationship management (CRM)
ERP Structure
Advantages of ERP Systems Provides integration of the supply-chain,
production, and administration Creates commonality of databases Can incorporate improved best processes Increases communication and
collaboration between business units and sites
Has an off-the-shelf software database May provide a strategic advantage
Disadvantages of ERP Systems Is very expensive to purchase and even
more so to customize Implementation may require major
changes in the company and its processes Is so complex that many companies
cannot adjust to it Involves an ongoing, possibly never
ending, process for implementation Expertise is limited with ongoing staffing
problems
Video Case Study Why is accurate inventory such an
important issue at Wheeled Coach? What kind of plan would you suggest for
dealing with excess inventory at Wheeled Coach?