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MATERIALS REQUIREMENTS
PLANNING http://www.slideshare.net/anandsubramaniam/lot-sizing-techniques
*What is MRP?
*Computerized Inventory Control
*Production Planning System
*Management Information System
*Manufacturing Control System
*What is MRP? (contd)
*This is the most comprehensive approach to manufacturing inventory and other dependents which demand an efficient inventory management system.
*The MRP system determines item-by-item, what is to be processed and when, as well as what is to be manufactured when.
*This is based on order priorities and available capacities.
An MRP system is intended to simultaneously meet three objectives:
* Ensure materials and products are available for production and delivery to customers.
*Maintain the lowest possible level of inventory.
*Plan manufacturing activities, delivery schedules and purchasing activities
*MRP Functions
*Forecasting
*Order, Planning and Control
*Priority Planning and Control
*Planning Capacity Requirement and Development of Broad Business Plans
*The scope of MRP in manufacturing:
Manufacturing organizations, whatever their products, face the same daily practical problem - that customers want products to be available in a shorter time than it takes to make
them. This means that some level of planning is required.
Making a bad decision in any of these areas will make the company lose money. A few examples are given below:
*If a company purchases insufficient quantities of an item used in manufacturing, or the wrong item, they may be unable to meet contracts to supply products by the agreed date.
*If a company purchases excessive quantities of an item, money is being wasted - the excess quantity ties up cash while it remains as stock and may never even be used at all. This is a particularly severe problem for food manufacturers and companies with very short product life cycles. However, some purchased items will have a minimum quantity that must be met, therefore, purchasing excess is necessary.
*Beginning production of an order at the wrong time can cause customer deadlines to be missed.
*Independent and
Dependent Demand
Independent Demand
A
B(4) C(2)
D(2) E(1) D(3) F(2)
Dependent Demand
Independent demand is uncertain. Dependent demand is certain.
Independent demand: Demand for final products.
Dependent demand: Demand fort items that are subassemblies or component parts to be used in production of finished goods.
*What can MRP do?
*Reduce Inventory Levels
*Reduce Component Shortages
*Improve Shipping Performance
*Improve Customer Service
*Improve Productivity
*Simplified and Accurate Scheduling
*Reduce Purchasing Cost
*Improve Production Schedules
*Reduce Manufacturing Cost
*Reduce Lead Times
*Less Scrap and Rework
*Higher Production Quality
*What can MRP do?
*Improve Communication
*Improve Plant Efficiency
*Reduce Freight Cost
*Reduction in Excess Inventory
*Reduce Overtime
*Improve Supply Schedules
*Improve Calculation of Material Requirements
*Improve Competitive Position
*Three Basic Steps of MRP
*Identifying Requirements
*Running MRP – Creating the Suggestions
*Firming the Suggestions
*Step 1: Identifying the Requirements*Quantity on Hand
*Quantity on Open Purchase Order
*Quantity in/or Planned for Manufacturing
*Quantity Committed to Existing Orders
*Quantity Forecasted
*Step 1: Important Information
MRP is…..*Company Sensitive
*Location Sensitive
*Date Sensitive
*Step 2: Running MRP – Creating
the Suggestions
*Critical Items
*Expedite Items
*Delay Items
*Step 3: Firming the
Suggestions
*Manufacturing Orders
*Purchasing Orders
*Various Reports
*Overview of the MRP System
Product Structure File
Master Production Schedule
Inventory Master File
Material Requirements
Planning
Manufacturing Orders
Purchase Orders
Various Reports
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*MRP Inputs*Product Structure File
*Master Production Schedule
*Inventory Master File
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*Product Structure File
*Bill of Materials:* It is a materials list that provides information useful to reconstruct the manufacturing process. It is the master product definition that contains “as designed” information.
*ASSEMBLY DIAGRAM
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* Master Production Schedule
*Schedule of Finished Products
*Represents Production, not Demand
*Combination of Customer Orders and Demand Forecasts
*What Needs to be Produced
*Inventory Master File
*On-Hand Quantities
*On-Order Quantities
*Lot Sizes
*Safety Stock
*Lead Time
*Past-Usage Figures
*MRP Process*Schedules the Production of all items using an MRP
Matrix
Item: Low-Level Code: Lot Size: Lead Time: PD 1 2 3 4 5Gross Requirements
Scheduled Receipts
Projected on Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
MRP Matrix
*Terms Defined
*Item – name or number for the item being scheduled
*Low-Level Code – the lowest level of the item on the product structure file
*Lot Size – order multiples of quantity
*Lead Time – the time from when an order is placed to when it is received
*PD – Past Due Time Bucket, orders behind schedule
*Terms Defined
*Gross Requirements – demand for an item by time period*Scheduled Receipts – material already ordered*Projected on Hand – expected ending inventory*Net Requirements – number of items to be provided and when*Planned Order Receipts – net requirements adjusted for lot size*Planned Order Releases – planned order receipts offset for lead times
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*MRP Processing
*Gross requirements: (Forecasted)Demand period by period
*Net requirements(t)
=Gross requirements(t)-Projected inventory(t-1)
-Scheduled receipt(t)
*If Net requirement(t) > 0
set Planned order receipts(t)>=Net requirement(t)
*Planned-order receipts is the production planned
*Projected inventory(t)=Projected inventory(t-1)+Scheduled receipt(t)+Planned order receipts(t)-Gross requirements(t)
*Planned order release(t-LT)=Planned-order receipts(t)
*MRP example with LT=2 and 1 level
Periods 0 1 2 3
Gross requirements 6 11 7
Scheduled receipts 2 3 0
Projected on hand 10 6 0 0
Net requirements 0 2 7
Planned order receipts 2 7
Planned order releases 2 7
Inputs
Outputs
*Figure 13-8
*Other Considerations
*Safety Stock*Not much for items with dependent demand
*Lot sizing*Lot-for-lot ordering
*Economic order quantity
*Fixed-period ordering
*Part-period model
*MRP example with Lot size=5, LT=2 and 1 level
Periods 0 1 2 3Gross requirements 6 11 9Scheduled receipts 2 3 0
Projected on hand 10 6 3 4
Net requirements 5 10
Planned order receipts 5 10
Planned order releases 5 10
Inputs
Outputs
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*Figure 13-9
*Inputs to the Production Plan
Aggregate Production Plan
MarketingCustomerDemand
EngineeringDesign
Completion
ManagementReturn on
InvestmentCapital
HumanResourcesManpowerPlanning
ProcurementSupplier
Performance
FinanceCash Flow
ProductionCapacityInventory
*The Planning ProcessProduction Plan
Execute MaterialPlans
Master ProductionSchedule
MaterialRequirements
Plan
CapacityRequirements
Plan
Execute CapacityPlans
Realistic??No
Yes
*MRP Outputs
*Manufacturing Orders
*Purchasing Orders
*Various Reports
*Advantages of MRP
*Improved Business Results
*Improved Manufacturing Results
*More Accurate And Timely Information
*Less Inventory
*Less Materials Obsolescence
*Time Phased Ordering Of Materials
*Higher Reliability
*More Responsiveness To Market Demand
*Reduced Production Cost
*Disadvantages
*Increase In Material Acquisition Cost
*Higher Transportation Costs And Higher Unit Cost
*Potential Hazard Of A Production Slowdown Or Shutdown
*Use Of Standardized Software Packages
*Does not Take Into Account Plant Capacity And Distribution Capacity
*High Stock-Out Costs.